EP122: This Week in the World of Airbnb

EP122: This Week in the World of Airbnb


What does Donald Trump’s inauguration mean for the future of Airbnb?

This week Jasper is joined by Silvia Li, Head of Marketing at Hostfully, to discuss what impact the Trump administration will have on Airbnb corporate as well as Airbnb hosts around the world. Some of what Trump has said and done might hurt Airbnb while some might help.

Also discussed is Professional Airbnb Investors and their impact on the market, Airbnb’s impact on the hotel industry and the one gadget that solves Airbnb hosts’ “biggest problem”.

Some of the topics covered

Article #1: How will Uber, Lyft and Airbnb fare under Trump?

  • What might hurt:
    • Deteriorating relationship with China
    • Trump’s conflict of interest as a hotel owner
  • What might help:
    • Trump’s focus on reducing regulations

Article #2: The Rise of the Professional Airbnb Investor

  • Large real estate companies are looking at Airbnb closely
  • ROI is generally greater for short term vs. long term rentals
  • 6% of Airbnb hosts’ in New York City have 3 units or more
    • Account for 1/3 of revenue
  • Regulatory uncertainty is holding real estate companies back

Article #3: How hard has Airbnb hit hotels? It’s not as bad as they thought

  • Occupancy rate much lower for Airbnb’s than it is for hotels
  • Average daily rates only $20 lower for Airbnb’s than hotels ($149 vs. $169)
  • Jasper has seen an increase in average rates over the years

Article #4: The One Gadget That Solves Airbnb Hosts’ Biggest Problem – Seth Porges

  • Ring Video Doorbell
  • Keeps guests from bringing more people than allowed/agreed to
  • Prevents many other issues

Resources mentioned

ring.com

Article #1: https://www.cnet.com/news/how-will-uber-lyft-and-airbnb-fare-under-trump/

Article #2: https://priceonomics.com/will-real-estate-investors-take-over-airbnb/

Article #3: http://www.miamiherald.com/news/business/article127358484.html

Article #4: http://www.forbes.com/sites/sethporges/2017/01/20/the-one-gadget-that-solves-air-bnb-hosts-biggest-problem/#1a051ee740dc

 

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Complete Transcript for Get Paid for Your Pad Episode 122

Jasper:

Welcome to Get Paid For Your Pad, the definitive show on Airbnb hosting, featuring the best advice on how to maximize profits from your Airbnb listing, as well as real-life experiences from Airbnb hosts all over the world. Welcome.

 

Jasper:

This episode is brought to you by Hostfully, a company that helps you make beautiful guidebooks for your listing. Make your own at hostfully.com/pad, and a special for Get Paid For Your Pad listeners, you’ll get a free guidebook consultation after you make your guidebook.

Welcome to another episode of Get Paid For Your Pad, and today I’m discussing the news in the world of Airbnb with Silvia Li, who’s the Head of Marketing at Hostfully. So, Silvia, welcome. How are you?

Silvia:

Hi, Jasper. Thank you so much. I’m really excited to be on this episode, and looking forward to chat, everything about Airbnb.

Jasper:

Yeah, absolutely, me too, and we selected a few interesting news items. And let’s dive right into it. The first thing we’ll talk about is very timely. Trump has just been inaugurated, I think a few days ago, right?

Silvia:

Yes. I mean, basically, it was on Friday, so we have four more years to go.

Jasper:

Okay. I’m sure you’re very excited about that.

Silvia:

I’m trying to keep myself very optimistic. So, hopefully, everything goes right these upcoming four years.

Jasper:

But, the interesting question is, how would Airbnb fare under Trump? So, let’s look at some of the things that Trump has announced that he will do, and think about how that will affect Airbnb. And this is an article on CNET.com that came out.

Well, first of all, I think Airbnb has a lot of ambitions in China. The article mentions that Trump has repeatedly said to be tough on China, and he wants to impose trade barriers and all that kind of stuff, so the relationship with China could deteriorate a little bit, which might harm Airbnb’s ambitions. What do you think?

