What happened to Airbnb?

Airbnb knows people are unhappy. Its CEO, Brian Chesky, has acknowledged the “tens of thousands” of complaints across social media about the platform’s growing costliness. It knows that hosts’ expenses — like home insurance, property taxes, and the cost of labor for cleaning and maintenance — have climbed amid a period of high inflation. The internet is strewn with complaints of pictures that don’t match the actual property, extreme demands and rules from hosts, hidden cameras, reservations getting unceremoniously canceled, and more. And several cities are aiming to regulate short-term rentals, even setting down a de facto ban on them, as New York, one of the biggest Airbnb markets in the US, did in September.

Yet Airbnb, which launched in 2008, is also making more money than ever. Bookings reached an all-time high earlier this year, and the company raked in almost $2 billion in profits in 2022, marking its first full profitable year. Airbnb’s stock price is also up dramatically from where it was at the end of last year.

All this success is part of the company’s problem. What started as a scrappy idea offering an affordable alternative to hotels has now made Airbnb a target for lawmakers and a magnet for critics. Airbnb may not be collapsing, as some doomsayers are predicting, but it is facing a reckoning — an existential questioning of what it offers and where it will go from here.

The great pandemic Airbnb boom transformed the business

How Airbnb arrived here is complicated. Covid-19 was a giant blow to the travel sector, including Airbnb, as lockdowns reduced the supply of short-term rentals by a significant 25 percent, according to Jamie Lane, chief economist at AirDNA, a short-term rental data analytics firm.

Simultaneously, people also started wanting more space outside of dense cities. Interest rates were very low, so in general, people bought houses during this period — some to live in, others to rent out.

Meanwhile, the idea that one could get rich by becoming an Airbnb host — the gold rush-like dream that helped spur the company’s success through the 2010s — found renewed popularity on social media platforms like TikTok, Reddit, and YouTube. New hosts were encouraged by just how quickly demand bounced back: By 2021, domestic travel was revving up again, but concentrated on rural destinations where social distancing was easier. Supply couldn’t catch up fast enough, and Airbnb prices leaped. Amateur investors eager to meet the Airbnb demand bought up properties to turn into short-term rentals, piling in “when the rates were really low,” says Lance Lambert, a housing expert and editor of real estate analytics site ResiClub.

Between mid-2021 and mid-2022, the number of new Airbnb hosts in the US jumped by over 50 percent, and the growth was biggest in small towns, says Lane. Expansion, however, hasn’t been an entirely positive change: In some cases, Airbnb has rapidly changed the character of these neighborhoods from residential areas to tourist towns. Because there are so many more listings now, Airbnb hosts say they are watching their bookings plummet. The flood of new hosts has meant fewer can earn good money. “Now, the markets are completely oversaturated,” says Melody Wright, founder of mortgage strategy and technology company Huringa.

Meanwhile, excess supply hasn’t led to lower prices, and anecdotes about bad Airbnb experiences keep pouring in. Some of the most vocal grievances center on cleaning fees. In the US, only 15 percent of Airbnb listings don’t have cleaning fees, and a NerdWallet analysis found that cleaning fees now make up about a quarter of the total price guests pay. Airbnb’s service fee is generally under 14 percent on top of the nightly rate, and it also takes 3 percent from most hosts.

All this is encouraging a hospitality-industry doom loop: If hosts see their bookings drop, they might try to raise rates to make up for it (or at least resist lowering them), which drives guests back to hotels or the cheapest Airbnbs that tend to be run by bigger professional hosts who can afford to cut prices in ways small hosts can’t. If hosts try to lower rates to draw in more bookings, they might still be unable to turn a profit. “For both the guest and the host, it’s just not a good value proposition anymore,” says Wright. The only one winning, it seems, is Airbnb.

Airbnb did not respond to Vox’s request for comment. But Chesky has been vocal about listening and attempting to fix guests’ top gripes. In its 2023 fall update, Airbnb rolled out a site layout letting customers see the total price, including cleaning fees, when browsing listings. This feature follows the release of a new pricing tool for hosts that would display rates other hosts are charging nearby — a way to encourage hosts to lower their prices. “We need to get our house in order,” Chesky told Bloomberg in a recent interview. Ultimately, Airbnb doesn’t seem to be able to — or perhaps won’t — rein in the high rates and fees customers are grumbling about, and hosts continue to bemoan that they aren’t given the support they need to thrive.

Why are cities cracking down on Airbnb?

Airbnb began as a more flexible, more social experience than hotels, but that sense of peer-to-peer exchange has all but disappeared. Airbnb hosts today are often professionals who intend for hosting to be their main job and source of income, and new hosts often list entire homes rather than home-sharing their primary residence. Many form LLCs, hire employees, or engage the services of professional property management companies to manage their listings. The majority of Airbnbs are run by hosts with multiple listings. That’s contributing to the persistent shadow now looming over Airbnb: the perception that it’s a social ill worsening the housing crisis.

