Can Airbnb Survive Coronavirus?
FEARGUS
O'SULLIVAN APRIL 3, 2020
The short-term rental market is reeling from the
coronavirus-driven tourism collapse. Can the industry’s dominant player stage a
comeback after lockdowns lift?
What will
happen to home-sharing in the wake of coronavirus? It’s one of many questions
about the fate of pre-pandemic sharing-economy juggernauts like Airbnb. That
company and its competitors have transformed the market for travel
accommodation in recent years, reshaping neighborhoods and whole cities in the
process as short-term rentals swept through heavily touristed parts of the
world. But with tourism on hold, national economies staggered, and public
attitudes about shared space very much in question, the prospects for that industry
are now murky.
In the
immediate future, things look dire indeed. Across the world, Airbnb bookings
have tanked. Data analysts at AirDNA say that bookings across Europe collapsed
in March, dropping 80% compared to the previous week in the week beginning
March 9, and another 10% on top of that in the week of March 16. In the U.S.,
where virus response lagged, the figures for falls in booking are uneven, but
scarcely less dramatic. By the middle of March, bookings in New York City, San
Francisco and Seattle had already dropped more than 50% compared to the week
beginning January 5, with drops of over 35% in Washington, D.C., and Chicago.
To weather
the crisis, Airbnb has reportedly canceled all marketing activities, put its
founders’ salaries on hold and slashed those of top executives by half. It has
halted all but essential hiring, may postpone going public and has not ruled
out layoffs. “Airbnb is resilient and built to withstand tough times and we’re
doing all we can to strengthen our community and our company,” the company said
in a recent statement to Reuters.
In a
fast-evolving situation, Airbnb has offered blanket cancelation of any
pre-lockdown bookings made for stays up until May 31 — which antagonized hosts
who thought the cancelation policies they had agreed with guests would hold.
Acknowledging their anger, company founder Brian Chesky outlined the company’s
dilemma in a statement: “If we allowed guests to cancel and receive a refund,
we knew it could have significant consequences on your livelihood. But, we
couldn’t have guests and hosts feel pressured to put themselves into unsafe
situations and create an additional public health hazard.”
To repair
the relationship, Airbnb to set up a $250 million fund, in order to compensate
hosts for up to 25% of their lost income, with an additional $10 million
bailout fund for super-hosts. U.S. hosts will also be eligible to apply for
relief from Covid-19 stimulus payments, a bailout that Airbnb is also asking
the national government to extend to hosts in Canada.
These
measures could help the company regain goodwill from hosts, which will be
important once tourism revives. But when that revival could come, the form it
might take, and what it could look like in the cities where Airbnb has been
most prominent remain mysteries.
Mobilizing
for the crisis
For now,
many of those now unrented units are being put to good use. Short-stay hosts
worldwide have offered stays in over 100,000 units to people in need, whether
that’s accommodation for medical staff in Italy who want to stay near their
hospitals and self-isolate during the crisis, or homeless residents of cities
such as Barcelona, where the city has struck a deal to rent 200 short-stay
apartments to allow people who would otherwise be on the streets to self-isolate.
Beyond
that, there are many ways the situation might evolve when the immediate crisis
recedes.
A rural revival could come first
If, as the
crisis stabilizes, lockdowns are lifted and some travel resumes, home-share
listing in cities might not be the first to revive.
“I think
that in more isolated rural areas, Airbnb is likely to be pretty resilient,”
says Marie Hickey, head of commercial research at U.K. real estate consultants
Savills. “It could be the case that we don’t see a truly sustained recovery in
overseas visitors until well into 2021, and the market that will bounce back
quickest may be the domestic leisure market.”
While
people might be more wary of traveling to other countries, urbanites who have
been cooped up in city homes under lockdown may well take the opportunity to
travel somewhere nearby for some open space and fresh air once it is safe to do
so.
Hotels fight back
When travel
to cities returns, it may not be Airbnb that reaps the benefits. Some experts
think there may be a medium-term swing back toward traditional hotels once the
travel industry starts to revive, due to fears about how consistently hygiene
standards can be enforced in the home-share market. “People might be less
inclined to book Airbnb after the recovery due to perceived cleanliness issues”
says Michael O’Regan, senior lecturer in marketing at the U.K.’s Bournemouth
University. “They simply can’t guarantee a deep clean on a host-to-host basis
after every guest.”
Following a
period where social mixing has been discouraged, travelers might nonetheless
remain wary of sharing hotel spaces that have a large turnover of guests mixing
in public. Hickey thus predicts a possible swing toward a previously niche
sector: apartment buildings that are run by hotels. “We might see serviced
apartments, or so-called aparthotels, being the main beneficiaries of the
situation,” she says. “They’re similar to Airbnb listings but you have that
confidence as a user that they’re being operated just like a hotel, with
regular cleaning and health and safety precautions.”
This sector
has already grown in recent years, thanks partly to the concept of staying in
apartments while traveling being so widely publicized by the Airbnb boom. It
might now stand to be the quickest sector to recover. That wouldn’t be a bad
thing for cities in need of cash — hotel-type accommodations generally
contribute more in tax, and are on a scale to support full-time employees.
Ex-Airbnbs return to the long-term rental market
The
downturn is going to force a lot of Airbnb landlords to find alternative ways
to pay off their loans — possibly by finding longer-term tenants.
Indeed,
there’s already been much online discussion — some of it gleeful — of Airbnb
units filtering back onto the long-term rental market. In Dublin, for example,
the number of one- and two-bedroom apartments available for rent in Central
Dublin hit a five-year high in March, with several of the listing photos
betraying the apartments’ past as tourist accommodation.
A similar
trend seems to be taking place in in London and Madrid. In Amsterdam, some
short-stay landlords are taking the optimistic approach of looking for longer
term tenants — but only until the summer.
Many might
welcome the disappearance of at least a proportion of home-shares as a long
overdue correction. It’s certainly possible that quality of life for residents
might improve in some heavily touristed areas — such as Barcelona’s Old City —
if more apartments had full-time tenants, thus reducing noise nuisance and
supporting a broader ecosystem of locally focused stores and amenities.
The long
road back to business as usual
But there’s
another possible outcome — that this massive global shock to the lives of
millions of people ends up, over the longer term, changing little. “There was a
lot of discussion during the SARS and MERS epidemics about how it might change
people’s behavior” says O’Regan, “but things ended up going back to business as
usual pretty fast. I don’t think Covid-19 is a fatal blow. I think a lot of
people will go back to hosting.”
Neither of
those global outbreaks were nearly as far-reaching as the Covid-19 pandemic, of
course — and the present crisis has yet to crest — but when cases start
trending down, there might be intense pressure from cities and people hungry
for income to return to business as it was as quickly as possible. In
Amsterdam, for example, the pandemic is costing the city €1.6 billion a month.
With much of that lost from hotels, restaurants and catering, many people will
not be worrying about overtourism for a good while.
The crisis
may also shed light on one major criticism of Airbnb — the accusation that it
exacerbates urban housing shortages by removing apartments from the longer-term
market. In cities that have been the most vocal about the effects of short-term
rentals on housing prices and quality of life, such as Paris and Barcelona,
it’s possible that the tourism hiatus could expand the rental market and ease
affordability for locals.
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