The multi-billion dollar question for Airbnb: to be compliant or commercial?

  • Tightening of regulations in London has slowed Airbnb’s supply growth by over 30%
  • Silver lining for complying homeowners as nightly rates for existing supply has shot up, resulting in windfall returns
  • Hostmaker’s expertise in yield maximisation and hospitality operations is helping homeowners capitalise on this opportunity

London came to be the second largest city for Airbnb in 2016 after surpassing New York, which was second in 2015. The total number of London listings was already enjoying high double-digit growth, but the same was the case for New York. It was actually the tough stance of its Governor, Andrew Cuomo, who started a personal war on the company (spurred on by the hotelier lobby) that ended in an almost complete ban on listing entire homes there by October 2016.

Airbnb cities top rank

On December 1st 2016, Airbnb sent a kind email to all its London hosts announcing that it would be implementing a 90-day counter on all of its entire home listings within 3 months. Upon reaching this number of booked nights, the listing would then no longer be able to accept more short-let bookings as per the Deregulation Act 2015. The news hit the front pages of all major newspapers.

And so it was on March 1st 2017, when homeowners started to see their calendars blocked once the limit had been reached. Notably, entire homes in London represented just over half of the 47,000 listings at the end of 2016, or about 25,000, stemming from a trend of 10% growth month-on-month until that point. By January 2017 that growth stalled; see for yourself in the chart below:

Airbnb listings

There was a significant compound effect: the rate of new listing creation fell from around 5–8% to 3–6%, whilst the rate of listing deactivation doubled. This resulted in the number of listings falling from 25,000 in December 2016 to 22,000 by January 2017. And the fall continued over the months that followed, dropping below the 20,000 mark come April.

There are two important dates here, therefore: December 1st 2016 when the Airbnb email was sent out, and March 1st 2017 when listings started to get blocked. The first one had a largely psychological effect: hosts were lacking accurate information from Airbnb but many decided to finish 2016 and leave the platform for good, to start the New Year afresh. With the second date, Airbnb effectively forced out mainly those properties operating full time as they had already reached the limit, and in doing so pushed them back into long term rentals. You can clearly see these points on the data representing the trend turning points: first a cliff, then a gentle fall in number of total listings. If Airbnb listing growth would have continued at the same pace as before, the number of listings could have been over 27,000 by now. Instead we have witnessed a 32% fall, with 19,000 active listings at the time of writing.

However, anyone familiar with the actual implementation of the 90-day counter would have noticed that Airbnb is not making those listings disappear: their 2017 availability is just being shadowed, but they are still there. So what happens with actual Airbnb supply of bookable days? Well, Airbnb does not disclose real data. But we do know which listings still have days open to be booked. In the following graph we can see the total number of days still vacant between half a month and a month from the date quoted. From our own Hostmaker internal data we know that half of the bookings are done within 30 days of the check-in date, so it is fairly reasonable to assume that this metric is accurate enough to see the effect of the counter on Airbnb supply.

Data updated on 7th April 2017. Raw data source: Airdna

Airbnb inventory 2 weeks - main pic

So again we see a sustained 10% growth month-on-month until January 2017 — peaking at 19,000 days available -, a turning point and a subsequent steep fall down to 10,000. This represents a remarkable 40% drop. So Airbnb has definitely taken positive measures to be compliant with regulation, but at what cost? With an IPO looming in 2018, this doesn’t bode well for Airbnb in its second largest market.

By the way, the black vertical line in the chart above represents the date from when vacant days are not measured one month in advance, but rather one month and a week, two weeks, two months… thus not directly comparable.

Well you could argue that one month ahead is not enough. Hey, I plan my holidays further in advance than that! That may be the case but I am paying attention to the change both in trend — and in days — and employing the same methodology that has been existent from the beginning. So in order for that argument to be true, you would need to assume that there has been a massive change in behaviour in early 2017 or some sort of fire sale on Airbnb.

Anyway, the same can be seen when you extend the methodology of collecting vacant days to one and a half, or even two months ahead:

Data updated on 7th April 2017. Raw data source: Airdna

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What does that mean for me as a host?

Good question. If you happen to be a lucky host with the appropriate planning permission on your property, you will see a significant uptick on your nightly rates as a large chunk of competition is driven off Airbnb. Make sure your listing is up to scratch and your property does look attractive in the photos or the guest might choose HomeAway instead. At Hostmaker we are delighted to help you out with the interior design, whilst our professional photographers and listing gurus do a great job in making your property shine. Also note that at Hostmaker, we do not limit to Airbnb; we also list your property on Booking.com, HomeAway and TripAdvisor, maximising the potential outcome for you as a host.

If you are a host that wishes to short-let your property while you are away up to 90 days a year, you are lucky too. You will no longer need to fight against the Airbnb algorithm that ranked you at the bottom of the pile for lack of available days. Now you are more than certain to get a booking at decent rates when you are away. Hostmaker was founded to serve hosts who do not want to deal with the hassle of renting out their places on their own. Call us now and we will get your listing up and running within one week, and you can make your home pay for your holidays!

Joseba Matanza, Head of Analytics @Hostmaker

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