Airbnb has been one of the success stories in the tourism industry over the last couple of decades. The company has recently advertised its growth strategy but has also come under increased scrutiny from regulators due to the impact its listings may have on local communities and the real estate market. So, what’s the story behind Airbnb, and what impacts will the brand have on future tourism, communities, and real estate markets?
A brief history of Airbnb
In 2007, three Californian roommates decided to supplement their rent with a rented-out air mattress. They quickly expanded the concept by founding Airbnb and attracting investment, growing rapidly through the beginning of the next decade. The company then expanded globally to take advantage of the growth of peer-to-peer services and the sharing economy.
Airbnb went public in December 2020 through an IPO and was able to ride out the challenges posed by the pandemic. It’s become a global tourism and hospitality platform with a significant impact on travel and accommodation, local housing markets, and individual communities.
What’s next for Airbnb?
From a broader perspective, the future looks quite bright for Airbnb. Letting yields may remain favourable for short-term or holiday lets, and rents could continue to rise. Staycations have become increasingly popular, and the number of travellers is also increasing, post-pandemic, for business or work trips. This growth could lead to a rise in the number of real estate investors seeking properties for Airbnb lets, with a knock-on effect on local communities and the real estate sector. However, to address housing availability and affordability, governments may introduce legislation to try and control short-term lets, which may require property owners to have a specific licence (or certificate).
Airbnb itself is moving forward at pace to try and take a more significant “slice” of the tourism market. The company intends to market several new property types and take an even closer look at the luxury sector with new marketing products.
What this means for local communities
The rapid growth of Airbnb in some cities has often led to a reduction in available longer-term rental housing. This challenge could also reduce the housing supply for residents or drive up rent prices. As more landlords decide to change over to Airbnb, this could lead to a change in character for certain communities and neighbourhoods. These areas could lose some of their identity as homeowners cater more to short-term visitors.
However, the government may adopt changes in England where short-term let accommodation would shift to a new planning permission category. Local councils may then have discretion to insist owners seek planning permission before creating a new Airbnb listing. Other nations within the UK may also introduce licensing schemes.
What this means for tourism
The tourism sector will likely feel an increased presence from Airbnb as the company introduces four new property types: Vacation Home, Unique Space, Boutique, and B&B. Until this point, it was only possible to choose from a shared space, a private room, or the entire home. Now, hosts can make their properties more appealing to a broader range of travellers in the tourism sector. The company is updating its search capability to make the platform more attractive than traditional hotel or resort options.
Airbnb also intends to personally verify a select group of homes (starting with 2000 properties in 13 cities), which it’ll then classify as “Airbnb Plus.” Those hosts can benefit from design consultation services provided by Airbnb and provide another option for discerning travellers.
The company is also offering a luxury tier entitled Beyond by Airbnb. This gives travellers custom-designed trips, which include world-class hospitality and the finest homes available. Both Airbnb Plus and Beyond by Airbnb will offer “high-end” travellers a good reason to focus on this platform rather than luxury or bespoke retailers.
What this means for Real Estate markets
As more investors seek the benefits of having an Airbnb rental, this will increase demand for residential real estate, driving up property prices in some areas. Some real estate companies and property managers could focus more on the short-term gains of Airbnb rentals by offering their own options or creating new platforms. Again, this could affect the availability of rental housing.
However, much will depend on potential regulation. It’s worth noting that the New York City government has implemented significant restrictions within the short-term rental platform. Thousands of Airbnb listings could disappear from rental platforms in that city as the government enforces tighter restrictions.