Last May, Curbed reported that the number of Airbnb listings outstripped the number of available apartments for rent in all of Manhattan, Brooklyn, and northwest Queens. That lopsidedness is happening in many other cities, too. Asheville, North Carolina, has 2,881 properties — not private rooms — listed on the service as of September, according to Inside Airbnb, a site collecting data on Airbnb units to show the company’s impact on residential communities. At the time of writing, there are a little over 250 long-term rentals listed on Zillow. Austin had 12,205 full-property Airbnbs and about 3,700 long-term rentals. Skyrocketing rents in the past two years have been a major issue in both of these cities.

The national housing shortage has led to more scrutiny of Airbnb as short-term rentals constrain housing supply that would otherwise be available for residents. Studies have shown that Airbnbs raise home values and rents, and the impact tends to be bigger in very densely populated areas where the housing shortage is worst. A 2018 report from the NYC Comptroller’s office estimated that 9 percent of the city’s rent increases between 2009 to 2016 could be blamed on Airbnb.

It’s not just cities. The Airbnbs that have moved into rural America at full force are also becoming an intense concern for residents facing ever-higher rents and home prices there.

“Take somewhere like Missoula, Montana,” says Wright. The small city of about 77,000 people had 60 homeless encampments as of August 2022, while the state has seen a 62 percent increase in homelessness since 2019. “Missoula never had a homeless situation, not like this,” Wright says. The median listing for a home is now over $600,000 there. AirDNA currently shows over 600 active short-term rentals in Missoula, the vast majority of which are entire homes, while Zillow shows just over 200 long-term rentals. Other small towns are facing similar rapid changes. Sedona, Arizona — a town with under 10,000 residents — is running rampant with short-term rentals as its reputation as a tourist destination grows. As of 2021, as a report from Wired last year highlighted, 15 percent of Sedona’s housing supply was listed as short-term rentals. Right now, AirDNA shows about 2,800 active listings for entire homes; Zillow shows about 50 long-term rentals. The median price of a single-family home there is now over $1 million.

“And so you have no affordable inventory for anyone anymore,” says Wright.

Anti-Airbnb neighborhood groups have been popping up in communities for over a decade now, and though they’re spread all across the country, their grievances are similar: They don’t want higher rents and property prices, and they don’t want to be surrounded by noisy Airbnbs occupied by a revolving door of strangers. Plus, there are some unexpected knock-on effects when there’s a housing shortage exacerbated by short-term rentals: Amid a national teacher shortage, for example, schools struggle to find teachers because many can’t find affordable housing in the area.

Can Airbnb fix its problems?

The relative slowness of Airbnb regulation, happening in piecemeal fashion across the country, is why so many regions now find themselves overrun with short-term rentals. The era of an unfettered short-term rental market, however, is over.

New York, San Francisco, Los Angeles, and Honolulu are among the major cities that have passed short-term rental restrictions of varying strictness. In New York, hosts must now register their short-term rentals listed on sites like Airbnb, firming up enforcement of its existing short-term rental laws, including a 2016 bill that limited a host to listing just a single address on Airbnb and banned stays of fewer than 30 days. These measures essentially eliminate professional hosts from taking long-term rentals from locals. San Francisco and Portland, Oregon, have similar “one host, one home” policies. A study conducted by Ralph Siebert and Zaiyan Wei, professors of economics and management, respectively, at Purdue University, found that the policy reduced rents and home values in these cities by an average of 3 percent. “With the restriction, people stopped buying properties from the local markets, or they put more properties back to the long-term rental market,” Wei told Vox. He expects the new NYC law to have a sizable impact on rents and home values.

Other cities and towns require hosts to register their short-term rentals and pay a fee, but they don’t put a residency requirement or limit how long the property can be rented out as an Airbnb. In some cases, enforcement of new regulations is delayed as Airbnb and hosts fight back. To block short-term rental restrictions in San Francisco, the company spent over $8 million; it sued the city of New York in an attempt to stop the latest restrictions from going into effect and allegedly rallied hosts to lobby the city.

As for what’s needed to win back customer goodwill, that’s simple: “Economics will win here,” says Lambert. Hosts that keep their nightly rates too high won’t get the number of bookings they need to be profitable, and could simply exit the short-term rental market.

Yet Airbnb keeps pushing for more hosts to join. It was a core goal of a shareholder letter released earlier this year, with the company stating that it wanted to turn hosting “mainstream.” “Look at their earnings reports — their only strategy is increasing listings on the platform,” says Wright. It has been working, but it’s also exacerbating some hosts’ struggle to stay in business. More listings while demand slows might mean lower nightly rates, but even if Airbnb prices do come down, there’s no indication Airbnbs will ever return to being the cheaper, cozier alternative to hotels.

“The economics for Airbnb and for hosts are very different,” says Lambert. For the company, it’s probably a good thing to have as many hosts as possible. For hosts, the opposite is true.

It’s a predictable arc seen among some of the biggest tech companies of the past decade, such as Uber or Netflix. At first, affordability and convenience won over customers, but many have similarly soured on these services when the companies raised prices.

“When Airbnb rolled out, everybody thought it was going to kill hotels,” says Lambert. “And it really just became hotels.”