The concept on which Airbnb is founded – tourists becoming ‘locals’ and locals profiting from the tourists by hosting them in their homes – is under threat in a way its founders could not have envisaged, a virus that is currently enveloping the world and potentially changing how we live, work and travel forever.
Airbnb is a huge business – it has been estimated to be worth more than USD30 billion and there are more than seven million listings spread across 700,000 hosts in 100,000 cities. But, it is not only the company which is now threatened but hosts themselves as many have turned property rentals into a business, at one end of the scale by letting out their own property and at the other by buying up empires of apartments simply to be rented out through the medium, some on a permanent basis.
The platform was scheduled to go public in 2020. But, then along came the COVID-19 pandemic. Suddenly, Airbnb hosts are personae non gratae in their neighbourhoods. Not only do they see a collapse in their properties’ income-generating potential (and for many this is all they do), they find their neighbours heaping opprobrium on them for the prospect that short-term renters may spread the virus.
Many hosts are either pulling out of Airbnb to find cheaper long-term tenants where the properties are not those they actually reside in or, more worryingly, have been offering virus ‘14-day isolation suites’. The first option is not an easy answer as everyone else rushes to do the same thing and very big rent cuts will be inevitable in order to attract anyone in a saturated market. The latter option is even more fraught and, let’s not mince words, reprehensible.
In the first case, an example is Edinburgh, Scotland where on the main thoroughfare Princess Street landlords have flooded the rental market with their Airbnb apartments; over 200 Airbnb listings on a road of less than 500 homes. The number of new rentals coming on to the market in the week the UK lockdown commenced increased by 45% in London, 55% in Brighton, 62% in Edinburgh and 78% in Bath. It’s the same story in other countries with a 61% increase in Dublin and 41% in Prague.
The corporate sector has led the public response, by cancelling Airbnb bookings made by staff, in the same way as they did (and often still do) insist on key executives not travelling on the same aircraft on business. Corporate power is no protection from the virus any more than political might. As this is written the British Prime Minister, Boris Johnson, languishes in intensive care, struck down by the virus. Not that he was likely to have stayed in an Airbnb.
Meanwhile, pressure groups like We Live Here and Neighbours Not Strangers which were already ardent lobbyists have called for an immediate ban on all short-term rentals, due to the risks from COVID-19.
Airbnb does not support reservation requests from users who are showing symptoms (but how would they know?), or those who are awaiting test results and the company has introduced a ban on any listings that “reference COVID-19, coronavirus or quarantine” and those which “incentivise bookings through COVID-19-related discounts, stocks of limited resources, or the highlighting of quarantine-friendly listing attributes”.
It has also updated instructions for cleaning and hygiene, recommending hosts stock their properties with “a few extras” like “antibacterial hand sanitiser, disposable gloves and wipes, hand soap, paper towels, and tissues”. It doesn’t mention toilet paper but then again there is not much of that to be found, anywhere now.
Airbnb reports it has not seen a material drop in the overall number of listings on its platform in many countries and is sticking to the global tourism industry mantra that travel is resilient in the long term and will ultimately recover. We shall see, as most now believe the future landscape will be very different and much smaller in scale than that seen previously.
The fallout from the pandemic is likely to last far longer than the 31-May-2020 date Airbnb is supporting bookings or even whenever governments lift movement restrictions. Hosts are reporting no bookings throughout the summer, and research by the analysis website AirDNA shows bookings in some cities has fallen by 95%. That spells financial disaster and not just for the hosts.
Investors hoped a flotation would value the business at up to USD42 billion even though it lost over USD320 million in the first nine months of last year. Losing money heavily at the operational level is the new norm for businesses in the weird and whacky world of the ‘disruptors’ and it barely seemed to impact on share price expectations until now.
The big problem Airbnb faces is that unlike other tech firms it can’t diversify. It has one product. Uber can deliver parcels and food rather than driving people around but Airbnb has nowhere to go. It appears it has now been disrupted by the ultimate disruptor – a particle less than five micrometres in size and invisible to the naked eye, which is indiscriminate and has already been responsible for over 80,000 confirmed deaths across the world.