Like the tourism industry, AirBnb is going through what looks like a termo-nuclear winter. But if the business is just going through an industry-wide crisis, one wonders whether its model makes it even more vulnerable than others. Or in other words, if home sharing is soluble in a post-COVID-19 world
Not so worrying signs for Airbnb during COVID-19
According to AirDNA, which analyses this market:
- there was an 84% drop in new bookings
- an 80% increase in cancellations
- compared to 2019, March revenues are down 60% in a city like New York and AirBnb expects a 54% drop over 2020 overall.
These are frightening figures, but if we compare them to the hotel industry, for example, we can’t say that the situation is worse. The situation is not brilliant anywhere but it does not seem to be worse in home sharing.
And there are even positive signs.
Since January the supply has only fallen by 3.5%, which is somewhat reassuring. Renters still have faith in the model and that is the first good news. Now I would be curious to see figures per market as the situation must be very contrasted depending on how the countries have managed (or not) their containment. By definition, the fact that people are less mobile this summer, or even stay at home, should lead to a mechanical decrease in supply for those who rent their main residence during their absence. More than half (or only?) of the Airbnb offer is not full time rental which means that a small half is “professional” rental that will not be affected by the owner’s situation.
There has also been a change in demand. While stays of 7 days or less, which make up the bulk of demand, are down by 80%, those of more than 7 days have seen demand triple! The reason for this? In countries that did not apply “strict” containment and where it was still possible to move around, locations outside the major urban centres were used as a place of containment for those who wanted to take shelter in a less densely populated area.
In the last two weeks, stays of more than 2 weeks have increased by 50%!
Although home sharing is suffering, it is not deprived and its offer is so protean that one can even think that it is more resilient than that of the large hotel groups in the face of the crisis. And generally speaking, there is a difference between a non-professional hirer who loses a supplementary income and will recover and a hotelier who loses his livelihood.
But will it be enough to survive? Indeed, if the lessor is resilient, what about Airbnb, which is a hotelier that does not say its name.
Black outlook for Airbnb
Like all these businesses in the so-called “sharing economy”, AirBnb has raised a lot of money to finance hypergrowth without showing much evidence of profitability. In times of growth when confidence is high, last year’s losses of $574 million are not a concern. When the economy, and even more so travel, is at a standstill, the market’s sanction falls: Airbnb’s valuation has dropped from 70 to 30 billion dollars.
Why ? Because beyond the tourism industry, it is the very model of AirBnb that is unsound in the current context.
Airbnb renters are not amateurs
As mentioned above, renters who use AirBnb to supplement their income represent a little over 50% of the supply, so the rest are real professionals or fake amateurs who have invested in real estate to rent on AirBnbwhich is more profitable than the “normal” rental market. With such a drop in demand, they will find themselves unable to repay their loans and will either have to sell or reposition their property in another market.
The decline in supply mentioned above therefore seems set to increase with properties returning to the normal rental market, which many municipalities welcome.
In the meantime, AirBnb, which has built its success on the size of its inventory, notably thanks to “professional” renters, will lose its appeal.
Home Sharing in the health safety crash test
But there is still one last factor whose impact we cannot measure today. If “rural” renting has made it possible to confine or protect oneself away from large urban centres, what will happen in the future? Without prejudging the future, we are moving towards rather harsh rules for the hotel sector with the obligation of social distancing, total disinfection of rooms with a ban on re-letting them before 24 hours etc.
One cannot imagine that Home Sharing is not subject to the same constraints. This raises the question of whether landlords will have the technical and financial means to deal with them. We are also thinking of people who do not rent a flat but just a room in their home.
And even apart from that, will customers have confidence?
From our point of view there will be no single answer to these questions and there will be trends market by market.
Hoteliers’ revenge on AirBnb?
In the end, if the model can and will certainly suffer a lot from the current crisis, one can wonder if the clientele that does not go to hotels and remains attached to Home Sharing, those who will benefit from the fire are the professionals of a very professionalized ” fake Home Sharing “, which would give more sanitary guarantees and would have the means to apply them. I am talking about “hotel-grade home sharing” with, for example, Onefinestay (Accor), Oasis Collection (Hyatt) or Homes and villas (Marriott), which is the result of the Tribute Portfolio Homes pilot and many others already in existence and to come. It will often be more expensive…but does health have a price?
So yes, the Home Sharing model seems fragile in the current context. But is it much more than the traditional hotel industry? We will talk about it soon.
Photo : AirBnb by Daniel Krason via Shutterstock
