The home-sharing market around the world has been extremely affected by the COVID-19 situation. Flights getting canceled and people scared of getting infected or spreading the virus has created a huge wave of short term rental booking cancellations that have seriously affected Airbnb hosts. The real question is can the industry’s leader survive to this lockdown?
Airbnb’s exponential growth has driven new entrepreneurial spirits to a new market focused on buying properties dedicated entirely or even partially to hosting through Airbnb and other similar rental platforms. But how are these owners facing the crisis of tons of canceled reservations and full money reimbursements to guests?
Out of the on-demand services — including Lyft, Uber, Doordash, or Instacart — Airbnb has suffered the most. It has proven to be really unstable during the pandemic as hosts saw $1.5 billion in booking evaporate when the U.S. started following the social distancing guidelines in mid-March.
The main problem hosts are facing is caused by non-stop expenses and mortgage payments every month. It is not just the fact that there are no upcoming reservations, but also the full refunds to guests for booking from March 1st to May 31st. The income from these reservations was already expected to pay lots of mortgage payments, which has caused owners to start looking at how to resale their properties without getting into a foreclosure.
Even if there are too few Airbnb properties to say this company’s emergency will cause a housing crisis, it is undermining the property value as homeowners are pressuring to sell without minding if they have a small loss to avoid expropriation.
One-third of the entire Airbnb host community own 25+ properties, which means they have created mini short-term rental empires in Airbnb-approved properties such as the W Residences condo, the Mondrian South Beach condo, or the Four Seasons Residences. The Coronavirus has taken them by surprise and has left them without earnings to pay loans or cleaning and maintenance services.
Airbnb has responded to the host’s complaints by creating a $17 million fund to help the top-rated hosts cover their mortgages. The government on the other side has decided to include hosts under the Cares Act (Coronavirus Aid, Relief, and Economic Security Act), which allows them to be eligible to request small business loans that just approved another $484 billion.
Hosts are deciding to leave the short-term rental market aside at least till the COVID-19 crisis calms down and has started to look for 12-month rentals to secure some kind of income. However, as said by Nick Papas, Airbnb’s spokesman, ‘this slowdown will be temporary, and traveling and hosting will get back to normal at some point’.