The Changing Tides of Airbnb: A Boom, A Bust, and What's Next

*Note: This is an article variation of Peter St Onge’s video, The Airbnb Bust.

‍

As the economic sands shift beneath our feet, the once-glittering opportunity of Airbnb hosting seems to be losing its luster. With news of falling revenues, would-be hosts are questioning if they've missed the golden age of Airbnb. However, according to Peter St Onge, Ph.D., the situation is much more nuanced than it seems.

The COVID-19 Boom

"The story starts back in March of 2020 when media went wall-to-wall on COVID-19. Millions stayed home to save lives but soon decided cities like New York are really boring if everything's closed," St Onge explains. As people fled to second homes or opted for remote rentals, Airbnb listings became the go-to solution. St Onge recalls a trip in 2020 when he drove through the New Hampshire mountains, only to see signs shouting, "Lowlanders go home!" High demand drove Airbnb prices sky-high.

The Market Reacts

So, what happened after this boom? "High prices brought new supply. With the Federal Reserve offering three percent mortgages, millions of people looked at Airbnb profits, whipped out their calculators, and decided they too wanted a piece of the pie," St Onge notes. This led to an oversaturation of the Airbnb market. According to St Onge, as of March 2023, listings were up 26%, outpacing the growth they had built in the previous 13 years.

The Reality Check

The post-pandemic reality has been less rosy. "The pandemic restrictions eased, and millions could no longer pretend to work in Boston while lounging in Maui," says St Onge. This led to a glut in supply, with empty rentals and plunging prices. Host revenues are down 13% year-on-year across Airbnb, with average monthly earnings at just over $1,000. While this isn't terrible, it's a far cry from the $5,000 people were hoping for. "Moreover, it's not enough to cover many of the mortgages hosts took out," St Onge adds.

Upgrading to Survive

Amid the decline, hosts are finding themselves in a fiercely competitive market. According to St Onge, many are investing in high-end appliances, outdoor kitchens, and other amenities to entice guests. "They're also having to be meticulous about presentation—ensuring the shampoo, soap, and towels are all impeccably arranged," he says.

The Regulatory Hurdle

St Onge also highlights another obstacle: "Cities like San Francisco, New York, and Chicago are trying to outright ban Airbnb, blaming the platform for expensive rents rather than taking responsibility themselves."

What's Next for Airbnb?

"I don't think Airbnb as a concept is dead. It's a sound idea, especially for families," St Onge predicts. However, he cautions that it will take time for the glut to work out, and a looming recession could hit travel and leisure sectors hard. "The biggest takeaway is there's no free lunch. Airbnb, like everything else, takes a lot of work for the money. And as always, the Federal Reserve stands ever ready to screw it up," he concludes.

In this era of volatility, would-be Airbnb hosts need to be cautious, creative, and prepared for ups and downs. If you want to keep tabs on the rapidly evolving landscape of Airbnb and other investment opportunities, make sure to subscribe to Peter St. Onge's channel for insightful analysis and updates.

‍