Is AirBNB really dead?

[Daniel Muscarella]

Hi all,

I'm a 19 year old and have been wanting to get into real estate, specifically renting a property and putting it on airbnb to get cash flow, however I been seeing around that airbnb isn't what it used to be.  People complain that there are too much for cleaning fees and that hosts make the guests do a lot of work that really seems unnecessary.  I also see people say that they rather get hotel rooms now instead of airbnb because it's a cheaper option.  So, I just want to see if anyone that is in airbnb can justify that and maybe give me some tips for someone that is starting out or wants to start out.  

[Kelly Sennholz]

Thanks for your insightful comments, Carolyn. :)

Here is the thing about doing a short term rental property. I’m very bullish for those willing to do the legwork on a short term rental. I feel that most will likely do well.

HOWEVER:

This higher income type of property investment comes with higher risk.

Not only with the normal roils of the hospitality business, of which you have become a 'member business', but because due to the large sector share of Airbnb, you have also tied yourself to their company - - to some degree. Yes, other options might pop up quickly if Airbnb failed, but know that you now have FOUR different business sectors upon which your own personal financial success lies.

1. Real Estate in general
2. Short term rentals vis a vie your local laws/rules, etc
3. Hospitality business and economic factors associated with travel
4. Airbnb itself, as your main “supplier” of customers

You have greatly increased your margins but with the increased margins comes increased risk requiring a larger emergency fund and a keen eye on the market. Some find this increased complexity enjoyable as it may provide short and longer term opportunities not otherwise available.

See these articles from this week alone. My comments were simply to inform folks who may not otherwise know the massive amount of angst re: Airbnb swimming around the travel industry right now.

These articles may give you a start on better understanding the known risks with this type of investment. We all know the great benefits and clearly some units will do better than others for a variety of reasons.

I hope this information helps.

* * * * * *

"Shares of short-term rental property platform Airbnb (ABNB -3.69%) are down 49% from their all-time high as of this writing. But I'm afraid there's far more to this story than that. Airbnb stock has made a move of 15% or more 12 different times since it became a public company, exhibiting extreme volatility for a company of this size.

Here's what Airbnb's volatile stock price means for investors right now, and here's also why you should care.” https://www.fool.com/investing...

Airbnb (NASDAQ:ABNB) Sets New 52-Week Low After Analyst Downgrade https://www.marketbeat.com/ins...
Airbnb survived Covid, but the crisis mode in “sharing” economy stays

https://www.cnbc.com/2022/02/0...

Airbnb issues permanent global party ban in wake of string of shootings https://www.kmaland.com/news/business/airbnb-issues-permanent-global-party-ban-in-wake-of-string-of-shootings/article_0c6e9e91-97a6-53de-9eda-72da5b94466f.html


Sorry for the messy fonts! 

[Kelly Sennholz]

And lastly, as a frequent traveler, I would say the massive and unprecedented insecurity in the airline and hospitality world right now will make people spend quite a bit more money for security of their reservation. 

They will pay more to know for sure they have a place when they and their family arrive.

Airbnb has a problem in this regard and are just now beginning to weakly address it.

[Bruce Woodruff]

@Kelly Sennholz How are vacation rental reservations not secure? They penalize hosts severely for cancelling on guests, I know this for a fact.

[Kelly Sennholz]

Well, I can share one interesting thing I know. Airbnb communicates entirely different messages to host and guest. I ran into an issue w/ a place this year. Host was telling me, "They said x, y, z" and I said, "No they said the opposite to me." She copied their message to me. It was true. They were just randomly telling each of us what we wanted to hear, which made the problem worse. One of the top complaints on traveler threads now is last minute cancellations with no notice, no home, no place to stay. As I shared, I've had 3 this year alone myself, out of 6 stays.

[Carolyn Fuller]

Quote from @Kelly Sennholz:

Well, I can share one interesting thing I know. Airbnb communicates entirely different messages to host and guest. I ran into an issue w/ a place this year. Host was telling me, "They said x, y, z" and I said, "No they said the opposite to me." She copied their message to me. It was true. They were just randomly telling each of us what we wanted to hear, which made the problem worse. One of the top complaints on traveler threads now is last minute cancellations with no notice, no home, no place to stay. As I shared, I've had 3 this year alone myself, out of 6 stays.

In all the years I've been staying in Airbnb units, I have experienced one cancellation and it was months before the checkin date which gave me plenty of time to rebook. I can't say the same for my hotel experiences. Though, I do admit that the last minute cancellation by the hotel was highly unusual.

