As Ulrich Beck taught us, we live in a metamorphosing world. We are not simply experiencing changes; we are going through a metamorphosis. Even the current global pandemic is part of this metamorphosis, which eradicates all the certainties of modern society; what was inconceivable happens now, suddenly, as a global event.
This reflection fits well in the current context and offers a way to read what is happening and what will happen in many areas due to the virus shock. One of the hardest hit sectors is tourism, paralysed by the lockdown imposed by governments and by the prohibition to travel freely. The European parliament estimates a loss of one billion euros in revenue per month as a result in the European tourism market; the U.S. Travel Association projects a loss of 4.6 million jobs through May in the U.S travel market, a figure likely to increase. Roger Dow, president and CEO of the association said that “the impact on travel is six or seven times greater than the 9/11 attacks”.
According to many agencies, such as the Engel & Völkers, the sub-sector most negatively exposed is that of short-term rentals, while for others, such as AirDNA, an online rental analysis company, short-term rentals are more resistant to the impacts of the Coronavirus than hotels, cruises, and airlines. What is sure is that in the last years, Airbnb and its competitors have transformed the travel accommodation market, reshaped cities and neighbourhoods, sometimes strengthening the hyper-touristification process. Till yesterday we have been reflecting on the impacts of short-term rental platforms on cities, warring about over-tourism, gentrification, exacerbation of the housing crisis… (find our reflections here) and struggling to join forces and find collective solutions also among cities (see the European Network for Short-Term Rentals or the opinion on “A European framework for regulatory responses to the collaborative economy” adopted by the European Committee of the Regions (CoR) in December 2019; or again the reflections made during the 2018 Sharing Cities Summit and the 2019 Sharing Cities Encounter). Today the global pandemic has completely changed the tourism scenario, by zeroing out tourism and emptying our cities.
Headlines report: “Airbnb’s Coronavirus Crisis: Burning Cash, Angry Hosts and an Uncertain Future” (Wall Street Journal); “How the Covid-19 crisis locked Airbnb out of its own homes” (The Guardian); “Can Airbnb Survive Coronavirus?” (CityLab); “Is this the end of Airbnb?” (Wired). According to AirDNA, bookings on Airbnb are down 85 percent, and cancellations close to 90 percent: so much so that revenue generated by the platform, in March alone, fell by 25 percent (on an annual basis). Trends that will not pick up soon, since much of the world is still on lockdown and that, in the year of the Airbnb’s debut on the stock exchange, are already impacting on the company’s evaluation (from 50-70 billion dollars, to 26 billion according to the Financial Times). Nevertheless, the company remains optimistic; as declared by the CEO and co-founder, Brian Chesky, Airbnb was born “during the great recession of 2008. The desire for connections and travel is a human prerogative, which will emerge strengthened from this period of separation […] we will see a new flexibility in the world where people work and move, including a greater interest in travel closer to home”. In addition, Airbnb just cashed a billion-dollar check from two new investors: private equity giant Silver Lake and investment firm Sixth Street Partners, demonstrating to still have trust from the market.
The first reactions of Airbnb relate to its community (in line with the company narrative about the central role of the community), with the twofold goal of on the one hand helping hosts and on the other hand creating the conditions to let its community support the emergency response on a solidarity base. In terms of internal help Airbnb has reserved a donation of $250 million to hosts, as a contribution to cover the cost of cancellations following the COVID-19 pandemic (responding to the protests of apartment owners who were called to the full refund of reservations between March 14 and May 31); in addition, a Super Host Relief Found has been launched to support Superhosts who live in the accommodation listed in the platform and who need help to pay their rent or mortgage, as well as for long-time experience hosts; the fund was collected thanks to Airbnb employees who donated $1 million, while the founders put in the remaining $9 million; another $7 million has been added by investors, for a total of $17 million. Starting in April, hosts will be able to apply for grants of up to $5,000, which will not have to be refunded.
In terms of external help Airbnb has extended its already active program, Airbnb Open Homes, creating a program for healthcare workers, starting from Italy and France, with the goal to provide complete accommodation to 100,000 professionals worldwide, enabling them to maintain isolation. Airbnb therefore waived the costs of these accommodations, allowing operators to focus on assistance. In addition, the platform is providing guidelines for house cleaning.
In Italy other platforms have launched a similar support campaign: Altido, CleanBnB, Halldis, Italianway, Sweetguest and Wonderful Italy, six of the main Italian companies managing apartments for short-term rentals. They have signed an agreement to support the efforts of medical and nursing staff through the campaign #stateacasanostra [#stayinourhome]. The cost of renting the properties for those who participate in the campaign is totally absorbed by the promoting companies, which will only ask guests for a contribution for the final cleaning and sanitization.
Furthermore, several reactions from the market can be detected:
1- a rural revival. Beside the falling down of revenue from the listings in urban areas, we are observing a revenue increase for the listings located in suburban areas and in particular in rural areas, especially in the United States, where 73% of March Airbnb’s revenue was indeed made outside large urban centres. AirDNA reports the following data:
- Airbnb revenues in rural areas: $1.32 billion in March 2020, up from $1.04 billion in March 2019.
- Airbnb revenues in urban areas: $631 million in March 2020, down from $706 million in March 2019.
