Airbnb, and other home-sharing platforms like it, fundamentally transformed not only the travel industry but the short-term rental market. It reshaped neighborhoods and whole cities in the process as short-term rentals swept through touristy parts of the world. Last year, the company was estimated to be worth over $30 billion dollars and was scheduled to go public in 2020. Then came the COVID-19 pandemic, presenting whole new challenges. Now, Airbnb is seeing a collapse in bookings as the travel industry is on hold and national economies are staggered. Hosts who have become reliant on income properties to pay their bills are struggling due to the lack of business. Plus, with public attitudes about shared space very much in question, the forecasts for the Airbnb industry are now foggy.
What will happen to Airbnb in the wake of the COVID-19 pandemic? Can the industry’s top player recover after lockdowns lift? While it’s too soon to tell, we can make a few predictions after looking at historical facts and Airbnb data. Here’s what we found out so far.
Airbnb Coronavirus Crisis: Facts & Data
As travel bans took effect in March, demand for Airbnb and short-term rentals have taken a hit worldwide. Data analysts at AirDNA reported that bookings have tanked and booking cancelation reached an all-time high. According to AirDNA, bookings across Europe dropped 80% in the week beginning March 9th. On top of that, there was yet another 10% drop in the week of March 16th. As for the Airbnb market in the United States, the figures for drops in bookings are uneven but less dramatic. By the middle of March, bookings in New York City, San Francisco Bay Area and Seattle had dropped over 50% compared to the beginning of 2020, with drops of over 35% in Washington and Chicago.
Of course, booking cancelations will affect the Airbnb occupancy rate for hosts. According to Mashvisor’s Airbnb Calculator, Airbnb occupancy rates fell more than 35% in every major city in the US housing market in March of 2020 compared to the same period last year. Mashvisor’s listing data comes straight from Airbnb. And our Airbnb analytics is verified by real hosts and mirrors the performance of actual Airbnb rental listings over the past 12 months. The graph below shows the difference in Airbnb occupancy rates for top Airbnb markets in the US in March 2019 vs March 2020.
Check out the rest of our data regarding how the COVID-19 pandemic is affecting the Airbnb business here: Airbnb Data Reveals the Impact of Coronavirus.
Airbnb vs the COVID-19 Pandemic
In a fast-evolving situation, Airbnb announced that it’ll extend its “extenuating circumstances” policy. Accordingly, it’ll offer full refunds for any pre-lockdown bookings made for stays up until May 31st. After the backlash from hosts, Brian Chesky, the founder of the home-sharing platform, acknowledged the consequences of this policy and, to repair the relationship, announced that the company will set up a $250 million host relief fund to compensate hosts for up to 25% of their lost rental income, with an additional $10 million fund for its Superhosts. In addition, Brian Chesky reminded Airbnb hosts in the US that they might be eligible to apply for relief from the CARES Act, like small business loans, unemployment assistance, and mortgage reliefs.
As for how the company itself is trying to survive the COVID-19 pandemic, Airbnb has reportedly canceled all of its marketing activities, has put its founders’ salaries on hold and slashed the salaries of top executives by half. It has also halted all but essential hiring, it may postpone going public, and has not ruled out layoffs. These measures could help the company regain goodwill from hosts, which will be important once the tourism and travel economy recover. In a recent statement, the company said: “Airbnb is resilient and built to withstand tough times and we’re doing all we can to strengthen our community and our company”.
Furthermore, the company recently announced that it’s raising $1 billion dollars from private-equity firms Silver Lake and Sixth Street Partners. This investment will allow Airbnb to endure and, hopefully, thrive in a travel industry transformed by the COVID-19 pandemic. Silver Lake and Sixth Street Partners said they have faith in the Airbnb business and the existing leadership team. “While the current environment is clearly a difficult one for the hospitality industry, the desire to travel and have authentic experiences is fundamental and enduring,” said Silver Lake managing partner Egon Durban.
So, Will Airbnb Survive the Coronavirus?