Not sure why your experiences are so very different from mine. I do tend to avoid any listings that look illegal or otherwise dicey to me. I don't choose the cheapest listings and I don't generally look at a listing with less than a 4.9 rating. And I do read the reviews. And my experiences have all been lovely, sometimes, over the top magnificent. I certainly can't say that about my hotel experiences. 

[Kenneth Mooney]

@Daniel Muscarella I think some context on my response is appropriate - I have historically been a long term buy and hold investor but as the economy started to boom AirBNB did catch my eye. For me personally, AirBNB scares the heck out of me. We are either in, or in the midst of a recession, where people historically restrict their spending. Traveling for enjoyment COULD , not definitely, but could come to a halt which would kill your returns on by doing STR.

That being said, I do not see the "mid term rental" market going anywhere. That would include travel nurses, travel PT's, etc. Anyone on a travel contract where the company pays for housing. Those still provide great rental rates (increase over market typically) and they always need furnished rentals. 

Ultimately, depends on the market you are in and what brings people to the area. 

[Bruce Woodruff]

Quote from @Kenneth Mooney:

For me personally, AirBNB scares the heck out of me. We are either in, or in the midst of a recession, where people historically restrict their spending. Traveling for enjoyment COULD , not definitely, but could come to a halt which would kill your returns on by doing STR.

It's still smart to buy a 'STR possible' house, meaning it has a very desirable location. When the vacation travel market is booming, you make tons more. If (and this is a big if because it hasn't happened yet and may never) the STR market slows, you can go MTR. And if that slows down, just go to the standard LTRs. It's all about options.....with a basic LTR, you have only one.....

[James M Palovich]

I am not currently in STR space but have been looking into it for a little bit myself and know quite a few people that own STRs. From what I am hearing and seeing, most Airbnbs are rented out for the experience opposed to just a place to stay for a few nights like a hotel. While of course that is not always the case, going into STRs that is going to be my strategy. I myself am an outdoorsy person and will be looking to create an experience for others like me by getting land near national parks or more secluded, yet still naturally beautiful areas. North Carolina could fall under this category in some places. and then building a tiny house on the property. This seems to be a trend I am seeing and people are liking. A know a few people that simply own condos or rent apartments in cities that seem to work well by meeting the needs of people looking for both an experience or simply a place to sleep.

[Kelly Sennholz]

Carolyn Fuller I'm pleased you have had great experiences. The 3 cancellations were Hawaii apartment, Palm Springs apartment and another Palm Springs. I believe all 3 to have been cancelled due to increasing prices in their area, causing them to cancel and raise the price instead of honoring the reservation. Three out of 6 reservations is not good. 

I'm sharing with you a massive number of posts of late re: cancellation issues with Airbnb. They just changed their cancellation policy in response but I'm not sure that will be sufficient.

News this week:
"Booking Holdings, Airbnb and Expedia fall more than 15% month-to-date as flight cancellations show ripple effects"

I agree with above post re: the great returns but high instability of Airbnb. One of the problems with just "switching over to mid or long term rentals if things go south" theory is that there will be a significant number of Airbnb owners doing the same thing at the same time if that occurs. Having 200 rentals fall on a neighborhood in a short period of time will be challenging.

I love Airbnb rental biz and kudos to all of you doing it, fantastic. I'm simply pointing out what any good business person would do, which is the pros and cons of a business. It's important, especially for new investors, to understand all of it before one proceeds.

[Matt McMains]

Quote from @Manny Vasquez:

Airbnb, VRBO and other STR platforms are performing very well with very healthy profit margins. I run an STR company in Orange and Los Angeles Counties and my STR's are performing quite well. I'm not sure where you heard your information, but it is clearly from a person who either has no experience in STR's, or if they had an STR they ran it poorly or the STR was situated in a bad location.

 Manny, I have a home in Corona, CA that I'm looking to Airbnb in the next year. Do you have any insight in the market over here? 

[Jon Martin]

Quote from @Kelly Sennholz:

Carolyn Fuller I'm pleased you have had great experiences. The 3 cancellations were Hawaii apartment, Palm Springs apartment and another Palm Springs. I believe all 3 to have been cancelled due to increasing prices in their area, causing them to cancel and raise the price instead of honoring the reservation. Three out of 6 reservations is not good. 

Your experience is valid as it pertains to you personally, however it seems like good old fashioned bad luck for one person to have that many cancellations. We have a lot of STR owners here, and I don't think any of them would support booting reservations or raising prices on an existing booking because prices happened to go up. As always, people tend to share bad experiences more than good (we are hard wired for this) and there are entities that have a vested interest in amplifying these stories. Especially the hotel industry, who is taking a beating because their business model sucks in today's world. When you divide the number of these stories by the total number of stays, you are probably talking a fraction of a percent.

