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Is the Airbnb bubble bursting?

Customers are increasingly walking away from Airbnb lets. Credit: Getty

June 29, 2023 - 1:00pm

Airbnb is one of the great success stories of the 21st century. By providing an online marketplace for holiday lets, the company has become a major player in the travel and property industries.

This hasn’t been without controversy. Airbnb and similar services have, in effect, transferred millions of homes out of the long-term rental market and into the hotel trade. That’s bad news for renters and also for aspiring homeowners who find themselves competing with Airbnb hosts for the same houses and apartments. The effect is especially concentrated in city centres and tourism hotspots.

But is the bubble bursting? According to the real estate guru Nick Gerli, income from Airbnb properties is collapsing in locations across America. That includes major cities like Phoenix and Austin, where revenues are reported to be down by almost half compared to last year.

Investors who ploughed their savings into such properties are in a tight spot, but it’s even tighter for those who took out mortgages. Squeezed between falling revenues and rising interest rates, many owners could be forced to sell up. With the number of short-stay properties exceeding the number of homes currently for sale in the US, a panicky mass exit could push beleaguered housing markets over the edge.

It was, of course, a dysfunctional housing market that triggered the global financial crisis of 2008. So will history repeat itself?

There are differences between what happened in 2008 and the situation currently unfolding. Back then, the root of the problem was the subprime mortgage crisis, caused by the reckless expansion of lending to high risk customers with insufficient collateral. However, mortgages used to purchase Airbnb properties and similar ventures do not fall into the subprime category — not least because they’re taken out by people who already own their own homes and are borrowing to invest. Unless hopelessly over-extended, they will have collateral.

One might ask whether it’s right for older people with spare capital to push their younger counterparts off the property ladder. But even if the practice is morally bankrupt, that doesn’t mean it’s going to result in financial bankruptcy. It’s also worth noting that we’ve so far avoided the major job losses that played a big part in previous house price crashes.

And yet the pricking of the Airbnb bubble is still a revealing sign of the times. Over the last 15 years we’ve seen tech companies like Airbnb, Uber and Lyft rise to prominence by rapidly expanding the reach of their apps. They’ve taken over the real-world economy by providing — and controlling — the marketplaces that enable entire industries to function. Crucially, the key to success here isn’t necessarily having the best app but, rather, the app that people use because everyone else does. This is why scaling-up is so important. 

However, rising interest rates mean the end of easy money, which is what fuelled the pace of expansion. The app companies have to replace investor cash and cheap debt with revenues, thus requiring consumers to pay more for services whose low cost we once took for granted. All of a sudden, we find ourselves questioning their value. 

Yes, the apps have their advantages, but do we really need them to book accommodation or hail a cab? After all, we managed well enough before. 

And so the significance of this moment may not be the risk of a housing crash or a financial crisis, but instead the unravelling of a business model that has sustained Silicon Valley for more than a decade. 


Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.

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tug ordie
tug ordie
1 year ago

Personally I stopped using airBNB permanently years ago. In major cities tenants charge a few bucks less than the hotels found a block away and you get the pleasure of spinning the roulette wheel and hoping it doesn’t land on filthy, bug infested, chore requirements, etc. I have had hosts cancel on me as I was driving to the property, seen piles of human hair on the floor….there was some novelty in staying with a local or in a locals abode but the race to the bottom has infected it and it is utterly shit now

tug ordie
tug ordie
1 year ago

Personally I stopped using airBNB permanently years ago. In major cities tenants charge a few bucks less than the hotels found a block away and you get the pleasure of spinning the roulette wheel and hoping it doesn’t land on filthy, bug infested, chore requirements, etc. I have had hosts cancel on me as I was driving to the property, seen piles of human hair on the floor….there was some novelty in staying with a local or in a locals abode but the race to the bottom has infected it and it is utterly shit now

Billy Bob
Billy Bob
1 year ago

AirBnB is a cancer on society, the sooner it falls over the better

Betsy Arehart
Betsy Arehart
1 year ago
Reply to  Billy Bob

I won’t use ABB because they are highly Woke infected. I use Booking, always stay in motels/hotels and have been highly satisfied. Their app is easy to use. If you reach their Genius level through providing reviews and travel information you get a discount. And so far I have not detected a hint of wokeness; they’re just business. Awhile back I tried the ABB app because it was the only option (I thought) for the place I needed to stay in my village (family problem issue). They make you sign their woke statement in order to use their service. Happily it turned out that I was able to work directly with the owner to secure the place and didn’t have to use ABB.