With uncertainties about how long the coronavirus and travel bans will last, things look dire indeed in the immediate future. Whether Airbnb can bounce back fully from this crisis – and how quickly – also depends on how consumers feel about traveling and staying in other people’s homes once the COVID-19 pandemic eases. Some say traditional hotels might gain an advantage when the travel industry starts to recover due to fears on how regularly hygiene standards can be enforced in the short-term rental market. On the other hand, more people might remain wary of crowded hotels following a period of social distancing. This is why some experts believe Airbnb will reap the benefits after the pandemic.
As for Airbnb executives and investors, they’ve expressed confidence that the company will recover after the pandemic. Brian Chesky has cited Puerto Rico as an example to show the resilience of his business model. Booking volumes bounced back swiftly after Hurricane Maria devastated the island in 2017. More recently, we can also take a look at how the Airbnb business is getting back up in China. The president of Airbnb China is optimistic and confident about the short-term rental market and the travel industry as China’s economy starts to recover. He explained that the company is experiencing huge growth in short-term trips as Chinese travelers on Airbnb are looking for domestic travel destinations.
Results of a recent survey conducted by Airbnb China show that Chinese hosts are experiencing positivity and confidence in their Airbnb investments moving forward. Almost 99% of hosts felt either ecstatic or neutral about getting engaged in short-term rentals immediately after the outbreak. In addition, 72% of these hosts added that they would maintain their Airbnb hosting activity. Another nearly 60% of Airbnb China hosts said they’re looking to accept more weekly and monthly rentals going forward.
All of this tells us that there’s a connection between economic recovery and people’s growing interest in traveling. Moreover, while people might be wary of traveling to other countries after the COVID-19 pandemic, the desire and anticipation to travel again are still there, even if on a domestic level. However, when the Airbnb coronavirus crisis will come to an end and what it would look like in US cities where Airbnb has been most affected remain mysteries. Mashvisor aims to keep real estate investors updated on coronavirus trends in the US. So make sure to keep checking our investment blog to stay informed.
What Should Airbnb Hosts Do in the Meantime?
With the spread of coronavirus, a downturn in the Airbnb economy was inevitable. If you’re an owner of an Airbnb investment property, then you’re definitely wondering what to do during this time as travel bans and social distancing measures are still in effect. Airbnb encourages hosts to put their rental units to good use. The home-sharing site announced that it doesn’t support reservation requests from users showing symptoms or those awaiting test results. Instead, Airbnb said it’ll focus particularly on long-term stays from students needing housing to remote workers, building on the rising demand it has seen as people quarantine during the COVID-19 pandemic.
The company’s updated instructions for cleaning and hygiene recommend hosts to stock their properties with a few extras. This includes things like antibacterial hand sanitizer, disposable gloves and wipes, hand soap, paper towels, and tissues. Airbnb is doing everything it can to help hosts to stay in the short-term rental market. And it seems to be working as many Airbnb hosts worldwide are offering stays to people in need. Whether that’s accommodation for medical staff who want to stay near their hospitals and self-isolate during the crisis, or for homeless residents who would otherwise be on the streets. Some hosts are also offering “14-day quarantine suites”.
However, many hosts have decided to pull their listings off of Airbnb to find cheaper long-term tenants. Converting your Airbnb into a long-term rental is one option, of course, as traditional rentals are known to be safe investments that’ll provide rental income in times like this. Many are doing this with plans to return to the short-term rental market once the Airbnb market and travel bounce back. Brian Chesky reassured hosts saying “We know that COVID-19 will have an impact on this in the near-term, but we also know that travel is resilient and will rebound”.
Keep in mind, however, that switching rental strategies would be a smart decision in some locations more than others. You need to analyze your neighborhood and rental property using real estate data to ensure that this is a profitable solution in 2020. Mashvisor offers real estate investors both traditional and Airbnb data in addition to a number of investment tools (like the Airbnb Calculator) to help them make wise decisions during the COVID-19 pandemic no matter where they own property in the US housing market. To use our tools, sign up with Mashvisor and use promo code BLOG15 for 15% off.