Is the Airbnb Market Oversaturated?

Is the Airbnb Market Oversaturated?

Airbnb has become one of the most popular alternatives to hotels since its launch in 2007. Travellers can find authentic accommodations through the online service which connects them with local hosts. Airbnb has expanded its user base to more than 220 countries since being founded.

Is Owning an Airbnb Profitable?

In the real estate market, Airbnb can be a fantastic way to earn extra money. Having a constant occupancy rate, which will result in a positive cash flow, all depends on your willingness to invest time and effort into educating yourself about rental properties, the housing market, and how to deal with Airbnb guests.

Let's take a look at some of the positives of owning and running your own Airbnb:

1. The Revenue Potential

Airbnb properties allow you to earn more rental income than regular property leasing. Hosts of Airbnb properties are able to change their prices whenever they want, unlike traditional rental properties that work with fixed prices. This model has become widespread, and guests are willing to pay more for Airbnb rentals, resulting in hosts earning more than rental property owners.

2. Earn more by offering additional services

As an Airbnb host, you can earn additional income by offering additional services like breakfast, transportation, laundry service, or even Airbnb Experiences to guests. Profits can be reinvested into the business, which can lead to an increase in income.

3. A diverse portfolio of guests

Airbnb hosts usually see a rotation of guests each month (unless they offer long-term rentals). In addition to hosting a wider range of guests at your property, a high guest turnover will also give you the opportunity to interact with a wide variety of guests from around the globe.

4. Your property is more in your control

Unlike traditional renting, Airbnb rentals give you more control over your property. By conducting more frequent property inspections, you are able to pick up on problem areas sooner. Also, the guest turnaround time is shorter, which helps with getting maintenance and cleaning done more efficiently

5. Pricing Policy

One of the advantages of owning a vacation rental is that you're better able to adjust and increase your prices, so you have greater control over your pricing policy. Airbnb’s Smart pricing tool allows you to automatically change the price based on demand, helping you to optimize your revenue.

Want to learn more about how to start an Airbnb business? Click here .

When it comes to investing in the short-term rental industry, do you have concerns about the market conditions? Do you have reservations about owning an Airbnb? Here's what you need to know.

Is the Airbnb market Oversaturated?

Compelling Airbnb Industry Stats :

As per Airbnb data sources, there are over 5.6 million Airbnb listings worldwide and over 4 million Airbnb hosts based on the platform. There are over 100,000 cities and towns listed on Airbnb.

Since its founding in 2008, Airbnb now operates in over 220 countries as part of a new "sharing economy." With that being said, there are nearly 2 million listings available to potential guests at any given time across the globe.

Interestingly, there have been 800 million stays that have been booked worldwide by 150 million users on the Airbnb platform, with over 4 billion guests having stayed in an Airbnb since its inception. According to Airbnb, hosts earn an average of $13,800 annually. Since 2021, the average earnings of hosts have increased by 43.8% and continue to be on an upward trend, which indicates great earning potential for anyone embarking on a journey with Airbnb.

According to ipropertymanagement, on average, 6 guests check into an Airbnb listing every second and Airbnb’s main website saw 91 million visits in January 2020 with 50% of traffic through mobile devices alone!

Does Airbnb have a positive impact on the Economy?

In a study conducted by HR&A Advisors for Airbnb, it was found that people who rent their homes on Airbnb use the income they earn to stay afloat in difficult economic times. Additionally, the study determined that travellers who use Airbnb enjoy longer stays, spend more money in the cities they visit, and bring income to less-touristy neighbourhoods.

Commenting on the study CEO Brian Chesky stated that “This study shows that Airbnb is having a hugely positive impact – not just on the lives of our guests and hosts, but also on the local neighbourhoods they visit and live in.”

In sum, the study summarizes Airbnb's positive impact on the economy in general:

  • 90% of Airbnb hosts rent the homes they live to visitors occasionally, and nearly half the income they make is spent on living expenses (rent/mortgage, utilities, and other bills).

  • Airbnb guests stay an average of 5.5 days and spend $1,045 during their stay on food, shopping and transportation, compared to hotel guests who stay an average of 3.5 days and spend $840.

  • Over 60% of Airbnb guest spending occurs in the neighbourhoods in which the guests stay.

Is the Airbnb Market Oversaturated?

One of the most common questions floating around the market is whether Airbnb is oversaturated. More so due to the pandemic taking its toll on the short-term rental market in 2020, negatively impacting industry stakeholders.

As of early 2020, the COVID-19 pandemic caused considerable harm to the worldwide tourism industry. A long-term lockdown and travel restrictions had adverse effects on the short-term rental. Despite that, we were able to see Airbnb's rental market rebound in late 2021.

Is the Airbnb Market Oversaturated?

In the first three months of 2022, Airbnb posted the strongest growth in gross nights booked outside of urban areas in spite of changes it made to its service last year in response to the post-pandemic travel surge.