Betsy Arehart
Betsy Arehart
1 year ago
Reply to  Billy Bob

I won’t use ABB because they are highly Woke infected. I use Booking, always stay in motels/hotels and have been highly satisfied. Their app is easy to use. If you reach their Genius level through providing reviews and travel information you get a discount. And so far I have not detected a hint of wokeness; they’re just business. Awhile back I tried the ABB app because it was the only option (I thought) for the place I needed to stay in my village (family problem issue). They make you sign their woke statement in order to use their service. Happily it turned out that I was able to work directly with the owner to secure the place and didn’t have to use ABB.

Billy Bob
Billy Bob
1 year ago

AirBnB is a cancer on society, the sooner it falls over the better

Lizzie J
Lizzie J
1 year ago

I tried looking for an apartment just yesterday on Airbnb. The app is really showing its age. The map facility is useless and there is very limited sort and filter. Booking.com is way better.

Lesley van Reenen
Lesley van Reenen
1 year ago
Reply to  Lizzie J

I find Booking.com far worse
. Far more clunky. I use both apps frequently as a host and as a customer.

Lesley van Reenen
Lesley van Reenen
1 year ago
Reply to  Lizzie J

I find Booking.com far worse
. Far more clunky. I use both apps frequently as a host and as a customer.

Lizzie J
Lizzie J
1 year ago

I tried looking for an apartment just yesterday on Airbnb. The app is really showing its age. The map facility is useless and there is very limited sort and filter. Booking.com is way better.

Dominic A
Dominic A
1 year ago

Maybe some of the hotels should become housing for young people. I lived for a year in such a place in Tokyo – a ‘gaijin house’ of around 100 people, each with a room and sharing large kitchen, public rooms. Great fun, for the young at least – would help Gen Z keep costs down and get them socialising without the intermediary of the phone.

ralph bell
ralph bell
1 year ago
Reply to  Dominic A

Great idea!

R Wright
R Wright
1 year ago
Reply to  Dominic A

Isn’t that what one would call a youth hostel?

Dominic A
Dominic A
1 year ago
Reply to  R Wright

No, I’m talking about long term lodgings. More of a frat house for workers.

Dominic A
Dominic A
1 year ago
Reply to  R Wright

No, I’m talking about long term lodgings. More of a frat house for workers.

ralph bell
ralph bell
1 year ago
Reply to  Dominic A

Great idea!

R Wright
R Wright
1 year ago
Reply to  Dominic A

Isn’t that what one would call a youth hostel?

Dominic A
Dominic A
1 year ago

Maybe some of the hotels should become housing for young people. I lived for a year in such a place in Tokyo – a ‘gaijin house’ of around 100 people, each with a room and sharing large kitchen, public rooms. Great fun, for the young at least – would help Gen Z keep costs down and get them socialising without the intermediary of the phone.

Thor Albro
Thor Albro
1 year ago

“After all, we managed well enough before”. More than just a whiff of Ludite nihilism here. The Airbnb and Uber models have brought enormous advantages to the consumer, and these apps are thankfully never going away.

Meanwhile, it’s really no surprise that Airbnb entrepreneurs may have over invested, and the marketplace will adjust accordingly, As a heavy Airbnb user I can attest that vacation rental costs are up 50%-100% over the last 3 years, so a market correction was due.

J. Edmunds
J. Edmunds
1 year ago
Reply to  Thor Albro

The “Airbnb and Uber models” are nothing but supplying high value services (accommodation and transport) while outsourcing the costs and risks of owning the high value assets (buildings and vehicles) required to provide those services.
Something for nothing.
Of course, the nyusikas have come home to roost.

J. Edmunds
J. Edmunds
1 year ago
Reply to  Thor Albro

Why do I pay good money to subscribe only to have to wait for censorship?

