In addition to this, Reventure Consulting CEO Nick Gerli recently tweeted how revenues are down nearly 50% in major cities, making rental hosts and side hustlers fear the future.
“In the first six months of 2022, we were booked for 88% of the days, excluding days required to clean and prepare for new guests. However, this has dropped to 71% this year, resulting in a 24% drop in income,” says Andrew, AirBnB Host and project manager at Sofilmar. Andrew isn’t alone; there are many hosts with the same complaint.
The question remains: Is Airbnb still a profitable side hustle?
The Debate On Nick Gerli’s Claims
While Nick Gerli claims a revenue drop of 47.6% in Tennessee, 47.2% in Phoenix, and 46.1% in Austin, Dennis Schaal from travel news site Skift believes the claims are exaggerated.
Gerli claimed that revenue per active listing in the New Orleans metro area was down 37.1%, but AirDNA, a site tracking data and analytics for the short-term rental industry, pegged the decline at only 1.2%.
Melanie Brown, executive director at Key Data, also argues the decline is not as dramatic as Gerli claimed.
What Airbnb Owners Say
While most Airbnb hosts saw decreased revenue and bookings this year, many attributed it to increased listings.
Noah Cammann, founder of Florida State Online, says, “In 2022, I had 85% occupancy, but it dropped to around 70% this year. The oversupply of Airbnb accommodations in my area has played a part in this trend. “
Similarly, in an article for Business Insider, Ric Kenworthy, owner of Old Town Rental, which manages 95 Airbnb properties in the Phoenix area, revealed that his occupancy rates were only at 45% two days before the Superbowl kickoff, even after cutting down the costs from $1200 to $500.
He blames the locals, who don’t typically rent their spaces, wanting to ride the wave and make quick money.
Sarah, a blogger at DukesAvenue and a former Airbnb property owner says, “Over the years, the supply of properties in popular cities has increased to the point where renting out via Airbnb may no longer be viable.
It’s not just a case of funding the property mortgage in a higher rate environment; renting out a home on Airbnb requires insurance, licensing with the relevant authorities, taxes, fees to the platform, maintenance fees, cleaning and management fees, and more.
Bookings Declining as Travel Spending Increases?
According to AirDNA, Airbnb listings in the United States reached an all-time high of 1.4 million in September 2022, up 23% from the previous year.
Airbnb 2023 quarterly results also reveal that the overall nights and experiences booked at Airbnb grew by 19% in 2023, and their supply shot up by 18%. In short, the demand for vacation rentals rose, but so did available listings.
However, the supply is not expected to keep rising owing to the rising interest rates deterring new investors. Still, a 9% growth is anticipated from existing homeowners yet to list their properties.
Due to this increased competition, many rental owners must revisit their strategy to stay booked.
Other Factors That Also Bookings:
- Off-Season Travel
Airbnb reports that the top-earning weekends for hosts in 2022 were non-holidays, suggesting that any time could be an excellent time to become a host and start earning.
It could also suggest that travelers aim for off-peak seasons to avoid crowds, explaining the vacancies during profitable weekends like the 4th of July or the Super Bowl event.
- Rise in Offbeat Places
There has also been a surge in tourism to smaller cities and offbeat destinations.
“On average, we have noticed a decrease of about 10% in bookings in major cities in the last year. Comparatively, bookings for rural and secluded properties have increased by around 15-20%,” says Shri Ganeshram, the CEO of Awning.com, a company that helps investors navigate the real estate market.
- Need For Places That Are Instagram-Worthy
A study of over 1,000 millennials in the UK showed that 40% cite choosing a hotel based on its Instagram worthiness. However, a lot of Airbnbs need to be more focused on this.
“We rent a unique A-Frame tiny home in the Catskills, NY. We have rented this property for under a year, so we still need year-over-year projections, but when compared to a previous Airbnb property we owned in Joshua Tree from 2020-2022, our A-Frame is doing very well.
“Our occupancy rate for the past year is 71%, which far exceeds the 48% average for our area. Our nightly rate ranges from $232-$440, a premium compared to similar properties that primarily house two guests at a time. Our net profit goes from $1500 during the low season to $3500 during the high season. We attribute the success of our property to its unique design and its focus on engagement with the surrounding forest nature,” says Brian Wong.
Location and Distance From Tourist Places
A lot also depends on the location of your property.
“Our numbers are up slightly because we are in a high tourism area, Yellowstone, and we are a cheaper alternative to Jackson Hole. We are in Alpine, WY, 40 miles away. People are looking outside the tourist areas for low-cost alternatives. In 2022, we did 50k; in 2023, we are on pace for 50-55k.” says Gino Sesto, Founder of Dash Two.
Similarly, Airbnb reveals that flexible bookers are 10% less likely to book in Miami and 10% more likely to stay within unincorporated Miami-Dade, outside the municipality boundary.
What Airbnb Is Doing To Protect Hosts
Airbnb says, “This year, we have reported high demand for travel, and we’re always looking at new ways to support our Host community so they can attract more guests, which is why we introduced new pricing tools to help Hosts set competitive prices in May.”
The typical Airbnb Host in the US earned approximately $14,000 last year, demonstrating that Airbnb remains a strong income generator for our Host community as we continue to innovate with our Hosts in mind.”
The pricing tools also help hosts understand the price breakdown of what guests pay and hosts earn and invite co-hosts to help manage their listings.
Airbnb recently launched Airbnb Setup, allowing new Hosts to get one-on-one guidance from a Superhost. The company is constantly working towards improving the experience for travelers and hosts.
Is It A Good Side Hustle Right Now?
To jump into vacation rentals, you must have a strategy and dig deep into trends before spending a dollar. Gone are the times when you could jump on any city and any property and make money renting it out.
Kent He, a real estate investor, recommends using tools like AirDNA to understand rental demand in your area and PriceLabs to select a market in need to increase your chances of profitability.
Besides that, Airbnb releases data reports to show the trends that could help make decisions. In 2022, US hosts on Airbnb welcomed more than 44 million guest arrivals to areas without hotels and claimed an increase in non-urban travel.
I completed a 70k renovation to a property last year, which allowed me to price higher and ultimately led to a 25% increase in booking income per reservation.
“Overall, the old way of thinking about these investments as simply a ‘place to crash’ with basic amenities no longer cuts it. The current data showing heavy decreases in bookings this year is without a doubt influenced by a saturated market of ‘of-the-mill’ houses that don’t have that special edge to keep people coming back,” says John Lanpher, Airbnb Host
Investing in one-of-a-kind properties, unique selling points, offbeat locations, or renting existing properties is the most feasible option to make money with Airbnb right now.
This article was produced and syndicated by Wealth of Geeks.
