It’s been a whirlwind year for Airbnb. At the start of 2020, the home-sharing vacation rental company was sitting on billions in cash and was planning a direct listing on the stock market. The pandemic wiped out 90% of bookings, and many were pondering if the company would survive. But bounce back it did, thanks in part to consumers taking “staycations” over the summer.
Airbnb filed for its long-awaited public offering on Monday, revealing its past performance, revenue data and trajectory. Some Hawaii property managers have mixed views about Airbnb, and wonder what impact this move will have. However, Airbnb’s market reach is significant, and it is hard to turn away rental potential, especially in Hawaii’s fragile economy.
When going public, Airbnb reported 4 million hosts in 220 countries, listing 5.6 million “active listings” on its platform, with 29% of its “Nights and Experiences” and 41% of its revenue coming from North America. As of September 30, 2020, Airbnb has 5,465 employees in 24 cities around the world after reducing its workforce by approximately 1,800 in May 2020 due to the pandemic. Airbnb is the third U.S. company in the short-term rental industry to go public, preceded only by ResortQuest (1998) and HomeAway (2011). Both companies were purchased within 6 years of their IPOs. The filing provides a highly anticipated show-and-tell of Airbnb’s performance, including its financials, listing counts and calculations, risk assessment, and strategic position.
Why they are going public in a pandemic
Airbnb has a few reasons to go public during this time according to Bloomberg.com. Primarily, employees and investors have been waiting over ten years to cash out. And the clock is ticking—there is a restriction on some stock options that will expire early next year. After staggering pandemic losses, Airbnb is able to take advantage of historically low interest rates to raise more capital and refinance existing debt, especially on their latest billion-dollar deal with Silver Lake and Sixth Street Partners, made at a high 11% interest. Finally, public markets are trading at record highs, so it’s a good time to enter the market.
How Airbnb has negatively affected housing markets
According to Forbes, research has shown the ‘Airbnb effect’ slowly increases the value of an area which in turn increases the housing prices and puts negative strain on the indigenous residents, many of whom are pushed out due to financial constraints. Harvard Business Review conducted their own research across the U.S. and found the “Airbnb effect” encourages landlords to move their properties out from the long-term rental and for-sale markets and into the short-term rental market. This can displace many long-term renters as well as decrease the availability of long-term rental units, causing an upward rental cost increase due to shortage of supply for long term units. To be more precise, a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in housing prices as found in a separate U.S. study.
Maui’s current debate over short-term rentals in private homes
Rental rate increases and lack resident rental housing attributed to companies like Airbnb is much of the reason Maui has an ongoing debate over capping short-term rentals outside of resort areas.
As reported in The Maui News, many apartment zoned condominiums on Maui are generally “grandfathered in” as vacation rentals, if the property’s restrictive covenants allow it. The debate is really about converting private homes, which could be long-term rentals, into vacation rentals and Airbnb rentals.
Communities expressed concern that people no longer know their neighbors, which in essence erodes the cultural way of living many hope to keep alive. Long-term renters complain they have been displaced due to homeowners wanting to convert to short-term renting. Some argue that the hotels, condominium resorts and tourist areas that were carved out away from local residences should be the ones serving tourists.
However, the alternative debate is from homeowners who are in fear of losing the short-term rental portion of their residence that brings in needed income they are dependent on.
Both sides of the table leave a lot of thought to analyze if Airbnb becomes a larger presence in communities.
What Can Property Managers Expect from a Public Airbnb?
A major difference between Airbnb and their competitor HomeAway is the way that HomeAway’s leadership are actively engaged with the vacation rental management community. Airbnb has not shown the same courtesy, including making policies during the pandemic that were very different than industry standards, and overriding agreed upon owner policies. Hopefully that will change under more public scrutiny.
Additional Concerns Raised
The vacation rental industry is moving toward contactless hosting due to COVID-19. Current Airbnb marketing features their “up close and personal interactions,” with a group of similarly aged friends hugging, kissing and celebrating in a private home. Since we are still in the midst of a raging pandemic, this campaign’s timing seems to be off.
Property managers in residential neighborhoods also have to ensure guests can act respectfully as good neighbors, something that has been a problem for some Airbnb guests. Also, with private homes, there is no assurance that they are following Airbnb’s “Enhanced Cleaning Protocol.”
The Positives
Airbnb does not just have short-term vacation rental units in private homes. They are also a significant presence in Maui vacation rental condominiums. Vacation rental companies, like our sister company Destination Maui Vacations, list units on their own website, but also expand the marketing reach for owners by showcasing units on HomeAway, VRBO, Airbnb and other channels. Occupancy is important, but so is the integrity of communities managed by Destination Maui companies. That is why we have our own stringent policies.
We will continue to monitor Airbnb’s success with a positive attitude, while maintaining high standards for our communities.