J. Edmunds
J. Edmunds
1 year ago
Reply to  Thor Albro

The “Airbnb and Uber models” are nothing but supplying high value services (accommodation and transport) while outsourcing the costs and risks of owning the high value assets (buildings and vehicles) required to provide those services.
Something for nothing.
Of course, the nyusikas have come home to roost.

J. Edmunds
J. Edmunds
1 year ago
Reply to  Thor Albro

Why do I pay good money to subscribe only to have to wait for censorship?

Thor Albro
Thor Albro
1 year ago

“After all, we managed well enough before”. More than just a whiff of Ludite nihilism here. The Airbnb and Uber models have brought enormous advantages to the consumer, and these apps are thankfully never going away.

Meanwhile, it’s really no surprise that Airbnb entrepreneurs may have over invested, and the marketplace will adjust accordingly, As a heavy Airbnb user I can attest that vacation rental costs are up 50%-100% over the last 3 years, so a market correction was due.

Steve White
Steve White
1 year ago

It’s not just Air B&B, it’s traveling in general that is more difficult because of inflation, and bad decisions on things like energy. Governments don’t seem to care about the people in nations they rule, but have fake empathy/sympathy for anyone and anything not in front of them. Anything they can focus our eyes on where they are not accountable.
The excuse used to be that climate change is bad for children 100 years from now, so you must suffer now. Yet ECB president Christine Lagarde just stated that climate change is the primary cause of inflation in the world. Realy? 🙂 So what is the answer?
According to her we need to hurry up and create a digital Euro for the sake of liquidity. So, with a CBDC like that you will also need to worry if you have perhaps shared the wrong opinion online to even be able to travel and pay for an Air B&B.

Last edited 1 year ago by Steve White
Steve White
Steve White
1 year ago

It’s not just Air B&B, it’s traveling in general that is more difficult because of inflation, and bad decisions on things like energy. Governments don’t seem to care about the people in nations they rule, but have fake empathy/sympathy for anyone and anything not in front of them. Anything they can focus our eyes on where they are not accountable.
The excuse used to be that climate change is bad for children 100 years from now, so you must suffer now. Yet ECB president Christine Lagarde just stated that climate change is the primary cause of inflation in the world. Realy? 🙂 So what is the answer?
According to her we need to hurry up and create a digital Euro for the sake of liquidity. So, with a CBDC like that you will also need to worry if you have perhaps shared the wrong opinion online to even be able to travel and pay for an Air B&B.

Last edited 1 year ago by Steve White
Stan Konwiser
Stan Konwiser
1 year ago

The Uber/AirBnB models are technologies that have democratized the marketing and delivery of personal service businesses. Formerly, only organizations with large capital investments could reach critical mass in such businesses and could be very profitable. The taxi and hotel business were low hanging fruit. Other businesses never attracted the capital to develop (dog walking, handyman, baby sitting, house sitting). The internet has opened these markets through this model. The technology is simply a tool, the success of the participants will wax and wane as all business models do. This technology is also very disruptive and has the ability to challenge the business models currently dominated by large capital especially when government regulated. Such is Capitalism at work.

Stan Konwiser
Stan Konwiser
1 year ago

The Uber/AirBnB models are technologies that have democratized the marketing and delivery of personal service businesses. Formerly, only organizations with large capital investments could reach critical mass in such businesses and could be very profitable. The taxi and hotel business were low hanging fruit. Other businesses never attracted the capital to develop (dog walking, handyman, baby sitting, house sitting). The internet has opened these markets through this model. The technology is simply a tool, the success of the participants will wax and wane as all business models do. This technology is also very disruptive and has the ability to challenge the business models currently dominated by large capital especially when government regulated. Such is Capitalism at work.

Walter Schwager
Walter Schwager
1 year ago

A number of cities are trying to restrain Airbnbs, such as Amsterdam, Miami, to stop the shrinking of the long-term rental market.

Mangle Tangle
Mangle Tangle
1 year ago

Not sure this article says much.

Richard Craven
Richard Craven
1 year ago

I’ve never used AirBnB, because they made a substantial donation to the violent racist hate group Black Lives Matter.

Richard Craven
Richard Craven
1 year ago

I’ve never used AirBnB, because they made a substantial donation to the violent racist hate group Black Lives Matter.