Is AirBnb Hosting a Poor Business Decision?

The PropTech startup called AirBnb™ has enjoyed tremendous success helping generate exceptional profits for many homeowners who rent out their home or part of it.

They’re certainly an interesting entity, and by studying them, you might gather strategies and tactics to help grow your profits.

The global revenge travel boom in 2022 revenues hit an astonishing $8.4 billion.  Airbnb revenue for the 12 months ending June 30, 2023 was $9.088B, a 23.1% increase year-over-year .– evidence that many landlords continue to join the network.

However, is venturing into the booming short-term rental sector a better business decision vs long term leasing? Is converting some units to short-term airbnb/vrbo rentals a valid diversification tactic? Exploring the opportunity for info, might help you find ideas to improve your rental income and the way you market and do business.

Booming Travel and Short Stay Demand Market

Airline travel this fall remains very brisk globally. Revenge travel continues.  According to a report, (RevPAR) short term rental revenue increased across Europe and globally through June, jumping 5.7%.  A Forbes Travel poll found that 87% of Americans will do the same or more travel in the remainder of 2023. There is demand. The US has lagged the world in short-term travel.

Quite a few Americans, Brits, Australians and Canadians do make a living off of Airbnb, or fund their own travel experiences via funds earned through it. Airbnb has many enthusiastic owner customers and renters.

But is the lure of converting homes or apartments into Airbnb rentals one of the worst ideas a property owner can make? Does it open your investment, home or landlord business to extreme risks that one day could wipe you out? Is there a risk you could be kicked out of your HOA, community or multifamily development?

It’s a risk that might be downplayed by homeowners who think they can manage all situations. Yet, tenant management has its challenges. And without proper vetting of renters, the risks are many.

Whopping Rent Prices Attract Owners

The average Airbnb host earns about $1000/month. According to alltherooms.com, the average Airbnb price globally in 2021 was $137 per night. It’s an average $150/night in the UK, $208/night in the US, and $129/night in Spain.

In Arizona, it’s more lucrative at $287 a night, Massachusetts at $222, New Hampshire at $237, and Hawaii at $248 a night. In Austin landlords get $416 a night, Miami $207, and Nashville, $329 a night. There are incredibly high rental rates of thousands per night. 3 or 4 nights of bookings could exceed what landlords were earning via monthly or yearly long-term leases.

It Started as a Great Idea Solving Big Consumer Demand

As Sam Kemmis of NerdWallet relates in his recent post on Airbnb rental management, what started out as a great idea for the travel industry has been converted into a utility which can be abused by unscrupulous people (not travelers) leading to willful damage to property and local communities. So is it a trap, or an opportunity for landlords?

Airbnb and short term vacation rentals are banned in some communities and HOA’s. HOA management staff would be on the lookout for such rental businesses operating in their communities.

Serious Losses Hard to Prevent

News headlines, Tweets, and Facebook posts are flush with stories about shootings and property damage from inebriated, enraged, or drug-induced partygoers. These are events that lead to severe stress, damaged relations with neighbors, legal battles, and big financial losses.

If you’re still considering going the route of temporary rentals vs long-term home rentals, it might be best to review the potential losses including smoke, furniture and appliance damage, theft, fire, insurance increases/cancellation, and other liabilities. Because Airbnb’s system is not able to vet renter’s backgrounds and intentions. There are questions about Airbnb’s customer service as well.

Background checks, references including previous landlords, all help landlords such as yourself avoid the mayhem suffered by diving into the short term rental market whether it’s Airbnb, VRBO, or others. As Kemmis stated, it’s like a game of [Russian] Roulette.

Real Life Story of Material Loss via Airbnb

“My condo caught on fire on August 23, 2023. It is almost a total loss. It is not clear yet what is the cause. I am still waiting for the fireman report. I have received email from the resolutions team which adds item by item my personal belongings. To me, it makes no sense as the whole place burned down. I have sent photos and videos. I have tried to contact Airbnb several times. Each time I have to explain the reason why I’m calling as there seems to be nothing on the file. How can I manage to talk to someone that is familiar with AirCover for Hosts?”

It is frustrating to always have to talk to someone on the front line and has no idea of what I’m talking about.”  — community.withairbnb.com

Risks of Hosting with Airbnb

• damage to contents
• theft of TV’s, appliances, and other property
• cleanup costs from wild parties
• late checkouts anger incoming renters
• fire and flood
• injury to guests
• insurance claims have to be made
• home insurance costs rise or cancellation of home insurance
• renters squat in the unit
• low booking rate and unpredictability
• cleaning costs eat into profitability
• unit used to host scams and illegal activities
• renters bring guns/drugs/criminals and illicit activity into the unit

For many homeowners, the income derived is too necessary and many have purchased the property specifically to host Airbnb/VRBO renters. Some look to private landlords/property management companies for management and maintenance and find it is profitable.

With insurance and strong defensive management practices, a property management company may be able to control some of the risks. Talented property managers can reduce business risk.

Owners may be able to require minimum stays, security deposits, and charge rental rates above a threshold which would help to raise the price high enough that undesirable people won’t book.

Airbnb’s screening process is primarily for financial fraud. The rest is your business.

You might improve by:

• verifying the identity of all renters personally for a “Verified ID”
• checking social media profiles, online reviews to find social tags/names that could identify them
• requiring a large deposit and speaking to the renter personally.
• affixing expensive furniture, appliances, TVs to floors/walls to eliminate theft

Remember that although the renter looks legitimate, it’s who they bring to your rental unit that may be the real threat.

If you’re weighing an Airbnb hosting venture’s pros and cons, reconsider the many ways you can improve the marketing of your home rental, optimization management and maintenance of long-term rentals. It comes with less headaches and risk, peace of mind, and lower costs.

Read more on the ManageCasa blog on management and marketing topics so you elevate your revenue and manage like a pro.

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