Airbnb’s entry to the public
market is expected Thursday, now at a range of $56 to $60 per share according
to a securities filing Monday, giving it a $42 billion valuation.
The timing of the IPO is an indication of the strength of the
platform – and the overall short-term rental sector – as one of the relative
bright spots in an otherwise dismal year for the travel industry. According to a
report from STR and AirDNA, average daily rates for short-term rentals were reported
as higher in July 2020 than in July 2019 in the United States, Spain, Italy,
France and China.
Airbnb's S1 filing states that from July through September, the platform captured gross booking value
of $8 billion, just 17% below the same period in 2019 and above the 2018 amount
of $7.5 billion.
But the resilience of short-term rentals during the pandemic is, at this point, old news. The question that remains is how the sector will fare
in the future. One thing is clear: Industry leaders expect the spike in demand
to continue and are now putting a focus on growing the supply of rental properties.
As Airbnb’s S1 document states: “If we are unable to retain
existing hosts or add new hosts, or if hosts elect to market their listings
exclusively with a competitor or cross-list with a competitor, we may be unable
to offer a sufficient supply and variety of properties or experiences to
attract guests to use our platform.”
Meanwhile Expedia Group CEO Peter Kern, in the company’s call with analysts to
discuss Q3 financial results, said: “There
was a really acute demand spike there [on Vrbo]. We do think there's more
opportunity to serve them more opportunity, and I think we will continue to try
to grow our inventory.”
And Booking Holdings CEO Glenn
Fogel said in his company’s Q3 call: “People having
experienced this [alternative accommodations], now it goes into the
consideration set for any type of use, standard holiday or not. And that's why
I do believe, in the long run, to continue to build our inventory for the
single property type use is very important.”
Individual owners vs. property
As of September 30, Airbnb says it
has more than four million hosts around the world and 5.6 million active
listings. As of December 2019, the company says 90% of its hosts were
individual hosts, defined as “those who activate their listings directly on
Airbnb,” and 79% of those have just one property on the platform. The remaining
10% of hosts are property management or hospitality businesses.
The company calls individual hosts “the core of our host community”
and says, “Historically, we have seen an increase in the number of, and revenue
from, professional hosts on our platform. The uniqueness of listings on our
platform will be negatively impacted if the number of individual hosts does not
grow at the same rate.”
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In fact, there
may be more to the value of individual hosts than just maintaining “uniqueness
of listings.” According to a report from Transparent, Airbnb’s hosts with just
one property have the highest review scores.
Transparent’s analysis: 83% of Airbnb’s listings from hosts with just one
property are only listed on its site, not on Vrbo, Booking.com or elsewhere.
Group’s vice president partner success for vacation rentals, Kevin
Locraft, acknowledges the value of exclusivity that is more likely to come
from owner inventory, but he says that is not his priority.
“There’s more demand than we can handle in this space,
and so there’s more need for all inventory than ever,” he says.
“At the end of the day when
a traveler comes to any one of our websites, I want them to find exactly what they
are looking for. And exactly what they are looking today might be available
through an owner, it might be available through a property manager ... and therefore
I want it all.”
However, Locraft acknowledges the pandemic
has made attracting those individual owners more challenging.
“If you are a second-home owner there
is economic uncertainty, there’s regulatory risks that’s going on, there are travel
restrictions put in place and then taken away and then put in place in relation
to the pandemic. Some people are a little bit weary of opening up their home
and not knowing exactly who is going to be staying here. Some owners are
actually using their homes as their office or their second home more than they
have in the past. Those are the things we are battling against,” Locraft says.
“It’s not just a dollars-and-cents game, because if it were a dollars-and-cents game there’s no better time to be
listing your secondary home on Vrbo or Expedia or any of the platforms.”
Vrbo uses email campaigns,
search engine marketing and advertising on social channels such as Facebook and LinkedIn
to reach potential owners with messages about why they should list on Vrbo.