I've definitely stayed in STRs that had marginal furnishings and were chintsy with supplies, but I've never had an experience bad enough to make me want to stay in a hotel instead. If anything, the uncertainty and tightening of the market will force most hosts to up their game, which is a better overall outcome. 

[Carolyn Fuller]

@James M Palovich "I myself am an outdoorsy person and will be looking to create an experience for others like me by getting land near national parks or more secluded, yet still naturally beautiful areas. North Carolina could fall under this category in some places. and then building a tiny house on the property. This seems to be a trend I am seeing and people are liking."

Those Airbnbs that are an expression of their owners are my favorite Airbnb listings and the ones that Airbnb advertising is currently highlighting. 

We simply have a 1 bedroom ADU attached to our urban home that is an STR. I don't think it is unique. In fact, we made the mistake of designing it in a rather mundane fashion, thinking we'd appeal to a wider variety of people. We have another MTR unit that we designed to appeal to ourselves. It is a studio that is wildly popular and rents for much more than just about any other Boston area studio I've seen. It is so popular that many people just want to come visit the studio without any intention of renting it. We now require an application prior to an in-person visit just to weed out those people.

Lesson learned - It makes much more sense to design something unique that you would love instead of something mundane and ordinary.

[James M Palovich]

Quote from @Daniel Muscarella:

Quote from @Curtis Mears:

@Daniel Muscarella

A bigger issue is finding a landlord willing to let you make money off his asset. I had a tenant try it and i removed him asap and was prepared to sue him to get any revenue he collected from my property. You will need to find a really bad landlord who allows subleases.

 How would you go if you were 19 with no money and trying to get into real estate ?  What path would you take

 A pretty popular option for people trying to get into real estate with no money would be wholesaling. Of course it’s not as glamorous or easy as TikTok makes it out to be just like Airbnb arbitrage. 

[Colleen F.]

ok, you are talking about airbnb but I see people refer to getting an airbnb they are STR Short term rentals not airbnb's...... because there are other platforms out there. I think one of the biggest risks in this space is the dominance of airbnb as a platform in this market. As a result they get to write the script.

STR require more work and especially the shorter the stay the higher the cost. A 1-2 night stay in an area, a STR just doesn't make as much sense I think both as a host and a traveler but that's me. Now you might find a spare room STR that makes sense for that short of a stay but in most cases 4 -5 days STR start to make sense as a traveler.

[John Underwood]

@Daniel Muscarella

Try looking into wholesaling.

Also join your local Real Estate club if you have one.

[John Underwood]

@Mike Shemp

It seemed my Lake House wasn't showing up under Lake destinations on air. No bookings from them since February. Vrbo filled my calendar.

I called Airbnb and it is magically fixed now.

[Jason Smith]

This is what OP is referring to a comedian Caleb Hearon wrote on Twitter "i'm done with airbnb lmao these mother****ers have curfews, quiet hours, and chore lists now. i will be at a HOTEL." It has 442K likes. Some tik tok people jumped on the bandwagon and made videos, etc. Crap websites like Yahoo, Bored Panda,and Daily Dot ran with story. I have stayed at a VRBO beach house where they charged $130 cleaning fee but still wanted you to take out the trash and possible start a load of laundry for towels - so it does happen. But people have had viral complaints about Uber and Lyft and they are still around. If you buy a STR that only works making 2021 and 2022 daily rates you are going in trouble or if they are outlawed in your area. I predict the people that recently bought in Pigeon Ford, Destin and Joshu Tree are goning to get slaughtered.

[John Underwood]

@Kelly Sennholz

There are a lot of stocks that are down. Tesla, IBM etc. It more about the whole market right now. I have moved to mostly cash waiting to buy great companies at on sale prices.

[Kelly Sennholz]

Quote from @Jason Smith:

This is what OP is referring to a comedian Caleb Hearon wrote on Twitter "i'm done with airbnb lmao these mother****ers have curfews, quiet hours, and chore lists now. i will be at a HOTEL." It has 442K likes. Some tik tok people jumped on the bandwagon and made videos, etc. Crap websites like Yahoo, Bored Panda,and Daily Dot ran with story. I have stayed at a VRBO beach house where they charged $130 cleaning fee but still wanted you to take out the trash and possible start a load of laundry for towels - so it does happen. But people have had viral complaints about Uber and Lyft and they are still around. If you buy a STR that only works making 2021 and 2022 daily rates you are going in trouble or if they are outlawed in your area. I predict the people that recently bought in Pigeon Ford, Destin and Joshu Tree are goning to get slaughtered.