Silvia:

Yeah, I mean, I agree. Obviously, China, it’s a huge market. Uber tried really hard to break into it, but, I mean, it says in the article that there was so much competition with, in this case, Didi, basically the Chinese Uber, and I think, I hope, that Trump takes business a little bit more serious with China because it’s a huge market. And I think Airbnb will struggle a little bit, but hopefully, things will work out pretty well in this market because I personally know a lot of Airbnb hosts in China right now.

Jasper:

Yeah, I actually interviewed a person from Shanghai a few weeks ago, and she’s doing really well in Shanghai with Airbnb. The one thing that might help Airbnb is the fact that Trump really seems to hate regulation, so that could be good.

Silvia:

Yeah, I mean, it seems to me that… Obviously, he was a hotel owner and he was a businessperson, so obviously, you know, anyone that does businesses knows that there are so many laws and regulations, and I think, as a Republican himself, he would rather have less regulations on big corporations. And it actually might help Airbnb since they have teams and teams of just lawyers lobbying for certain policies right now.

Jasper:

Right. Well, the interesting thing is that, even though he says he doesn’t like regulations, he also said that he wouldn’t allow tenants in his own buildings to rent out their homes on Airbnb, so that’s…

Silvia:

Yeah, I mean, he’s an interesting character. I think…I hope I’m not wrong, but I think, obviously, he tries to look out for his business, and look for better profits and more revenue.

Jasper:

But, did he have to disassociate himself from his corporations so that there won’t be like a double interest?

Silvia:

Yeah, I think… I’m not sure because I’m not super-involved with U.S. politics, but I think, to be President, you have to disassociate yourself from any business. But, I think what he did was, he changed the ownership to someone in his family, if I’m not wrong.

Jasper:

Right. So, the conflict of interest pretty much still exists.

Silvia:

Correct.

Jasper:

The other thing he’s really big on is cutting the taxes for corporations. Now, I don’t actually know, does Airbnb even make a profit?

Silvia:

Right now, I believe they are profitable, but of course, not as much as the hotel business per se. But, I think they’re moving fairly fast, but with all the corporate lawyers fighting and lobbying for stuff, I think their growth has been pretty steady for the past few months. Yeah.

Jasper:

Yeah, I don’t think… I mean, if they’re making a profit, I don’t think they’re making a huge profit because, you know, obviously, they’re investing a ton of money in growing the different markets, but I think, eventually, the reason that they’re valued at $25 or $30 billion is obviously that investors believe that, in the future, they’re going to make a huge profit. But, for the time being, I don’t think that those tax cuts are going to help them that much.

But, in general, my perception of the things that Trump is saying is that I’m very skeptical whether he’s actually going to implement a lot of the things that he says because he’s already gone back on some of the stuff, right. He said he was going to drain the swamp, so to speak, and not have career politicians in big positions, to have business people and stuff like that, but that didn’t happen at all, did it?

Silvia:

I think, from what I’ve seen so far, he’s actually, obviously, promised a lot of things, and on his first day, he has already not done what he said he promised to do. But, I think what I find interesting, and it says it on this article, is that, for example, he’s working with a lot of tech founders from big corporations, like Uber, that are working on things related to the on-demand economy, and it seems to me that he’s actually putting people, like nominees, like transportation in this case for Uber, and yet he’s actually interested in working with these tech leaders to, hopefully, improve the tech industry, which in this case, Airbnb will fall into.

Jasper:

Right. So, that would be very good news for Airbnb.

Silvia:

Right.

Jasper:

Awesome. Let’s move on to the second topic of today. There’s a really long article that came out on the website called Priceonomics, and it’s all about the rise of the professional Airbnb investor. And I think this is a really interesting topic because more and more people are starting to realize that there’s a big return on investment to be made with Airbnb, especially compared to other types of investments that you can do. With the interests rates so low, everyone’s kind of looking for places to put their money and make a good return.

And, you know, it’s a great article. It’s very long, and it discusses all sorts of stuff, but I think the most interesting part is, they talk about the professional, like the big real estate companies, right, because, I mean, I’m sure there’s lots of individuals investing in Airbnb, like myself, but there’s also the really big trusts that own like 10,000, 20,000 units, you know, they own these huge buildings with 500 apartments per building. And the question is, you know, what’s going to happen if those guys are going to get involved, and when are they going to get involved?

