Sometimes the disruptor gets disrupted — then what? Fifteen years after upending the travel industry by enabling regular people to rent out rooms, houses and apartments to travelers, Airbnb is now having to contend with an industry that’s fighting back.
Earlier this month, New York City’s Local Law 18 officially went into effect, requiring short-term rental hosts to register with the city to be approved. The restrictions, which notably require hosts to both live in and be present in the space where they are hosting guests, severely limit the ability of tourists to stay in apartments in prime locations when visiting the city.
While New York’s restrictions may be some of the tightest, the list of communities enacting such laws is growing. Cities such as Dallas, Memphis, Quebec, San Francisco, Paris and Barcelona have implemented laws restricting property owners’ ability to conduct short-term rentals. In many of these cases, Airbnb has worked with local officials to preserve its ability to operate while addressing their concerns.
Still, Airbnb has called Law 18 a “de facto ban” on its ability to do business in the city, declaring that “the city is sending a clear message to millions of potential visitors … You are not welcome,” Theo Yedinsky, global policy director for Airbnb, told Wired. However, the impact on Airbnb’s overall business may be minor. Despite the high-profile dwellings in major metropolitan areas, Airbnb’s bread and butter business is in so-called “cottage communities,” where such rentals are not only common, but they are also welcome.
“It won’t affect them much at all,” says Marcus Rader, founder and CEO of Hostaway, which creates software for property managers and Airbnb hosts. “If you look at where [most of] their business is, it’s not in the cities.”
Indeed, the appeal of these secluded rentals, where affiliated groups (families, friends, neighbors) can stay together in a place that is not home grew significantly during the pandemic, when people were limiting exposure to unfamiliar people and crowded areas like large cities, says Jamie Lane, chief economist for short-term rental data insights company AirDNA.
“During the pandemic, more people than ever before discovered short-term rentals, as they looked for trips in drive-to and rural locations, away from urban centers, and preferring more space for their family groups,” Lane said.
Airbnb is playing up these “only those you know and what you want” qualities in its new global advertising campaign. Currently running on digital video and social in the United States and Canada — and rolling out to the rest of the world later this year — the effort compares the benefits of staying at an Airbnb rental over a hotel.
One spot, for instance, shows a group of friends arriving at a hotel pool that is full of children. “If you’re finally ready to take a trip without the kids, why stay at a hotel with more kids?” asks a voiceover. The scene quickly shifts to a private residence with a private pool as the voiceover says, “Get an Airbnb and get a place to yourself.” A second spot in the series wonders why a group of friends traveling together would pay for separate hotel rooms to be apart from each other.
Most recently, the company on Sept. 13 unveiled a third spot that showcases the amount of space obtainable by booking through Airbnb, including the ability to stay in a multi-story home, as opposed to staying at a conventional hotel. The campaign’s playful spots were made in collaboration with Buck Animation.
The company has also launched a number of marketing initiatives — such as creating a rentable version of Barbie’s Malibu Dream House and an opportunity to rent from actors Ashton Kutcher and Mila Kunis — that highlight the experiences the platform provides that hotels cannot.
So far, the restrictions in large metropolitan areas don’t seem to have had a significant effect on Airbnb’s overall business. In the second quarter of 2023, the company reported revenue of $2.48 billion, slightly higher than analysts’ expectations. Revenue grew 18% year-over-year, and the company’s net income reached $650 million, compared with $379 million in the year-ago quarter. The company also reported $19.1 billion in gross booking value for the quarter, up 12% YoY.
“Despite some negative press over the past few years, short-term rentals are doing better than ever: July 2023 saw the most nights stayed in the U.S. in a short-term rental on record, 9.4% more than in July of last year,” says AirDNA’s Lane.
In fact, restrictions such as New York’s Local Law 18 may have a greater impact on the city’s residents and tourism economy than the company. Particularly in areas with high housing costs, homeowners’ ability to lease properties to visitors can be a critical source of supplemental income to keep up with those costs.
“While no individual city represents more than a tiny percentage of Airbnb’s revenue, it is of course devastating for those renting out part of their home in New York who relied on the revenue to help make ends meet,” Lane says. “[It is also] disappointing for guests who are now left with few options for staying in New York, and even fewer affordable options.”
Or rather, fewer options in the prime locations. As Hostaway’s Rader notes, few cities are islands unto themselves. The rental restrictions within the cities themselves create more opportunities in surrounding communities, he said.
“If everyone wanted to stay downtown, then all of the hotels would be downtown,” Rader said. “Jersey City is just across the Hudson River.”
Clarification: The headline for this story has been updated to reflect that Airbnb’s marketing campaign is separate from new short-term rental restrictions.