Sometimes the disruptor gets disrupted — then what? Fifteen years after upending the travel industry by enabling regular people to rent out rooms, houses and apartments to travelers, Airbnb is now having to contend with an industry that’s fighting back.
Earlier this month, New York City’s Local Law 18 officially went into effect, requiring short-term rental hosts to register with the town to be approved. The restrictions, which notably requires hosts to each live in and be present within the space where they’re hosting guests, severely limit the flexibility of tourists to stay in apartments in prime locations when visiting the town.
While New York’s restrictions could also be a number of the tightest, the list of communities enacting such laws is growing. Cities similar to Dallas, Memphis, Quebec, San Francisco, Paris and Barcelona have implemented laws restricting property owners’ ability to conduct short-term rentals. In lots of these cases, Airbnb has worked with local officials to preserve its ability to operate while addressing their concerns.
Still, Airbnb has called Law 18 a “de facto ban” on its ability to do business in the town, declaring that “the town is sending a transparent message to tens of millions of potential visitors … You usually are not welcome,” Theo Yedinsky, global policy director for Airbnb, told Wired. However, the impact on Airbnb’s overall business could also be minor. Despite the high-profile dwellings in major metropolitan areas, Airbnb’s bread and butter business is in so-called “cottage communities,” where such rentals usually are not only common, but also they are welcome.
“It won’t affect them much in any respect,” says Marcus Rader, founder and CEO of Hostaway, which creates software for property managers and Airbnb hosts. “If you take a look at where [most of] their business is, it’s not within the cities.”
Indeed, the appeal of those secluded rentals, where affiliated groups (families, friends, neighbors) can stay together in a spot that is not home grew significantly in the course of the pandemic, when people were limiting exposure to unfamiliar people and crowded areas like large cities, says Jamie Lane, chief economist for short-term rental data insights company AirDNA.
“During the pandemic, more people than ever before discovered short-term rentals, as they searched for trips in drive-to and rural locations, away from urban centers, and preferring extra space for his or her family groups,” Lane said.
Airbnb is playing up these “only those you recognize and what you wish” qualities in its latest global promoting campaign. Currently running on digital video and social within the United States and Canada — and rolling out to the remaining of the world later this yr — the hassle compares the advantages of staying at an Airbnb rental over a hotel.
One spot, as an illustration, shows a bunch of friends arriving at a hotel pool that is full of youngsters. “If you’re finally ready to make a journey without the children, why stay at a hotel with more kids?” asks a voiceover. The scene quickly shifts to a non-public residence with a non-public pool because the voiceover says, “Get an Airbnb and get a spot to yourself.” A second spot within the series wonders why a bunch of friends traveling together would pay for separate hotel rooms to be aside from one another.
Most recently, the corporate on Sept. 13 unveiled a 3rd spot that showcases the quantity of space obtainable by booking through Airbnb, including the flexibility to stay in a multi-story home, as opposed to staying at a standard hotel. The campaign’s playful spots were made in collaboration with Buck Animation.
The company has also launched quite a lot of marketing initiatives — similar to making a rentable version of Barbie’s Malibu Dream House and a chance to rent from actors Ashton Kutcher and Mila Kunis — that highlight the experiences the platform provides that hotels cannot.
So far, the restrictions in large metropolitan areas don’t seem to have had a major effect on Airbnb’s overall business. In the second quarter of 2023, the corporate reported revenue of $2.48 billion, barely higher than analysts’ expectations. Revenue grew 18% year-over-year, and the corporate’s net income reached $650 million, compared with $379 million within the year-ago quarter. The company also reported $19.1 billion in gross booking value for the quarter, up 12% YoY.
“Despite some negative press over the past few years, short-term rentals are doing higher than ever: July 2023 saw probably the most nights stayed within the U.S. in a short-term rental on record, 9.4% greater than in July of last yr,” says AirDNA’s Lane.
In fact, restrictions similar to New York’s Local Law 18 can have a greater impact on the town’s residents and tourism economy than the corporate. Particularly in areas with high housing costs, homeowners’ ability to lease properties to visitors could be a critical source of supplemental income to sustain with those costs.
“While no individual city represents greater than a tiny percentage of Airbnb’s revenue, it is after all devastating for those renting out a part of their home in New York who relied on the revenue to help make ends meet,” Lane says. “[It is also] disappointing for guests who are actually left with few options for staying in New York, and even fewer inexpensive options.”
Or moderately, fewer options within the prime locations. As Hostaway’s Rader notes, few cities are islands unto themselves. The rental restrictions throughout the cities themselves create more opportunities in surrounding communities, he said.
“If everyone wanted to stay downtown, then all the hotels could be downtown,” Rader said. “Jersey City is just across the Hudson River.”
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