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Rentals vs Airbnb: Has COVID-19 shifted the tide?

Thursday, October 08, 2020

In 2008, Airbnb turned the hospitality industry on its head. For a company that owned no hotels or rental property, it was fast outpacing traditional accommodation. At the start of 2020, it showed no signs of slowing down, continuing to disrupt its industry. But only a few months later, Airbnb is a struggling business, having retrenched a quarter of its workforce before we were even halfway through the year. In addition, Chief Executive Officer Brian Chesky says the company expects to earn less than half this year what it did in 2019. The cause? COVID-19 of course.

Around the world, countries have responded to the Coronavirus pandemic by shutting their borders and limiting social contact. The tourism and hospitality industries are arguably the hardest hit, with restaurants and hotels closing down in unprecedented numbers. Even those that are now open are struggling to fill rooms and tables, in part due to the legal social distancing restrictions placed on their businesses, and in part because people simply don’t want to risk contracting the virus. In South Africa, the tourism company Flight Centre has closed 40% of its branches and shut its cruising brand Cruiseabout, while Comair has entered business rescue. 

Airbnb, which thrived on the idea of casual in-home accommodation, has no place in our current Coronavirus world. Some countries that have begun allowing the hospitality industry to operate again have still not given the green light to Airbnb accommodations, including our own. While licenced accommodation has been allowed to operate from level three, Airbnb has specifically been banned. This could be due to the inability of the government to regulate whether or not hosts will abide by laws to sterilise their rentals and enforce social distancing, but we can’t be sure because the government hasn’t stated its reasons.

Is this the end of Airbnb after just 12 years of business? Let’s take a look.

 

Airbnb today

In a bid to start operating again, Airbnb has launched a cleaning protocol for hosts where they can participate in a learning programme and earn a certificate. Achieving this certification indicates hosts understand cleanliness and take the prevention of the spread of the virus seriously.

In countries across Europe, where borders and tourism are slowly opening up again, Airbnb is seeing a spike in bookings from locals. Some Airbnb managing agents say that before the pandemic, nearly all bookings were from foreigners. Now, just about every booking is local. The company has caught on to this too. On its homepage, Airbnb is currently advertising local nearby getaways, which shows their understanding of their current market. Perhaps this is an indication Airbnb will find a new way to make money in a post-COVID-19 world.

Airbnb in the future

Another revenue avenue for Airbnb is long-term rentals, and the company has already begun investing in this; the search bar for monthly stays is also front and centre on their homepage. For the foreseeable future, long-term rentals might well be the bread and butter for the company and its hosts. These kinds of rentals might not be as lucrative but they are more reliable, which is what people are looking for during this time of uncertainty. Data analytics company Global Data says more and more hosts are moving their property rentals off Airbnb and onto platforms catering to month-to-month stays. However, if Airbnb can focus its business more on long-term stays, hosts may rejoin the platform in the future.

Here are helpful business insurance tips

 

Regulations on Airbnb

Over the past few years, Airbnb has been subject to new regulations in various countries in a bid by governments to combat a number of issues. In many European countries, people have bought property to rent out to tourists while locals find it harder to find affordable accommodation for themselves. In South Africa, the Tourism Amendment Bill, announced in 2019, aims to crack down on Airbnb rentals as many felt the laws faced by the hotel industry should also apply to these short-term rentals. The Bill seeks to place strict limits on how long an establishment can rent their place to one tourist, along with a cap on how much can be charged per night. Even before the pandemic hit, hosts – especially those who do so for a living – were facing major changes to how they do business.

With these stricter laws, the company already hasn’t had it as good in recent years as it once did.

The future for hosts 

The hosts who rent their homes and properties on Airbnb will share a similar fate if they can’t get into the long-term rental market. Worldwide, the platform has over seven million listings. In South Africa, there are around 35 000 hosts. While many hosts around the globe make their livings from renting out multiple units, most of the hosts in our country are freelancers, part-time workers, and stay-at-home parents who use their rental income to supplement other income. Should Airbnb not come out the other side of this pandemic, these people will need to find a new way to supplement their income. Not all will be able to make it in the long-term rental market.

The future of rentals

Airbnb may be trying to get more into the long-term rental market, but the fact remains that renting a house for, say 30 days, is easier said than done. For countries with stable economies that will recover relatively quickly after the pandemic, it is a real option for hosts. In South Africa, where our economy will take years to recover to an already recessive pre-pandemic state, it’s anyone’s guess how the rental market will perform. Seeff Property Group believes the rental market will boom after the lockdown has been fully lifted, but rental rates are likely to come down a lot. And while this industry is not exactly the same as the tourism rental market, it’s a good indication of the state of the economy and how people will need to adjust in the post-Coronavirus world.

 

In the bid to dominate the tourism accommodation industry, which will prevail – short- or long-term rentals? At this point, we can only wait and see.

 

Get a Dialdirect Business Insurance quote in minutes online or leave your details and we’ll call you back. There is no time like the present to start protecting your business. Sources: The New York Times; Business Insider; Euro News; Wired; Bloomberg; Business Tech;