"The Airbnb Collapse I Real, Revenues are down nearly 50% in cities like Phoenix and Austin. Watch out for a wave of forced Selling from AirBnb Owners later this year in areas hit hardest by the revenue collapse.”
That is a tweet by Nick Gerli tweeted in June and honestly there is a lot of misrepresentation in this data. Just the title that revenues are down in cities like Phoenix and Austin are not true at all
If you're like me you took part in the Airbnb Boom which began during the onset of covid and continued over the last few years. Seizing the opportunity to buy real estate in wildly appreciating markets and make a nice monthly cashflow return by listing your property on Airbnb. Now for most of us this was cruising along nicely until this summer here in 2023. For me personally It has seemed like tougher than any other time to keep my listings fully occupied and we've had to lower my rates some to accomplish that. In addition to that seems like our guest have been more demanding than ever. We've Received a few unfair ratings which Airbnb refused to do anything about. There seems to be something in the air so I decided to take a closer look and see what's really going on
Let's start off by taking a look at and breaking down this tweet by Nick Gerli, I'm going to break down what he is actually showing which is not Revenue. "In the tweet it shows Phoenix and its down 47.2% drop, stating that revenue in this chart is down nearly 50% is a lie because that chart is actually showing is revenue per available listing or rental.
The way this #, REVPal is calculated is taking the total market revenue on a given month or give year. In this case they are looking at month over month from May of 2022 through May 2023. So your taking the total market revenue and dividing it by the # of active rentals and that give you the revenue per active listing. The reason this is misleading is because when you look at the total market revenue for Phoenix
Using AirDNA or what I like to use, Pricelabs, In May of 2022 you will get $10.9M of total market revenue for houses listed on Airbnb. If you look at the same set of listings for May of 2023 you get $16.8M which is almost a 50% increase. Completely opposite of what he is suggesting that revenue is down by 50%, it is actually up by 50%.
So revenue for the market it up but that only looks at one part of the story. We also have to look at the number of listings available to get our supply. In May of 2022 there were just about 7K active Airbnb listings on the market. In May of 23' that number has increased by a decent amount, there Is about 9500 active listings. We are seeing that start to trend down with numbers of listings decreasing in q2 2023 to Q3 2023/
I attribute this to not as many new airbnb host getting in while interest rates are so high, It makes the numbers harder to work. At the same time you have some tired host starting to sell off or invest in other types of rentals.
So there are a couple of different factors that have led to such a large decrease in the RevPal #. We talked about supply and the overall number of listings in the market but you also have many believing that we have come to an end of to the travel boom that was onset by the start of covid. Many travelers were looking for places that were not as restrictive to the lockdowns at the onset of Covid, Arizona being one of the places travelers from near and far liked to travel to. Like any industry people see that you are making money and they rush in and it increases the supply. Some of those investors will realize that its not as lucrative as it once was. They will sell off and it will start the cycle over again.
Once some of the supply has exited the market my prediction is that RevPal will go back up. Does this mean you can't make money in Airbnb as a host in Phoenix? Not at all, myself and my friends are still operating Listings that are making money. It’s just not as lucrative as it was in the crazy pandemic time of 2020 and 2021. The other thing to keep in mind is what is going to happen with demand over the next few years. Everything I've seen from sources and blogs that Air DNA and PriceLabs put out is that demand has leveled off but they are still seeing modest increases and expect that trend to continue in the next 12 months
So going back to this Tweet by Nick, what I think he is getting to is that there is going to be a major sell off from Airbnb host that can no longer afford to pay their mortgage. This wave is going to flood the market with inventory and with the increased supply the Real Estate market will crash. Well we have a major shortage of inventory right now so if there we a sell off it would be welcomed because we are sitting barely over a month of supply Its not going to be enough to crash the market.
So Should you get into Airbnb? I think as of right now it would be wise to account for all the competition that has entered the market More than ever make sure you have the amenities, what part of town are you in. Are you buy local attractions, do you have a pool that will be desired in summer? What other uniqueness and amenities does your Airbnb offer compared to the competitors. You used to be able to get away with a run of the mill listing but you can't any more. Make your place stand out and you will be able to easily achieve the revenue you need monthly. To wait for the rents to increase and your property to appreciate with this markets pent up demand.
The link to this video is
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