In an interview with CNBC, Airbnb CEO Brian Chesky said, “To meet the demand over the coming years, we’re going to need millions more hosts” He feels that Airbnb is experiencing a high-class problem in which there are more guests seeking accommodation than hosts to accommodate them. Furthermore, he stated that “We are working our hardest to get more hosts on the platform.”

There is no doubt that this is a good problem to have. Airbnb hosts still have the opportunity to make it a success on the Airbnb platform, thus proving that in a holistic view the sector is not oversaturated.

The question of whether the Airbnb market is oversaturated might however be determined by the country, district, state, or city in question. For example, if the area is very touristic, there will definitely be a lot of competition and hosts will always need to be at the top of their game to remain profitable. Following this, in the recent study of Airbnb Trends for 2022, it was noted that one of the key elements of post-pandemic travel is guests wanting to travel to non-urban locations, staying for longer periods and booking the whole place, for a more private stay.

Airbnb Trends Evolving in 2022 and its impact on the Market

One of the main Short-term rental trends evolving in the post-pandemic era is the “long-term bookings from consumers”. According to a statement given to Reuters, CEO Brian Chesky stated “We are going to continue to see continued and sustained growth for stays of longer than a month and stays of longer than a week”

Compared with the pre-pandemic period in 2019, lease demands have increased by 10%. Due to higher average daily rates (ADRs), the entire industry produced about 40% more revenue. Note also that this happened despite 10% fewer listings.

It is expected that Airbnb prices will rise since travel markets around the world are opening their doors to both domestic and overseas tourists. As Airbnb listings increase, occupancy is also expected to remain high. According to AirDNA, In 2022, the average Airbnb occupancy rate is expected to be 59.8%, continuing the strong trend from 2021.

Is it a good idea to invest in Airbnb in 2022?

Short answer: "Yes" Why? Thanks to global market conditions and growth opportunities, 2022 could be the year that propels you to success in the vacation rental market, and Airbnb is the platform to take you there. In Airbnb News, the company reported that its first quarter of 2022 has been a record-breaker. Airbnb Co-Founder and CEO Brian Chesky said:

“The first quarter of 2022 was another record quarter for Airbnb. Guests are continuing to travel domestically and to rural destinations, and now, guests are also returning to cities and crossing borders at or above pre-pandemic levels. Airbnb is stronger than ever before.”

Airbnb's Q1 revenue was $1.5 billion which grew 70% year over year. It also exceeded pre-pandemic Q1 2019 revenue by 80%. A combination of growth in Nights (longer stays) and Airbnb Experiences Booked, as well as continued strength in ADR, despite the ongoing pandemic, the war in Ukraine, and macroeconomic headwinds, fueled the strong revenue growth.

Airbnb's phenomenal start to 2022 was the result of a number of positive business trends,

  • Higher Bookings. In Q1 2022, gross nights booked grew 32% compared to Q1 2019

  • Guests are returning to cities and crossing borders. Q1 2022 non-urban gross nights booked increased 80% compared to Q1 2019. Domestic gross nights booked also increased 65% compared to Q1 2019. Gross nights booked to high-density urban destinations grew 80% compared to Q1 2021, exceeding pre-pandemic Q1 2019 levels, and gross nights booked for cross-border travel more than tripled from Q1 2021, returning to near pre-pandemic Q1 2019 levels.

  • Longer Stays and even living on Airbnb. While short-term stays rebounded strongly in Q1 2022, long-term stays of 28 days or more continue to be the fastest-growing category by trip length compared to 2019. Long-term stays are at an all-time high, more than doubling in size from Q1 2019.

  • There is an expanding community of Hosts. Destinations with the strongest demand are showing the most supply growth, with non-urban active listings growing 21% in North America and 15% globally, compared to Q1 2021.

  • The rate of urban supply is increasing as demand returns to cities. As of Q1 2022, new listings are getting booked faster than a year ago, with the average time to get the first booking for most new listings being about a week.

  • Airbnb’s innovations, which included the New Host onboarding flow and the Ask a Superhost program, are further supporting this exponential growth and helping new Hosts be successful even faster than before. Thus, 2022 appears to be the optimum time for those who hope to join Airbnb's platform.

The company stated in closing the 2022 financial reporting highlights, "While we believe that travel will change as a result of COVID-19, the adaptability of our business suggests that we are well-positioned to serve this dynamic market as it continues to evolve and recover."

It is undeniable that Airbnb will be a huge force in the short-term rental market in 2022, and its growth trajectory is nothing short of phenomenal. Airbnb CEO Brian Chesky said "millions of hosts are needed, but it is now up to potential hosts to become part of the platform to make the most of the opportunity presented."

Hostaway

How can Hostaway Help?

Reach out to Hostaway's industry experts if you'd like to list your property on Airbnb. Let the Hostaway team serve as your resource for a free demo and let our product experts provide you with actionable advice about how Hostaway can be integrated into your vacation business and create growth opportunities for you!

Ready to find out how Hostaway can transform your business?