AirbnBust? Let’s clear up the conversation

Every few months, Airbnb gets dragged on the internet. To start things off, this past year, frustrated hosts dominated host forums with claims of “Airbnbust” – describing their low occupancy rates and drop in bookings. Then, customers complained about Airbnb service fees so much that it became a meme. And recently, the CEO declared on […]

November 22, 2023

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Every few months, Airbnb gets dragged on the internet. To start things off, this past year, frustrated hosts dominated host forums with claims of “Airbnbust” – describing their low occupancy rates and drop in bookings. Then, customers complained about Airbnb service fees so much that it became a meme. And recently, the CEO declared on Bloomberg that “Airbnb Is Fundamentally Broken.”

Airbnbust? Not for Brian Chesky

So, what’s really going on with Airbnb? Let’s look past the memes and clickbaity headlines and look at the numbers. In Q3, the Airbnb platform garnered 113 million night and experience bookings (up 14% YoY), valued at $18.3B (up 17% YoY) in gross booking value. The company extracts a fee from each booking which netted them $3.4 billion (up 18% YoY). The marketplace is strong and growing!

So, what are Airbnb hosts complaining about?

When we shift our focus to individual hosts in the US, a different picture emerges. According to AirDNA, STR occupancy decreased to 56.9% (down 1.2% YoY), while available listings have spiked 14.5%, reaching 1.56 million properties. This increased competition is forcing hosts to compete on price and quality, which benefits Airbnb customers but hurts host margins.

Not All Hosts Are Equal

In the Airbnb marketplace, success is not evenly distributed among hosts. Top hosts will continue to rank high in the Airbnb algorithm and garner high occupancies, while lower-tier, undifferentiated hosts may feel the impact more profoundly. In our current market with base mortgage rates of 7.5%-8.5%, new Airbnb investors are particularly vulnerable as they need to earn even more to cover high debt service/mortgage payments, platform fees, property management fees, maintenance, taxes, and insurance.

Hosts Seeking an Exit

At a recent real estate conference in Orlando, I met an Airbnb investor, Sarah, who was looking for an exit. Her property in Orlando, a top vacation destination, was negative cash flowing $700/month! We talked through three options: compete, sell, or convert.

– Competing: Sarah felt frustrated about the opacity of the Airbnb search algorithm and tried other listing sites like VRBO, but that didn’t move the needle.

– Selling: this was not attractive because she was unlikely to break even on the asset purchase and capital expenses (renovation, furnishing, and landscaping) that were invested. This was her last resort.

– Converting: Sarah was interested in switching from short-term rentals to mid-term rentals to achieve a higher net occupancy rate.

PadSplit is the best exit strategy for underperforming Airbnbs

While top hosts with hundreds of reviews on Airbnb continue to perform well, newer and underperforming hosts are looking for an exit as poor Airbnb reviews from hosts are becoming more commonplace. We believe PadSplit is the best exit strategy, which is why we’ve seen a big spike in Airbnb hosts converting their properties to PadSplits. Of course, not all STR and vacation properties will make good PadSplit homes. Our sweet spot is single-family properties in major metro areas with underutilized living space. On average, our hosts earn 2.5x more than traditional single-family rentals and 33% more than Airbnb while serving essential workers in their communities.

Is PadSplit a good fit for you? Here’s three things you can do:

  1. Try out our Earnings Calculator to see potential earnings for your property.
  2. Schedule a call with a PadSplit account executive or join a webinar.
  3. Check out our PadSplit vs Airbnb page.

– Hameto Benkreira, Growth Product Manager at PadSplit

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