Silvia:

Yeah. I mean, I think, just by reading through the whole article, it seems to me that there are a lot of people interested in getting into the Airbnb industry. And even when I was at the Airbnb Open, I actually met a host, he was a Superhost and also a property manager from Japan, and he actually currently had more than, I think he mentioned, 40,000 listings. And, obviously, I was like, “Wow, how do you manage all of them?” And he didn’t want to mention it, but I think there might be something going on. Definitely, Airbnb is talking to these folks and see if there’s any potential. So, I don’t know how that will go, but I think they are going towards that direction.

Jasper:

Right, where they would team up with the big real estate companies to set up some sort of system in which the real estate companies would allow their tenants to list on Airbnb.

Silvia:

Right. I mean, it’s probably really hard to upload all those listings, so they probably have to, like, some sort of software where they can automatically integrate whatever they’re using now to Airbnb so they can put all those listings into their system.

Jasper:

The article also talks about the number of professional investors that are using Airbnb right now, and they’re trying to make some estimates that are pretty interesting. They found some data from the city of New York, where apparently 94% of Airbnb hosts in New York City rented out two units or fewer, so only 6% has three units or more, which they then call a professional investor versus an individual. But, those 6%, they’re responsible for a third of all the bookings and the revenue in the city, so even though it’s a small percentage, revenue-wise, it’s actually quite a big part.

Silvia:

Yeah. I mean, it’s a pretty huge number, and I think they get a lot of demand on Airbnb. I’m assuming that these properties have already existed for a long time, but Airbnb has been a new way for them to distribute and get more supply of guests, and it’s going pretty well. And I’m seeing, just by talking to more property owners with just thousands of listings, it seems like this is the way to go. Although, I think, you know, at a certain point, it might get saturated. Especially if there are, for example, in this case, real estate companies getting in and putting thousands and thousands of listings in, the market might get saturated for hosts.

Jasper:

Yeah. Yeah, I think so too. And, according to the article, and I think this makes sense, the biggest threshold for the big real estate companies to get involved right now is all the regulatory uncertainty that exists around Airbnb. So, they don’t want to burn their hands on doing stuff that’s illegal and can damage the image of their company, I guess.

Silvia:

Yeah. I mean, I think it’s still pretty premature to say that there will be more real estate companies getting into Airbnb, just because, again, the market is still pretty early. They don’t want to start paying thousands of dollars, I mean, millions of dollars to lobby certain things, and it seems to me that, at least on the real estate side, they are probably doing pretty well. They are a multi-million dollar business, and they’re probably doing some testing, but so far, not really good signs yet.

Jasper:

Right. And I think that, to your point, when those big companies are going to get involved, I think the profitability of doing Airbnb in terms of return on investment will definitely go down. So, you know, there’s definitely a point to take advantage of the opportunities that are out there now, before the big boys come in.

Silvia:

Yeah. I mean, totally. I think, unfortunately, the margins will get smaller, but I think individual hosts and even hosts that have a couple listings can offer a different type of experience compared to huge real estate companies getting in, just because the service is more personalized and you get one-to-one with hosts, I mean, with guests in this case. But, compared to real estate companies, it’s more like outsourcing something, in renting out an apartment in this case. You don’t get that personal touch.

Jasper:

Yeah, absolutely, absolutely. Well, there’s one point being made in the article that I think is really good. They say, “There’s no city where a property owner can know exactly how Airbnb will regulate it or even if it will be legal 10 years down the line.” And, you know, obviously, big companies, they have a pretty long timeline that they look at, right?

Silvia:

Totally. I think if they make a huge investment like this, they’ll probably try to make sure that, in the next upcoming years, they will make some sort of profit. So, you know, in an industry like real estate, which is actually not super-high techy, I think they’ll try to make sure that those numbers make sense and there’s not much risk-taking, but instead, they want to make sure that everything goes right and that they will get a good return on investment.

Jasper:

Yeah, they don’t like to take too much risk, I think.

