This year has been an eventful one for short-term rentals around the world: The boom-bust saga and seeming unending fights about new regulations.
06.12.2023 - 04:27 / skift.com / Srividya Kalyanaraman / Steve Milo
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
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This year has been an eventful one for short-term rentals around the world: The boom-bust saga and seeming unending fights about new regulations.
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