Is Airbnb bracing for a supply shortfall, or owner churn away from short-term rentals to longer-term rentals?
Yesterday we wrote about Airbnb’s sweet deals with developers in Florida – where the company is partnering with developers to allow apartment tenants to rent out their units for up to 75 days per year. Airbnb would handle pricing, security, access for guests, and cleaning.
Let’s get into why this could be happening: the company could be bracing for a supply shortfall, or owner churn away from short-term rentals to longer-term rentals.
Broadly, there are two reasons why. First is the after-effect of regulations that might take listings off the market. Take New York City: As of July 2023, it had about 23,000 “active listings,” according to data from AirDNA. That’s a big drop from July 2019 when there were 36,000 active listings. They’ll likely drop more after the city begins enforcing its host registration law on September 5. We’ve reported that 16,000 of those listings could initially be at risk.
The second reason is demand-supply dynamics. The saturation of supply in some markets that are causing fire sales of homes and a dip in occupancy are prodding homeowners to go back to relying on longer-term, stable rentals even if it means lesser revenue.
“Airbnb was putting out last year about all the supply growth, I think they said they had 800,000 additional units. I think you’re going to see at some point some pretty significant correction on the outlook for supply,” said Steve Milo, founder and CEO of property management firm VTrips. “And I know that there have been revisions by analysts that follow the stock about the supply, but it may be far worse than anticipated.”
Milo said that it may not adversely affect existing supply, but it will affect new supply.
“So what Airbnb is likely to encounter is one, there’s going to be supply that’ll be pulled off the market because the cap rate for short-term rental is not as good as the cap rate for a long-term rental,” Milo said. “And a long-term resident, you don’t have to furnish it. Typically, the tenant would pay for utilities, et cetera. And there’s a lot less work involved in managing a long-term rental versus a short-term rental. There’s data out there to show that long-term rental rates have actually increased in the state of Florida pretty significantly.”
According to AirDNA’s last monthly report, the rate of growth, determined by the count of monthly available listings, has demonstrated a significant deceleration at 12.1% year-over-year growth in July. That compared to June, which witnessed an expansion of available listings by 13.7%. The current scenario is markedly different from July 2022, when the supply of available nights experienced a substantial yearly growth of 24.4%.
Available monthly short-term listings in the U.S. Jan 2018-July 2023
LA City Attorney’s Office Sues Short-term Rental Operator
Los Angeles-based luxury vacation rental company The Nightfall Group has come under city scrutiny. The Los Angeles City Attorney’s Office filed a lawsuit earlier this month against the company’s proprietor Mokhtar Jabli. The suit alleged The Nightfall Group was in violation of four codes: the city’s short-term rental ordinance and the party house ordinance, as well as California’s unfair competition and public nuisance laws, The Real Deal reported.
Furthermore, the lawsuit claimed that Jabli and his associates have transformed the properties into rentable nightclubs, resulting in activities that breach the city’s party house ordinance, including excessive noise, increased traffic, providing alcohol to minors, public intoxication, altercations, and littering.
Intrepid Travels Ventures Into Accommodations
Expanding its presence within the lodging industry, Intrepid Travel, a small group tours-focused travel company, has acquired Daintree Ecolodge in Tropical North Queensland for AU$5 million ($3.2 million). This acquisition signifies Intrepid’s move beyond its traditional tour offerings, indicating a shift into accommodations, particularly nature-oriented stays, ShortTerm Rentalz reported.
Intrepid purchased Daintree Ecolodge from the Morris Group. This move follows Intrepid’s earlier entry into the lodging sector through collaboration with Drifter Hospitality Group, a premium hybrid hotel network based in the Asia-Pacific region, in October 2021. Earlier this year in May, Intrepid partnered with CABN, a startup specializing in off-grid luxury lodging, with plans to introduce over 70 sustainable cabins in nature-centric Australian locations by the close of 2023.
Regulations Come to Melbourne
The Melbourne City Council has reached a significant verdict to establish a maximum number of days per annum during which properties can function as short-term rentals on platforms like Airbnb. This resolution is scheduled to become effective from February and will involve an annual registration fee per property as well as a cap on the number of rental days per property — the limit is the same as in Sydney, and it is notably more lenient than say San Francisco, where the cap stands at 30 days.
The exact figures for the registration fee and the limitation on days are yet to be finalized. According to the council’s data, around 14 percent of residential properties in Melbourne (approximately 4,100 units) are currently utilized as short-term rentals, with almost half of them being rented out for more than 90 days annually. Presently, the rental vacancy rate in the city of Melbourne is around 0.8 percent.
Sonder Appoints New VP of Sales
Short-term rental operator Sonder has appointed Chad Fletcher as its new vice president of sales. In this role, Fletcher will oversee Sonder’s corporate travel strategy, partnerships, and growing new customer segments.
Most previously, Fletcher was vice president, global sales at Choice Hotels International and has also held sales positions at Avis Budget Group and DHL Group.
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