Will Airbnb Crash in 2023?

Airbnb Article image

Despite recent speculations about the upcoming crash of Airbnb, the short-term rental industry is doing well, showing significant growth year-on-year.

A few days ago, the Airbnb rental industry was hit by yet another shock when Reventure Consulting published Nick Gerli’s analysis that an ongoing Airbnb bust will lead to a major housing bust.

The real estate expert is quoting 50% declines in Airbnb revenue in certain markets as evidence of an already occurring crash of Airbnb.

As you can imagine, this shocking news affects not only Airbnb hosts getting ready to sell before it is too late but also other real estate professionals and experts.

But before listing your Airbnb for sale, let us take a step back and examine why this data analysis might be somewhat misleading.

Here are four main reasons why talks about the imminent collapse of the Airbnb industry are not only premature but altogether ungrounded:

1. Airbnb Rentals Are Performing Better Than Last Year

In his analysis, Gerli uses short-term rental data from AllTheRooms.

Here, we will use analytics provided by the Airbnb calculator at Mashvisor, a US-based rental data analytics company.

According to Mashvisor’s analysis, the average Airbnb host in the US market makes $2,499 in July 2023.

This marks a sizable increase of 5.7% from July 2022, when the average monthly Airbnb income in the US was $2,364.

While this year-on-year growth of 5.7% is significant by itself, it is even more remarkable when we consider the 71% increase in the number of Airbnb listings over the same period (from 606,015 in July 2022 to 1,034,430 in July 2023), based on the same Mashvisor analysis.

So, there are not only more Airbnb properties on the market, but individual owners are also making more money from each one.

Importantly, this growth cannot entirely be attributed to inflation, which was 4% between May 2022 and May 2023 (latest available data).

All these factors indicate that the Airbnb industry is doing well, at least States-wise.

2. Revenue from Short-Term Rentals Continues to Exceed Revenue from Long-Term Rentals

After the successful launch of the Airbnb platform in 2008, short-term rentals quickly turned into a preferred real estate investing strategy for many investors.

The main reason behind it was the fact that, overall, Airbnb offers better results for investors than traditional, long-term rental properties.

In 2023, things are also continuing to look upward in this regard.

According to Mashvisor data, at the moment, Airbnb hosts make an average of 9.13% more per month than landlords: $2,499 vs $2,290.

Airbnb hosts are able to achieve this monthly rental income with an average occupancy rate of 51%, and a significant boost in the latter metric could lead to major increases in gross revenue.

With Airbnb rental income exceeding the income from long-term rentals, short-term rentals can easily be the more profitable real estate strategy if investors apply cost-efficient management tactics to push down operating expenses.

Despite the higher risks associated with owning an Airbnb business rather than a traditional rental business, it is worth it, considering the potentially higher returns as well.

Running an Airbnb business may come with more risks than a traditional rental, but the potentially higher returns make it a worthwhile investment.

3. Travel Activities Are on the Rise

Yet another reason owners should hold on to listing their Airbnb properties for sale is the travel industry trends and activities in the US.

Between May 2022 and May 2023, total travel spending went up by 1.4%, while air travel demand increased by 10%, based on data analysis conducted by the U.S. Travel Association.

The higher numbers are encouraging indicators that demand for vacation rentals will continue to grow as travel and tourism activities are still in recovery mode after the negative impact of the global pandemic.

Another strong positive indicator is the fact that hotel demand declined by 2%.

As more people travel and fewer choose to stay at hotels, the Airbnb industry can expect to see an increase in demand.

4. Geographical Inconsistencies Remain the Drivers Behind Demand and Returns

A key detail in Nick Gerli’s analysis to pay attention to before panicking about the future of Airbnb is that some cities have seen a decline of 50%.

But we all know that real estate investing in general and short-term rental property investing in specific are highly localized businesses.

Location is a key factor in the success of any real estate investment endeavor.

As a result of regional shifts and changes in traveler preferences following the pandemic-induced lockdowns, it is only normal for some markets to slow down, while others witness accelerated activities.

Airbnb reports that since the onset of the pandemic, as many as 2,100 US cities and towns have joined the short-term rental industry by getting their first Airbnb booking.

Demand is particularly strong in locations with no hotels.

Mashvisor data supports the stark differences in the performance of Airbnb properties across the US market.

Airbnb Is Not Crashing Any Time Soon: Moving Forward

While many Airbnb hosts might have witnessed a slowdown in demand and bookings due to geographical shifts, now is not the time to talk about a potential Airbnb crash.

Data collected and analyzed by Mashvisor shows that short-term rentals continue to grow steadily and remain one of the best hedges against inflation.

Despite the ample opportunities, investors need to do everything in their power to choose a market and property with strong potential.

It includes performing real estate market analysis and rental property analysis with the help of existing real estate data analytics tools and big data.

Author Bio – Peter Abualzolof

Peter is the CEO and cofounder of Mashvisor, a real estate data analytics company that helps even beginners make profitable investments in minutes.