Many Airbnb hosts like Sean Ray are now listing their properties on more websites and making them available for longer terms at discounted rates.
Courtesy Sean Ray
Sean Ray normally rents out his 3-bedroom Dallas house for a few days at a time to travelers who find it listed on Airbnb. On Saturday, Ray spent the afternoon touring the property with a mother of two who showed up seeking a long-term rental and wearing an N-95 mask.
“This is something that I’ve got to get done,” Ray said. “I won’t be able to survive much longer if I don’t get this thing rented.”
Ray and many other Airbnb hosts are now listing their properties on competing sites and making them available for longer terms at discounted rates. These hosts are trying to stay afloat on mortgages and arbitrage leases after the demand for short-term rentals has suddenly dried up due to the coronavirus pandemic.
An arbitrage is when a host rents a property and then rents it out to other people on Airbnb.
“I’m putting someone in my house and crossing my fingers they’ll pay because I can’t evict them,” Ray said. “But I can’t keep it on Airbnb because that’s a guaranteed loss.”
Airbnb hosts have been scrambling to find new guests or tenants for their properties since March 14, the day that the private tech company made a policy change to fully refund any guests who canceled their reservations between that day and April 14.
The change overrode cancellation policies many hosts had in place for protection, costing many of them thousands of dollars in lost revenue, according to numerous hosts who have spoken with CNBC. Besides the cancellations, many hosts are having a tough time finding bookings for short-term stays. It’s why many are cutting rates, extending the duration of stays and searching anywhere they can for new bookings.
Many Airbnb hosts like Liam McLaughlin are now listing their properties on more websites and making them available for longer terms at discounted rates.
Courtesy Liam McLaughlin
“After they made that announcement, we received an avalanche of cancellations,” said Liam McLaughlin, who manages 14 properties in Pittsburgh, Pennsylvania, on arbitrage. “We are now just trying to survive by locking in people at week long or month long rates to just break even.”
Many of these hosts had previously exclusively listed their units on Airbnb, but now, they are turning to other websites, including Vrbo, HomeAway, Zillow, Apartments.com and even Facebook Marketplace and Craigslist.
“The business model has completely all had to change,” said Ambur Storozynsky, a host who is converting two of her five arbitrage properties in Calgary, Canada, into long-term units. “There’s just zero demand for people who are coming for the weekend.”
Airbnb CEO Brian Chesky.
John van Hasselt | Corbis | Getty Images
For Airbnb, 2020 has quickly become a challenging year.
The company has been listening to investment pitches as it considers raising money, sources familiar with the matter told CNBC. This comes after a Bloomberg report earlier this month that said the company’s plans to go public in 2020 could be delayed until 2021 due to the coronavirus pandemic. Meanwhile, the company last week sent a letter to Congress urging lawmakers to pass legislation that could help the company’s network of hosts, either through tax relief or loans.
“Today, we have as many listings available on the platform for prospective guests as was the case prior to the pandemic,” an Airbnb spokesman told CNBC in a statement. “We are aware of news reports that larger property managers have been facing these challenges but these are not what represents the vast majority of Airbnb hosts.”
Hosting medical workers
The migration of Airbnb hosts onto other services and the potential loss of supply to long-term tenants could cause meaningful damage to the company, said Henry Harteveldt, travel industry analyst at Atmosphere Research Group.
“If a host shifts inventory from a home-sharing service to the home rental market, the home-sharing site (whether Airbnb or another firm) will suffer,” Harteveldt said. “The lower the amount of home-sharing inventory, the lower a site’s utility, and thus, its appeal to a consumer.”
Many Airbnb hosts like Travers Xanthos are now listing their properties on more websites and making them available for longer terms at discounted rates.
Chris Graf with Multiverse Media
That shift has already started for Travers Xanthos. He manages 24 properties in Nashville, Tennessee, most of which are on arbitrage agreements.
After seeing his bookings for March and April get canceled, Xanthos quickly came up with a backup plan and began listing his properties on Craigslist and Facebook Marketplace. He also purchased the domain MedReliefHousing.com, targeting his units to nurses and medical staff heading to Nashville to treat coronavirus patients in need of a place to stay.
Xanthos has already booked three of his units to nurses, he said. Xanthos is hoping the government offers relief to business owners like himself, but in the meantime, he’s hoping to find more long-term tenants.
“I’m not just going to sit back and rely on a bailout from the government,” he said. “I have to do everything I can to try to save my business that I’ve worked so hard for.”
Xanthos is also planning to print out flyers, make yard signs and call hospital’s human resource departments to promote his units, he said.
“Whatever happens, happens, but I’m going to give it my best shot,” Xanthos said. “If I defeat it, awesome. If I don’t, I know I gave it my best shot.”
Many Airbnb hosts like Sean Rakidzich are now listing their properties on more websites and making them available for longer terms at discounted rates.
Courtesy Sean Rakidzich
Sean Rakidzich has taken a similar approach with the 100 properties he manages in arbitrage and is proactively calling potential guests to fill his vacancies. Rakidzich has assembled an impromptu sales team to contact hospitals and corporate housing companies directly. The sales team has grown to nearly two dozen people, many of whom have been recently laid off due to the coronavirus outbreak.
“I don’t think anybody in this industry ever thought they’d have to pick up their phone and start hustling to find customers,” said Rakidzich, who runs a YouTube channel and a Facebook Group geared toward educating and connecting Airbnb hosts.
Besides medical professionals, hosts have had luck booking stranded travelers, college students whose campuses have closed down and people in need of a place to quarantine or isolate.
Although long-term rentals are an option, many hosts would prefer to continue short-term bookings. Long-term rentals provide a more reliable source of income and include less expenses, such as the cost of supplies like toilet paper and the service fee for Airbnb. However, short-term bookings usually generate hosts much higher revenues.
Many Airbnb hosts like Ruben Gomez are now listing their properties on more websites and making them available for longer terms at discounted rates.
Ruben Gomez, a host in Omaha, Nebraska, said he is going to focus on finding long-term tenants for his property. Omaha typically draws travelers for a number of events, such as the College World Series and Berkshire Hathaway‘s annual shareholder weekend, but with the coronavirus impacting so many events, he can no longer count on travelers to bring him revenue. However, Gomez said he hopes to return to the short-term market by next year.
“I definitely want to be back in the game next year,” he said. “But I need to be aware of the short-term loss on demand that we’re going through.”
But for hosts who want to eventually return to short-term bookings, several hosts who spoke with CNBC said that they will no longer exclusively list their properties on Airbnb. The company’s March 14 decision to refund all cancellations left hosts scrambling and broke loyalty, hosts told CNBC.
“The way they handled communications with the hosts has not been a professional way to treat your business partners,” Gomez said. “I’ll still be there because the money’s there, but I’m not loyal. It’s in my benefit to diversify.”