How COVID-19 may slim Airbnb down and get back to its roots

Home-sharing giant Airbnb is hit hard by the COVID-19 crisis.

With COVID-19 hitting Airbnb and its hosts hard, does the hotel industry stand to benefit in the long run?

As part of the global travel industry, Airbnb has suffered gravely during the current COVID-19 crisis.

We find out how the pandemic may push the company to shift back towards its roots and reconsider its growth plans.

Airbnb’s numbers reflect the state of the industry

With lockdowns and travel bans in place across many countries worldwide, Airbnb’s business performance is reflecting the current state of the travel industry.

According to the online rental analytics firm AirDNA, Airbnb’s bookings are down 85% with cancellation rates at close to 90% right now.

For March, the company’s revenue was down 25% compared to last year due to $1 bn in bookings being wiped out following the Corona Virus outbreak. With the anticipated rebound of travel having moved into the distant future, things are also not looking like they will pick up again soon.

The fall of professional hosts

Airbnb started as a way for people to make a few extra bucks off a spare room while offering travellers cheap and convenient places to stay.

This quickly transformed into hosts leasing properties only to put them up on Airbnb and make many times what they could have from month-on-month rentals. AirDNA shows that in the US alone around 600,000 listings are from hosts more than two offerings. However, without guests, these pro hosts have no income to cover their leases with.

If the situation doesn’t improve soon, which it likely won’t, many of them will be in trouble and will have to remove their listings from Airbnb, shift to month-by-month or longer-term rental, or give up their leased properties altogether.

First signs of this have already been seen in cities like New York and London where Airbnb listings seem to be migrating to platforms like Homads and Kopa where apartments can be rented for a month or more.

Seeing risk with new eyes

While the risks behind leasing to rent were always there, nobody believed things could turn so bad so quickly. The sudden change COVID-19 has brought is likely to have put a damper on yield-focused investors’ dreams of wanting to make a quick buck off a few nicely decked out downtown flats.

“There’s a possibility that this business model – of master leasing properties, furnishing them and relisting them on Airbnb – is not going to be attractive for people now they understand how volatile this environment can be,” says Scott Shatford, CEO of AirDNA. “There will still be people chasing yield. But will they get back into the one-bedroom apartments in London or New York? Probably not.”

This is a problem for Airbnb’s growth projections. With fewer of these high-powered pro hosts, the platform will grow more slowly or even have to contend with a shrinking offering in the near future.

But if that means the new Airbnb goes back to its root idea of connecting travellers and hosts, offering good value for money and benefiting the local communities it operates in, that may not be such a bad thing.