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All right, let’s move on to the third news item of today, and this is an article in the Miami Herald, and it talks about how hard Airbnb has hit the hotels. I think this is a topic that comes up pretty regularly. But the interesting thing, there’s a lot of talk about it, and obviously, the hotels are saying that Airbnb is really a bad thing, and Airbnb’s saying, “No, we’re actually not hurting the hotel industry,” but this article provides some actual data on the matter, which makes it interesting.

Silvia:

Yeah, I think those numbers are very interesting, and we’re going to talk more about it right now.

Jasper:

Yeah, so let’s go through some numbers. We’re talking about the Miami-Dade area, which apparently, is a very big market for Airbnb, and there’s a company who’s gathered a bunch of data and they say that Airbnb’s share of supply, demand and revenue in the overall lodging industry, it’s supply 8.5%, demand 3.6%, and revenue 2.8%, which basically means they’re much bigger in terms of supply than demand, which means that the occupancy rates in Airbnb are much lower than for hotels. And they also provide numbers on the occupancy. Apparently, hotels, it’s 77.5%, and Airbnb, only 30.9%. So, you know, in terms of revenue and demand, it’s only about 3% of the market.

Silvia:

Yeah. I think, based on these numbers, of course, you can get some conclusions. One is that Airbnb’s still a pretty early and small market compared to hotels, which have existed for decades. It’s a harsh comparison per se, I think, just because, again, hotels have been here for decades, while Airbnb has been here for almost a decade. So, I think these numbers will outgrow a little bit, but so far, I think I’m not 100% super-surprised, but I would say that it makes sense.

Jasper:

Yeah. No, I agree. Airbnb is just in the media so much that you feel like it’s, you know, it’s just completely taken over the world, and you forget that, in the bigger picture, it’s actually still a very small part of the total accommodations industry. And they also mention the daily rates, average daily rates, because Airbnb likes to say that Airbnb is cheaper than hotels, right. That’s one of their sort of big marketing quotes, so to speak. But, the report says that the average daily rate for a hotel was $169, and for Airbnb, $149, so that’s a $20 difference, which, actually, I feel like that’s not so much. It’s not a big difference.

Silvia:

Yeah. I think, in this case, this article provides data from that specific area, and I would agree with you that $20 is not a huge difference, especially if, you know, hotels are usually located in areas where there are a lot of touristic things to do around, but also, I mean, it’s easy to get into like a bus, probably, compared to an Airbnb. I was actually really surprised, as well, that the price wasn’t super-different. So, yeah, I mean, I think there needs to be extra research in this specific part, especially if Airbnb keeps quoting that Airbnb’s much cheaper than staying at a hotel.

Jasper:

Well, from my own experience, I’ve been using Airbnb for about six years now, and I’ve definitely seen an increase in average prices for Airbnb, and I think it has to do with the fact that Airbnb hosts are getting smarter. I don’t know who’s teaching all these hosts to increase their prices, but they’re definitely, I think, they’re learning that they can charge more.

And, you know, I’m an example with that. When I started renting out my house, I put it at $150 a night, which I, at the time, thought was a really good deal for me because it’s just so much more than if you rent out long-term, but soon enough, I realized that people were willing to pay much more. And also, with the rise of the smart pricing applications that are out there that people are using, and even Airbnb’s own smart pricing algorithm, (although I think it significantly underprices listings, but still), I think hosts are getting more help with determining what the optimal price is, and they’ve gotten a lot smarter with it.

Silvia:

Yeah. I think there was an article that I read a long time ago that said something that, you know, how you price yourself is how you define your listing. So, I mean, we see that a lot of hosts are, of course, pricing themselves a little bit more because the service that they provide is sometimes even much better than hotels, so it makes sense to charge more.

Jasper:

Yeah, I totally agree, totally agree. As the Airbnb hosts are learning to deliver a better product, they can also charge more, but I think it’s something that, I mean, it shows, you know, when you look at the Airbnb pricing algorithm, the smart pricing, it shows that Airbnb wants to keep the image of being cheaper than hotels. So, I think that’s why they’re advising hosts to sort of price a little lower than what would be optimal.

