With much of the world on lockdown, Airbnb and its hosts have been decimated in the fallout from the coronavirus pandemic. Here we look at the numbers on how much hosts are losing each month across top global cities, and just how many overextended hosts are facing a severe financial squeeze...
As the coronavirus devastates Airbnb, we took a look at how bad the situation really is for hosts.
To be frank, the platform is in a pretty rough shape as it's seen catastrophic declines worldwide since March. The rental analytics firm AirDNA puts some numbers to the degree of devastation:
- New bookings are down 85%
- Cancellation rates hit around 90%
- $1.5 billion in bookings were wiped out
With much of the world on lockdown, no travel means no rental income for hosts. Yet they’re still on the hook for their own mortgage and rental payments, so are in a severe cash flow crunch.
This is especially problematic for those ‘superhosts’ that have built entire businesses around the Airbnb ecosystem and a portfolio of multiple properties.
How much are superhosts losing each month?
We looked at some of the world's most popular destination cities to gauge how hosts are faring each month.
Using data from Inside Airbnb, we estimated rental incomes based on listings, pricing data, and occupancy rates for April 2020, then compared against local housing cost levels.
To ensure we calculated rental income levels for standalone properties only, we looked at listings classified as “Entire Homes/Apartments” and removed any private or shared rooms.
To estimate housing costs for each city, we took average property prices (Global Living 2019, CBRE) alongside average monthly mid-range rents (Mapping the World's Prices 2019, Deutsche Bank). As hosts could either own their property or be renting (i.e. arbitrage sub-leasing), we assigned relative weights to each — 75% toward property prices, and 25% for rent.
Looking at the numbers it is painfully clear that the pandemic has obliterated the economics of running Airbnb properties across these cities.
How many properties are hosts actually running?
This all spells major trouble for the ‘professional Airbnb entrepreneurs’ that have taken on boatloads of debt in order to scale up mini-property empires.
With little to no income, an over-leveraged host with 20 mortgages is now facing dire financial pressures and liabilities.
To better understand the staggering scale of this crisis, we looked at how many hosts are running multiple properties (not individual rooms) across these cities.
Again, using only “Entire Homes/Apartments” listings we see extremely high levels of hosts that are running multiple standalone properties. This likely means they're running entire businesses around Airbnb, took on excessive levels of debt to do so, and are now lack the cash flow to absorb lost bookings.
For example, in London there are 12,144 listings where the host is running 10+ properties. In Rome, there are 4,799 listings where the host has between 3-9 properties.
What's next for overextended hosts...?
Airbnb came out with a $250M fund to cover 25% of the cancellation fees that hosts would’ve received, and another $17M relief fund where superhosts can apply for $5,000 grants. They also successfully lobbied Congress to ensure that hosts are eligible for small business loans and unemployment insurance through various coronavirus relief bills.
These measures might stop the bleeding for a month or two, but most believe them to be woefully insufficient for hosts to weather the storm and make it through this crisis.
Eventually, the world will surely get moving again, people will start traveling, and the short-term rental market will rebound. That said, it’s impossible to say when, and it will likely to take some time…
In the meantime, hard-pressed hosts have taken to flipping their properties to long-term rentals, seeking forbearance to temporarily defer mortgage payments, and even starting to offload their properties onto the market.
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