Why Airbnb no longer works for most

Question

Hey everyone,

Jumping into something that's been bugging me, and I'm guessing some of you are feeling it too. Let's talk about Airbnb. It used to be the go-to side hustle, but lately, it seems like it's lost a bit of its shine. I know this might be a bit touchy, especially for those of you with stakes in real estate and Airbnb gigs.

Here's a scenario: Your home suddenly needs to be left behind due to life changes. The obvious choice seems to be selling, but then comes the tempting Airbnb pitch: "Turn it into a cash cow." Sounds pretty good, right?

So, you dive in, hoping to hit it big as Airbnb's next success story. But the market's tougher than you anticipated. It's oversaturated, and you find yourself having to cut your prices to stay competitive. The advantage you have? You got your house pre-pandemic at a steal and refinanced at those incredibly low rates, allowing you to undercut the competition significantly. This is precisely what's fueling the saturation issue.

You're not alone in this. Many are entering the market with high hopes, only to find themselves in a crowded space, leading to a race to the bottom on pricing.

This pattern of homeowners turning to Airbnb, thinking it'll be an easy win only to find the need for constant price adjustments, is reshaping the market. For those thinking about making the switch to Airbnb hosting, be warned: the landscape is evolving, and not necessarily to your advantage.

This isn't about scaring you off but rather painting a picture of the current Airbnb scene. The game has changed; being fully aware before jumping in is crucial. While some of you might be doing well with Airbnb, attributing it to the right timing or location, not every story is a success story. And it's worth noting, many of us pushing Airbnb have a stake in its success. The revolving door of homeowners trying and then abandoning Airbnb adds to the platform's challenges.

Like Uber did with drivers' resources, Airbnb is leveraging homeowners' properties. The real winners here are Airbnb and the guests who enjoy lower rates than traditional hotel stays. And let's not forget the ecosystem that supports this—realtors, property managers, cleaners, photographers, stagers, etc.

Let's keep this conversation going. Sharing your views, stories, and insights helps us all navigate the shifting tides of the Airbnb market.

Catch you later!

Brian Barch · Answer

To me, this is more about false expectations than it is any Airbnb failing.

I still scratch my head when I hear people talk about Airbnb failing them simply because they didn't instantly start clearing $1,000/mo.

I mean, great if you are, but if that's your expectation than you are misunderstanding the STR asset class.

Travis Timmons · Answer

The market matured and margins compressed. It's a sign of a healthy market evolution. Water is finding its level and good operators that know how to properly underwrite deals are doing and going to be just fine.

Andrew Steffens · Answer

I think the problem starts with people who own "an Airbnb". If you put all of your investment eggs in a proverbial Airbnb basket, you are already setting yourself up for failure. I have been in the short term rental business since 2016. I live, work, and operate in a traditional vacation market and a booming up and coming city, Tampa FL. I own 9 STR's and manage about 60 more. We did at one point have about 100 total doors. Many of the get rich quick types or borderline slumlords who tried to get into STR are all gone at the first sign of market correction. Everyone left standing understand this is a long term investment which pay dividends in reasonable cash flow and appreciation.

This is also not a side hustle, or it should not be. You either treat it like a business (or hire a professional PM if you are unable) or you will fail. This industry, like any other, produce winners and losers. There was a short period of time where nearly everybody was a winner but the cream has risen to the top and the rest have spoiled. As mentioned above, it is a sign of a healthy market cycle.

Ned J. · Answer

I've never actually used an Arbnb but have looked a few times. After all the tacked on fees that have been climbing (some of the cleaning fees were crazy in light of what they expect you to do to clean it yourself), I didn't see a huge benefit vs a traditional hotel.....so I passed.

Sarah Kensinger · Answer

I don't know what the point of this post is either, since most of us didn't just throw a previously lived in residence on Airbnb. Of course, it should be expected that those who made that choice wouldn't do well! The property wasn't underwritten, the homeowner saw money signs instead of reality, the market and guest avatar weren't researched, and good chance the furniture and decor were 15-20+ years old. The perfect recipe for Airbnb failure!

Trent Reeve · Answer

i would say, 1 - surge in new listings isnt a new trend, its been happening for years. Especially since people have realized they can turn it into a business and not a hobby.

2 - i dont see people turning their primary homes into Airbnb's. they need to move, they sell them. They are selling them because home values are going up and cashing in on that. Where are you getting your data that home owners are not selling and turning them into rentals?

Bruce Woodruff · Answer

VRBO is generally much easier to deal with than ABNB (IME), but that doesn't mean that the entire industry isn't changing. Over-saturation and ever stricter regulations are making a once no-brainer industry become a bit harder in which to succeed.

That's neither good nor bad, it's just made the STR gig more like every other industry. You have to be smart, do your research, work your arse off, and be careful.....

Brian Barch · Answer

It won't make sense for every traveler, particularly for a single, business traveler only staying one night, I might argue that STR's wouldn't make sense.But for a family of 5 that would have otherwise had to share 2 double beds and call in a cot from the front desk, it's a no brainer.My family of 5 was able to book a condo on the beach for 4th of july for 4 nights, about $250/night all in! Beats cramming into the Hampton Inn and paying the same amount for a crammed room and a highway view.

Tyler Warrick · Answer

Good take, and spot on with low interest rates killing it. I've had a lot of success with my property manager's going after Mid Term Rentals to supplement Short Term Rentals. For example, working with insurance companies who's clients home has been destroyed (fire, flood, wind etc).

I'm not the biggest fan of insurance, but have to recognize they will pay premiums for their clients to stay in homes for 2-6 months as the insurance company gets the home back in order. Has been very profitable for me (full disclosure, this aforementioned property does have a sub 3% interest rate as well).

Zander M. · Answer

@Tim J. I've spotted some trends in the STR market and am eager for some insights.

It appears there's a surge in new listings, causing occupancy rates to dip even as booked nights go up. Many homeowners seem to be converting their once primary residences into Airbnb rentals rather than selling, benefiting from their low-cost basis and the low mortgage rates they locked in.

This pattern could persist, possibly diminishing the profitability of STRs for quite a few. I've noticed this in my market have you noticed similar trends in your area?

Why Airbnb no longer works for most

Why Airbnb no longer works for most

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