top of page

Could Airbnb superhosts cause the next RE bubble?

Social media has been rife with speculations that AirBnB Superhosts may be leading the way to the next US housing crisis.

Let’s deep dive to find out the actual scenario: What is Airbnb Superhost?

Airbnb launched its Superhost program in 2016 to reward its most devoted hosts with a special VIP status. This was a response to the lack of consistent experiences on the ‘alternative lodging’ platform since Airbnb’s rating system proved an inadequate way of deciphering between professional quality operators and novice hosts.

The four criteria that hosts must meet to become an Airbnb Superhost are:

● Superhosts have completed at least 10 stays in the past year or 100 nights over at least 3 completed stays.

● Superhosts have a 4.8 or higher average overall rating based on reviews from their Airbnb guests in the past year.

● Superhosts respond to 90% of new messages within 24 hours.

● Superhosts cancel less than 1% of the time, not including extenuating circumstances. This means 0 cancellations for hosts with fewer than 100 reservations in a year.

This led to a virtuous cycle where hosts who provided a good experience for Airbnb customers received more bookings driven by better positioning in search (5% increased page views) which translated to 81% more occupancy than super hosts thus earning 60% more revenue per available day. This status mattered a lot more in emerging tourist destinations with larger metropolitan areas where safety can be a bigger concern for guests.

So what did this change?

Airbnb’s global inventory of 7 million listings – makes it bigger than the top-ten hotel chains combined, which have 5.48m guestrooms. In many markets, as many as half of the listings on Airbnb are advertised by hosts with at least one other listing. According to experts, 7 percent of hosts on Airbnb are Superhosts. Leaving aside part-time hosts, 19.4% of hosts had achieved Superhost status in 2017. Given that the margins on short-term rentals are higher than long-term ones, many of these superhosts signed more than 10 leases with the intent of keeping all the properties continually booked, or took out large bank loans to buy condos and remodel them as “AirBnB homes”. AirDNA estimates that a third of Airbnb’s U.S. listings are run by hosts with between two and 24 properties. The remaining third involves hosts with more than 25 properties.

Along with zero interest rate policy and quantitative easing after the 2008 economic recession, AirBnB helped push housing prices faster than overall inflation, rents, and wages. According to the Case-Shiller U.S. National Home Price Index, housing prices have surged by 59% since their bottom in 2012. (Captured in these interesting graphs: Graphs)

And these bets looked good until COVID-19 happened

Airbnb is at the cross-section of the travel industry and the mortgage market, two areas particularly targeted by the coronavirus outbreak and the ensuing economic shutdown. With coronavirus spreading across the globe, thousands of travelers have called off plans for vacations, work trips, and family visits. Airbnb hosts saw $1.5 billion in bookings vanish in mid-March. The travel ban along with AirBnB expanding its cancellation policy, short-term rental hosts are assessing their own sudden loss of revenue since rentals provided the bulk of their income. A recent survey among Airbnb hosts, 49% hosts said that the short-term rental income from Airbnb helped them make ends meet. With little to no cash flow and uncertainty over how long it will take the travel industry to get back up to pre coronavirus levels, the Airbnb superhosts might soon start to default on their mortgages.

But is this collapse in the Airbnb economy enough to crash the $16 trillion U.S. mortgage market?