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There are a lot of different ways people are using AirBnB to host guests. Some hosting styles align with AirBnB’s stated purpose, others less so. While some fall closer on the spectrum of playing nicely with city laws, others veer more towards messy legal quandaries. This article summarizes the different types of AirBnB hosts.
LA Times recently called one emerging segment of AirBnB properties "rogue hotels". This term feels appropriate for the types of listings operated by those intending to turn a profit. It has become apparent as regulations are adopted, and with subsequent blowbacks, that there is a differentiation being generated between those hosts who are in it for financial gain and those that enjoy hosting guests and are looking to subsidize living costs.
As new laws are being passed, an ongoing debate is the distinction between owner-occupied properties and those that are not. In New York State, rentals have been restricted to a length of 30 days or more, unless the host is present. Several reports have shown that this law is ineffective and plenty of hosts are maintaining listings on AirBnB that are available for less than 30 days without the host present in the home. In May, Santa Monica adopted a similar policy that permits short-term hosting when the hosts are present. Similarly, San Francisco passed legislation that allows hosts to rent their space as long as they are there 75% of the year, which only allows for 90 days or less of listing an accommodation as an "entire place".
An article published by Forbes in October last year detailed some entrepreneurial action taking place on AirBnB in New York City:
"A small group of power users made enormous sums of money running listings on Airbnb. Only 6 percent of hosts ran these large-scale operations but collected 37 percent of all the revenue. More than 100 users rented out 10 or more different apartments regularly through Airbnb. Together, they pulled in $59.4 million in revenue....Airbnb’s most prolific host in New York made $6.8 million running 272 listings."
These numbers directly clash with the brand AirBnB is striving to portray. AirBnB has unveiled its service with the conceptual notion of staying with a new friend. The marketing department recently released a TV commercial internationally. The narration in the advertisement is a thank you letter from a woman using AirBnB for the first time to travel the world.
"Then I met your friends... almost like family... I wanted to thank you for sharing your world with me."
A closer look into the types of AirBnB listings reveals there are three options: shared room, private room, and entire place. In every major market in the US the entire home listings outnumber the combined number of shared and private room listings. In some markets like Los Angeles, entire place offerings compromise upwards of 75% of the listings. Of course, entire home rentals on AirBnB do include hosts that are renting their home as an entire place listing while they are away. But they also include properties where the host never occupies the property, and those where the host is also not the owner.
Here are the possible hosting scenarios:
- Rent out space in an owner occupied owned home (this is what I do): I think this is the image that AirBnB is going for. Staying with a local in their home.
- Rent out space in a lessee-occupied rented home. A lot of hosts are renters themselves. It is necessary that a host has approval from the landlord to sublet for AirBnB. There should be written consent. Most rental property leases have conditions that bar tenants from subletting. Despite this, many people host on AirBnB without the consent of the property owner.
- Buying properties for the purpose of a short-term rental: There is a wave of hosts who are seeing AirBnB as a lifestyle, and even in some cases a career opportunity. With the right research into demand, pricing, and costs it is possible a host could buy a property with the intent of renting it on AirBnB. The problem I see with this, is that the average home loan in the US is for 30 years and this industry is just beginning to evolve. Regulations, competition, and industry change could all turn this plan into a financial disaster. Getting a home loan for business purposes and with the assumption of the home generating income is risky business.
- Lastly, there are short-term rental managers who are using AirBnB to promote properties that already conform to existing regulatory guidelines. You can find hotels, motels, and hostels that advertise on AirBnB, as well as the occasional campsite, rv, or boat. There are also a good number of traditional vacation rentals that follow city rules. These listings use AirBnB as an additional venue of advertising for their properties.
Those who are trying to make the most money are likely to pursue multiple combinations of these methods. However, as regulations come into place these entrepreneurs might find that their plan of having a short-term rental business is no longer viable. It is also apparent that this will be an ongoing hot topic given how AirBnB’s business model throws a wrench into existing laws regarding private and commercial property globally.
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