“It has been sort of tried and true
that the hook can be economic in nature and that would be enough to pull people
in. I think post-COVID it’s a little bit different,” Locraft says.
“You have to get people comfortable
with participating in this category in a particular uncomfortable time. [So] hooks
around how we provide the technology and a responsible platform so owners can
feel safe about the travelers they are renting to.”
In an email statement, Eric
Bergaglia, global head of Booking.com's homes and apartments business, says
that the platform is also looking for ways to serve individual hosts.
homeowners are the hallmark of the transformation of the alternative
accommodations space in recent years," he says.
"Because we recognize that renting out
your primary or secondary residence is quite different from operating as a
professional property manager, we are continuously in dialogue with all of our
partners and innovating to meet their specific needs so they can capture more
bookings and capitalize on all the short-term rental industry has to offer.
With the strong momentum behind this segment, with 30% of our new bookings in
the third quarter coming from alternative accommodation, we are committed to
continuing to listen and respond to our partners in order to grow
Record vacation home sales
According to a November report from
the National Association of Realtors, vacation homes sales in the United States
rose to 109,100 in the period from July to September, a 44% gain over the same
period in 2019 and up from about 60,000 sales in the period April to June.
There’s more demand than we can handle in this space, and so there’s more need for all inventory than ever.
Kevin Locraft - Expedia Group
Vacasa vice president of sales and marketing Shaun Greer says that as more transactions take place with this type of inventory, challenges mount for management companies and listing platforms that need to determine if new owners intend to occupy the property full time or list it for rent, either self- or professionally-managed.
Greer says Vacasa currently manages
about 25,000 of the 1.5 million vacation rentals in the United States, making
it the largest management company in the country.
To grow its inventory, Vacasa uses
content marketing, creating multiple reports each year with data on market
performance and occupancy trends – which Greer says partly accounts for a boost
in organic leads this year. In the first 11 months of both 2019 and 2020,
Vacasa says it took in about 4,000 inquiries, but this year those coming in
organically went from 1,168 in 2019 to 1,998 in 2020 – an increase of more than
71%, with the biggest jump coming between June and September.
Vacasa also partners with real estate
agents to introduce the Vacasa brand from day one.
“We help them help their clients choose the best vacation home,”
“We have a little over 3,000 real estate agents that are part of
our network ... sometimes our sales rep will go on the buyer meeting with the
agent to talk about property management services and the best way to feature
the home as a vacation rental.”
One factor that could complicate efforts to grow inventory is the
trend toward longer-term stays.
Airbnb says long-term stays – defined as at least 28 nights – were
already one of its fastest-growing categories in 2019.
And as the COVID crisis unfolded, “Stays of longer than a few days started
increasing as work-from-home became work-from-any-home on Airbnb. We believe that the lines between travel and
living are blurring, and the global pandemic has accelerated the ability to
Locraft says Vrbo has seen similar trends,
with customers booking stays for multiple weeks as the pandemic eliminated the
need to work from an office and moved schooling online for families with
says Vacasa is seeing a similar shift to stays of 30 days or more in multiple markets
in states such as Florida and Arizona.
those longer stays may be good for the hosts who get guaranteed income, if the
trend persists, it could impact available inventory broadly and, says Greer, impact
revenue for management companies and distribution platforms.
creates some challenges in that companies like us and Airbnb and others make
money off each reservation. We have less bookings happening but still the
guests are renting the house out for longer,” he says.
However, Locraft also sees upsides across the board.
“While long stays do take inventory off the shelf for a
longer period of time, any stay is a great outcome for all parties involved –
guests, partners and Expedia Group,” he says.
“For owners and managers, longer stays can mean less
time spent getting the home ready for the next guest. For travelers, it means
that fees are a lower percentage of the total price and for Expedia Group, it
means we need to find fewer travelers to fill partners’ calendars, so
potentially lower marketing costs.”