Yes, and I think his comment tapped into a ton of real life experiences, which is why it went viral. Every place I've stayed in past 2 year had entirely unreasonable ideas about how the place should be left. Basically, they wanted me to deep clean it, wash the sheets, do all dishes and do NOT leave them in drainer to dry (so I'm supposed to get up an hour early to do dishes, dry, put them away, strip all beds, wash sheets, mop floors... get outta here.... and pocket the cleaning fee. People are on to that. The threads on these massive travel sites are illustrative for STR owners. The bar has been raised.

[Michael Baum]

So we ask the guests to load and run the dishwasher, place all the used towels in the nearest tub and the trash out to the cans before they head out. No one has ever complained about that.

They know that this is our vacation home and not just a hotel room. If they are any kind of decent people, they try to take care of the place and not just leave it filthy. We don't ask them to run the washing machine but some do the towels. We don't ask them to clean out the fridge as we can take care of that so most don't but some do.

I will say that we vet each and every group that comes to the house and you never can really know, but whatever I am doing is getting the best quality groups. They take great care of the house, keep it clean, clean up after their dogs, wash the dishes and sometimes wash the towels. We are booked solid until end of Sept.

We did have our first cancellation. They were sorry and didn't give a reason which is fine. The week was booked 4 hours later.

Also the AirBNB guests have been great this year. Usually they are a bit messier and do some damage, but not this year. All our guests have been top notch.

[Carolyn Fuller]

When I first started in the STR world, it was on HomeAway. It was a much smaller world back then. It was standard for hosts to personally greet their guests on checkin and ask them to do a whole list of things on checkout. As time has gone by, competition has gotten stiffer, the quality of the listings has gotten much higher, hosts have become more professional. Self-checkins and "Please lock up when you leave" have become the norm now.

You see, guests have left reviews that nudge hosts toward simpler checkin and checkout procedures. Hosts have gotten more hospitality industry professional. Also, a lot of hosts have found their guest mostly weren't following their checkout procedures anyway, so what was the point! And then, of course, hosts started using STRs when they travelled. They began to notice what they, themselves, appreciated and resented.

Today, in my STR regulated city, my biggest competitors are the nearby hotels. I've gotten tons more hospitality industry professional as I compete, working my way up the review & ratings ladder.

[Aleksandar Popivoda]

Quote from @Daniel Muscarella:

What is the rush with wanting to invest in RE in the place where you are now?? I don't get it. It seems that BiggerPockets really managed to convince the big part of the younger population in US that the RE is the only way to achieve a " financial freedom".

Get a W-2 job and invest in yourself first. Try to be the best in what you do and the market will award you. With some cash stacked on the side and the experience in the real world you can start investing in Real Estate if you want to. But, by that time you will have much clearer picture if the RE is the best path for you or there are other avenues that don't sound so sexy but could be way more profitable.

[Jason Kudo]

Quote from @Daniel Muscarella:

Hi all,

I'm a 19 year old and have been wanting to get into real estate, specifically renting a property and putting it on airbnb to get cash flow, however I been seeing around that airbnb isn't what it used to be.  People complain that there are too much for cleaning fees and that hosts make the guests do a lot of work that really seems unnecessary.  I also see people say that they rather get hotel rooms now instead of airbnb because it's a cheaper option.  So, I just want to see if anyone that is in airbnb can justify that and maybe give me some tips for someone that is starting out or wants to start out.  

AirBnb has only been around since 2008. It’s not close to dead and really just getting started.

[Bruce Woodruff]

Quote from @Jason Kudo:

AirBnb has only been around since 2008. It’s not close to dead and really just getting started.

I agree. And maybe more importantly, the originator, VRBO, is going on 30 years and is actually gaining market share as we speak......
I feel this industry is still in it's infancy.....

[Monica Mejia]

Hi Daniel! I agree with most of these comments - Airbnb \ STR's aren't dead. I think that as long as hotels exist, so will STR's. Now, are there people that own a "dead" Airbnb, 100%. It is a business at the end of the day and if you don't run it properly or don't take care of your guests, you're going to fail.

Let's say that all STR's get banned, what then? Well, the reason I love STR's so much is because of the number of exit strategies that exist. You can switch to mid term rentals, rent room by room, long term rent, etc. As long as you are able to pivot with the times, you'll be okay!

I believe what you're interested in is a rental arbitrage. This is when you rent a property and then put it on Airbnb or other STR sites. I have been running an arbitrage in Colorado for about a year now and it generated about $90k in revenue. I got mine through a company called BNB Leverage. They found a property for me and got the green light from the landlord to operate a STR. My experience was really great.