Recent Inman article highlighted Airbnb’s 2022 profits of $1.9 billion, an early indication of their platform’s ability to withstand a broader economic slowdown.
Demand and daily rates surged 36% since 2019 and 40% from 2021 as investors sprang to rent out homes while the pandemic subsided. Overall, it was an incredible year for Airbnb given that in 2021 they posted a loss of $352 million. They reported ending 2022 with 6.6 million active listings worldwide, over 900,000 more than it had at the beginning of the year excluding the inventory it lost in China when it left the country in July.
Airbnb’s Warning To Short-Term Rental Investors
Airbnb’s chairman, Brian Chesky, reported their commitment to focusing on affordability for guests in 2023, paying mind to their original goal of being an affordable alternative to hotels. Given this focus, the company is forecasting a slight drop in average daily rates this year.
The company has been making changes over the past year to balance the dynamic between renters and investors/homeowners. The focus on affordability may already be taking its toll, with average daily rates (ADRs) falling from $156 to $153.
Airbnb’s warning to short-term rental investors: Expect rates to drop in 2023.
Airbnb Current and Future Plans
The company recently changed its algorithm to prioritize listings that guests have found provide good value for the price, and they’re working on new tools that let hosts see the total costs guests are paying for their rentals.
A decline in ADR would eat into revenue for the company, which collects a 3% “take fee” from hosts. They plan to continue to grow modestly while keeping costs down to offset ADR declines. One way they aim to increase their supply is by making it easier to become a host.
It’s a good time to own an Airbnb given the company’s ability to withstand and be profitable during an economic downturn. Airbnb owners need be mindful about daily rates and guest experience, but Airbnb ownership is still a great vehicle to profitability and wealth.
As an investor and Airbnb owner myself, I love to have conversations with other investors and those looking to break into the market. Leave me a message below if you want to chat!