It should be underlined that this sudden burst of rural demand has not always been accepted by residents. In some jurisdictions short-term rentals have been temporarily banned or non-residents stays have been prohibited (as recently reported by BuzzFeed News).
The rural revival is not yet recorded in Italy for example, but it is conceivable that accommodations in less-travelled areas will be preferred in the near future if the short-term rental will survive.
2- a traditional hotels’ payback. As underlined by professor Michael O’Regan of the UK’s Bournemouth University, when the travel industry will start to revive, traditional hotels could benefit more, since people “might be less inclined to book Airbnb […] due to perceived cleanliness issues”; and there is who predicts a possible swing toward a previously niche sector: apartment buildings run by hotels.
3 – a flow reverse. A question comes up: as in the past house units have been moved from the traditional real state market to the short-term rental market, will we see the flow reverse? The theory is that as the short-term market drops off a cliff, the listings from platforms like Airbnb will be moved onto long-term platforms, or reintroduced in the traditional housing market. As a result, due to the surge in supply, the rates of monthly rentals will be cut. By date, even if some owners are moving their listings to the traditional real estate market – subtracting in this way accommodation units from the tourist sector and re-introducing them into the long-term rental market – real estate economists have confirmed that there is no surge of short-term rental listings going into the long-term rental market.
Urban planning professor David Wachsmuth of the McGill University has been studying for years the urban impacts of short-term rental platforms and contributed to a 2019 Canadian study on Airbnb, finding that the company had pulled more than 31,000 units from the long-term rental market in Canada. Today, he expects that the health crisis will result in “a significant reduction in the number of units available in the short term”, but he invites to be prudent, since it is still too early to tell whether there is actually a reverse flow from short-term to long-term rentals. He talks of Airbnb as a “crater”: for people who rent spare bedrooms or use the platform to supplement their primary income, this is not the end of the world but simply the loss of a reliable secondary income; for the more aggressive speculators, who bought condos with the intention of renting them all year round, this can be a financial ruin.
As many researches have underlined, all over the world this last one is the biggest group; Airbnb listings are mainly owned by hosts with at least one other listing or by multiple owners, namely companies that manage rent-to-rent properties; i.e. in US, as reported by AirDNA, 600,000 listings out of 1.1 million are of multiple owners and are available for more than six months of the years, data that assimilates these properties more to hotel rooms and less to sharing economy holiday rentals. Greg Chauve, a Canadian property manager, is already perceiving the transformation of the business models for the category of multiple owners: those who used to have a tourism-oriented business are now looking for medium-long term tenants.
This perception is confirmed by the analytics firm GlobalData, according to which “Airbnb could lose significant portion of host community to long-term rental sites”; GlobalData affirms that a growing number of Airbnb hosts are deleting their listings and moving them on the less lucrative but more reliable monthly market. As reported in a recent Wired article, monthly rental listings startups such as Homads or Kopa, are recording a tenfold increase in hosts and listings in their platforms, letting the “Airbnb effect” become more visible than ever before. The same Airbnb is now offering long term rentals, at least one month. The famous housing activist Murray Cox, founder of InsideAirbnb, sees a very positive side in this temporarily reduced numbers of Airbnb’s listings: municipalities are having a clear picture of how pervasive are short-term rentals in their territory and might impose regulations to force extra short-term units off the market, as well as preventing new unit conversions.
Will these unexpected developments finally benefit local residents, people looking for a stable house in a constantly in crisis market? Will these changes open new hopes for the general housing market? Aligning with what Beck called “emancipatory catastrophism”, we can claim that a progressive and structural social change brought by a crisis, a metamorphosis coming out from a disruption, can become an opportunity – at least in this sector and with the previous premises.
Is this new scenario possible? Will we observe a shift oriented towards sustainable innovation rather than profit? As also Jeremy Rifkin stressed in his latest book, we need a pact for a socially responsible economy and for the planet. In his work Rifkin reflects mainly on climate change, but the connection between the current outbreak and the broader environmental dimension is evident; and it’s clear that short-term rental platforms are one of the sectors that need a change; or do we really want to come back to the existing wicked market? Can we aspire to a metamorphosis that, recalling Beck’s reflections, “goes beyond the theory of the world risk society” and “does not concern the negative side effects of goods, but the positive side effects of evils”? (p. 6).
The invitation is to reason in terms
of “emancipatory catastrophism”, realizing that the threat that
oppresses us could lead to a turning point in a cosmopolitan sense[1],
making us look to sustainable innovation, to a better environment for local
resident and to a more sustainable form of tourism, probably an “undertourism”
(Higgins-Desbiolles, 2020). Beck is not alone in his optimistic approach to the
crisis: among many others Jim Bendell talks of “deep
adaptation pandemic of love” and Sandrine Dixson-Declève and colleagues of
“crisis-as-progressive-opportunity”.
We need to think beyond the apocalypse and to guide the metamorphosis, starting
from what the pandemic has revealed regarding our broken and decayed political
and social system.
[1] Beck uses the term cosmopolitan revising it: for him the ‘cosmopolitan gaze’ means that in a world of global crises and dangers generated by progress the old distinctions – between inside and outside, national and international, us and others – lose their binding character and that we need a new realism, a cosmopolitan realism. Read more here.