Airbnb’s Impact in Seattle Has Been Drastic. Will Coronavirus Change That?
You’ve heard of Airbnb, the short-term rental company flipping the travel and leisure industry on its head. You’ve also probably heard how it’s helping local economies through boosting travel and tourism. What’s not been discussed much are the long-term effects a service like this has on the local housing market. The expansion of Airbnb into cities around the world comes with potential economic benefits and costs, with the costs usually outweighing any benefits to renters and local communities.
When you couple the expansion of a company like Airbnb with the current COVID-19 pandemic and its effect on the travel industry, you begin to see the danger a sweeping service like that can impose on any real estate market, let alone a major city like Seattle.
How Airbnb Changed the Housing Market
Airbnb literally redefined a traditional industry overnight. And it did so with a very simple and decentralized concept. Through the viral spread of the internet, seemingly anyone with a spare room could become a hotel, and travelers had an easy gateway to a new kind of experience. A few years after the company started in San Francisco in 2008, tourists could choose from hundreds or thousands (now 7+ million) of nontraditional hotel options in nearly every city in the world.
Unfortunately, as the platform began to expand rapidly and grew in demand, homeowners with a spare room quickly changed to profit-minded investors who buy and then rent entire homes. This has put a tight squeeze on renters living in popular and growing cities.
Why Rents Are Rising
Through independent research and studies, it is confirmed that Airbnb can in fact cause higher rents. The impact will vary from city to city, but the case can be made that rent will increase. In one analysis focused on New York, it found that Airbnb has increased annual rent for the median tenant by $380, and over $700 in some neighborhoods.
"What's happening is that some landlords are switching from the long-term market to the short-term market," says Davide Proserpio, an assistant professor of marketing at the University of Southern California. "Why? Because Airbnb reduces a lot of friction and makes renting in the short-term market quite easy for everyone."
COVID-19 Impact on Airbnb in Seattle
Seattle was one of the hardest hit by COVID-19 in the US, which put a strain on tourists wanting to travel to Seattle and rent an Airbnb. This impact can be seen in year-over-year data. What's shown is that after the onset of COVID-19, future demand for Airbnb in Seattle decreased rapidly. The effect on the Airbnb rental property business in the Seattle housing market was quick and painful for some.
AirBnB 2019 March Sales Data
- Airbnb Occupancy Rate: 74.28%
- Airbnb Daily Rate: $130
- Airbnb Rental Income: $2,885
AirBnB 2020 March Sales Data
- Airbnb Occupancy Rate: 54.01%
- Airbnb Daily Rate: $133
- Airbnb Rental Income: $2,246
The relationship between COVID-19 and the short-term rental industry is one that will continually change and right now really has some uncertainty. It’s also difficult to say what the future holds for the short-term rental industry and its relationship with the real estate industry. What we do know is that the need to buy and sell homes is still strong even in the face of a global pandemic.