Silvia:

Yeah, it makes sense from Airbnb’s side to keep it that way, but hopefully, you know, at the same time, they have to think about the hosts. They’re spending a lot of time working on this, so hopefully, there’s a mutual agreement on that.

Jasper:

Yeah, well, they have to keep the interest of the host and the guest in mind, which, you know, obviously with pricing, that’s the one thing where the interests are kind of opposite. So, I guess Airbnb can’t really be a good advisor on that, I guess.

Silvia:

Yeah.

Jasper:

There’s one more article that I wanted to quickly mention, and it’s actually written by somebody who’s been on the podcast. His name is Seth Porges and he’s a contributor for Forbes, and he writes… Well, the name of the article is “The One Gadget that Solves Airbnb Hosts’ Biggest Problem”. And, you know, when I saw the headline, the first thing I thought is, “That’s a very smart headline because whatever it may be, I want to know what it is.” And I don’t know if this is actually the biggest problem that an Airbnb host faces, but in any case, he talks about a little gadget that’s called ‘Ring video doorbell’ that you can use to see who’s in front of your door, basically.

So, you know, he talks about, that one of the problems, or the biggest problems that Airbnb hosts face is that people will show up with more people than they were supposed to. So, they book a place for four people and they show up with five or six.

Silvia:

Yeah, I think this is actually a very useful tool. Just, in my experience, even as a guest, you see sometimes there are last-minute emergencies where you actually have to bring someone with you and you kind of feel like you have to do that secretly, but at the same time, you don’t want to bother the hosts. And I think it’s pretty fair for hosts to use this, just because it’s their property and, of course, they want to make sure that everything goes right, and I think it makes sense for them to have something like this.

Jasper:

Yeah, I think it’s important because, in some places, Airbnb hosts are legally not allowed to host more than a certain amount of people because of fire security regulations. For example, in Amsterdam, the maximum is four, so if I were to host five people, then I would not comply with those regulations. (Well, I’m not complying with the regulations, anyway. Actually, this year, I haven’t hosted for 60 days yet, so I’m still legal, but not for long.)

But, anyway, I think people have to be honest, right. If you say you’re coming with four people, then you shouldn’t bring more people than that you reserved for. But, the interesting part is that Seth actually mentions to his guests that he has this video doorbell, and he frames it as something that’s for their security. And so, the guests automatically realize that if they’re going to come with more people, that he’s going to notice it, and so that alone apparently prevents people from showing up with more people than communicated.

Silvia:

Yeah, I think that’s probably the best feature that they have. I would say that… I was talking to a host at the Airbnb Open and he was saying that the first time that he hosted, I mean, that he opened his door to Airbnb guests, he actually had more people that came into his apartment, and they actually, they burned the house because they threw a super-party. So, that to me is like insane, and I will be willing to spend a couple hundred dollars on things like this, on security hardware that could prevent all these issues because, down the line, there are people that don’t respect your listing and don’t follow regulations. So, yeah, I mean, this is very useful.

Jasper:

So, if you’re interested, ring.com, you can get one for $199, so the video doorbell.

And with that, we’ve come to the end of the episode. So, Silvia, thank you very much for joining us today.

Silvia:

Thank you, Jasper. It’s been a blast.

Jasper:

It absolutely has. And next week there’ll be another episode and there will be somebody else from the Hostfully team who will be on the Airbnb news podcast. So, looking forward to that. And, for the listeners, thanks for listening, and if you want to stay updated about Airbnb news, you can also sign up for my newsletter. I send one out every Monday with a bunch of headlines, some Airbnb hosting tips, as well as some featured listings and some special deals. So, if you want to receive that, just go to getpaidforyourpad.com, and there you can leave your email address, and then you will be updated every week. And, of course, every Thursday there’s a news episode, and every Monday there’s an interview that you can listen to, as well.

So, thanks for listening, and see you next time.

Airbnb hosts in the U.S. who want to maximize their profits, pay attention, because Everbooked can help you do this. Everbooked provides nightly optimized pricing, a comparison tool that shows you where your competition is at, and a market reports tool that gives you the bigger picture and tells you where the best places are to invest. Sign up now for Everbooked and use code GPFYP to get the first three months for free.

 

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