The Professionals Move in on Airbnb
An Airbnb landlord in London made US$15.6 million last year renting out 881 properties, according to new research.
That figure represents the most money made in revenue by any Airbnb owner in the world in the last 12 months, but... another Airbnb ‘host’ was not too far behind raking in $15.5 million through 504 properties in Bali and takes the biscuit when it comes to profitability, earning a yearly average of $40,983 per property. Tokyo had the second highest average earnings per property at $36,130. On this reckoning London limped home in a modest seventh place.
Airbnb is one of the classic online economy success stories, fulfilling the vast public appetite for affordable accommodation matched by an equal need for owners and tenants to make money from properties they own or occupy. Of course, just as with Amazon or Uber, not everyone is happy about that. The hospitality industry for one, has conflicted views about the Airbnb phenomenon. Back in 2007, when Airbnb was launched in San Francisco, it was a vehicle for people to make some extra dosh renting out a spare room or, famously, an airmatress on the living room floor; that or their flat, their house when they went off on holiday. Today smart businessmen and women, plus realty companies worldover, use Airbnb as a tool to rent out multiple rooms and entire properties as well as flipping and managing sublets on a huge scale.
Making Millions? A look at Airbnb’s highest earning landlords London (881* properties) $15.6m Bali (504) $15.5m Cape Town (114) $7.6m Havana (132) $6.9m Sydney (245) $4.1m Paris (82) $4m Barcelona (162) $3.7m Madrid (124) $3.6m Lisbon (204 $3.4m Melbourne (157) $2.7 *number of properties managed
Top owners in cities including Cape Town , Paris and Barcelona all banked at least a $1.5m through dozens of flats, rooms and houses. The new data coming from Airbnb analysts AirDNA shows how the accommodation website has shifted from flat-sharing to property management with single operations turning over huge sums of money.
“Airbnb is no longer a community just for individuals renting out their space or properties in their own” said AirDNA CEO Scott Shatford. “We see traditional property management companies operating as many as 1,000 listings. These numbers don’t show a multimillionaire sitting on a gold mine. These are businesses that have emerged in this new economy, with hundreds of employees, managing other people’s second homes”, he says.
The figures show that earnings per property are highest in Bali, Indonesia’s premier holiday destination, where average revenue per annum was US$40,983, while a typical landlord in Tokyo is still making $36,130 p.a., while in London the figure drops to $20,958.
Airbnb aren’t happy with reports of this corporate trend. A spokesperson for Airbnb said that the typical host in the UK earned about $3,800 and hosted for three nights a month, adding that the Air DNA data is not official as it has been “scraped”, though he did not elaborate as to why that should in any way invalidate the findings. “Scraping” simply means information has been automatically taken from online websites. If the information originally posted is correct, then so is it’s use elsewhere; although clever use of such context can “spin” it one way or another.
Shatford claims the way Airbnb listings are managed is shifting. “It’s not a good trend for people who use Airbnb for unique accommodation as an alternative for a traditional hotel” he warned. “These people want to meet people, and for them it’s getting harder to decipher what is a corporate rental hotel against the one where Jane is going to meet you at the door and tell you about all the cool things to do in town.”
AirDNA says that 65 percent of global hosts are still individuals, while 35 percent are management companies, but he says the ratio is shifting quickly in favour of the professionals. Airbnb, on the other hand, claims that in the UK at least 80 percent of its hosts are “sharing a space in their primary home” As evidence of its worlwide committment to keeping it upfront and personal.
Their spokesman said: “the vast majority of Airbnb hosts are regular people who share their homes – typically the biggest expense – to boost their income and support their families. Whatever the case, “ the Airbnb model is unique and empowers regular people, boosts local communities and is subject to local tax, the company insists. It also makes Airbnb fundamentally different to companies that take large sums of money out of the places they do business”, he said.
The company points to the housing limits it has implemented, again in London, this year, with the support of the Mayor, stipulating that entire-home listings not be “shared for more than 90 days”.
It should be noted here also that the amount Airbnb users actually make is the sales revenue figure - not their profit, which would be less their expenses such as renewals and replacements, tax, rental (if applicable), insurance and cleaning etc.
A lucrative move for landlords? Where you can make the most money renting out properties on Airbnb Bali $40,983* Tokyo $36,130 Barcelona $28,648 Lisbon $27,780 Rome $27,677 Los Angeles $26,344 London $20,958 Amsterdam $19,255 Melbourne $18,855 New York $18,618 *Average yearly earnings per property
Today, according to AirDNA, Airbnb Bali properties manage an average per night rental of Rp.1,929,253 (c.$150.00) with an occupancy rate of 51 percent at an average Rp.23.1m ($1,750) per let. It is in the nature of Bali and the intense “villafication” it has undergone in the past 15 years that it has a higher percentage of “entire-home” rentals at 57% than the majority of destinations. According to AirDNA there are some 6,323 active hosts in Bali comprising some 1,000 who are what they classify as “Super Hosts”, with about 3,300 multi-listing hosts, while single entry hosts account for the balance of some 2,000.
The other unusual fact about Bali’s high profitability is that it has been achieved on rentals of 1-3 months. AirDNA report that most successful user properties are rented out for a minimum of 6 months of the year.
How did Bali manage to scoop the Airbnb pool, when it comes to highest yield?
For Bali the advent of Airbnb in 2011 was a dream waiting to happen, a match made in heaven. Those of you in days gone by who ever contemplated renting out their place, have only to cast your mind back to those days and what was involved. It was a long, complicated and expensive process upon which many of us gave up.
First, you had to do your market research to see what you could reasonably get and who would pay it. Then the commissioning of good photography. Next, the perils of finding and funding someone to build a decent website for you and not be scammed in the process. Then maintaining it plus the associated marketing and advertising; the problems of communicating with, vetting and getting paid by your would-be clients. And, after all that, the fear you’d rented your home to the family from hell and you’d come back to find your home trashed. No wonder many baulked.
All that changed when Airbnb arrived in Bali and took almost all the angst out of the process, doing a great job for a modest commission. They also did one more thing that radically changed the game for the better (depending on your perspective that is).... it made short stay lets easy and viable for everyone. In the past owners would plump for the relative safety and convenience of a long let despite the hefty discount that would accompany it. Now they don’t have to.
In terms of the volume of Airbnb business the results show pretty much what you would expect with London, Paris, Tokyo, Los Angeles, New York, Sydney topping the lists. When it comes to profitability Bali is so spectacularly ahead of all the rest that other destinations, particularly resort destinations, along with professional Airbnb users would do well to examine why?