Sky-high Airbnb rates make travel deals harder to find

May 5, 2022

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Rate inflation isn’t just limited to traditional hotels, as Airbnb this week reported average rates for a booking during the first three months of this year hit their highest levels ever.

Yes, everyone is well aware that hotel stays and airfare aren’t cheap now, and they’re really going to take off heading into the summer. But Airbnb’s addition to inflation in the travel sector is another headwind for travelers looking for increasingly rare bargains.

The average daily rate for an Airbnb in the first quarter was $168 — a whopping 37% increase over the same time in 2019. The number shows just how popular Airbnb became during the pandemic, as it is only a 5% increase from the first quarter of 2021.

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The good news is the rate surge will likely temper later this year as the broader travel industry returns to normal. But don’t expect prices to come crashing down, either.

“We think that [prices] will likely moderate throughout the back half of the year as mix continues to adjust more toward cities [and] more cross border, which have lower average daily rates,” said Dave Stephenson, Airbnb’s chief financial officer, on an investor call this week. “But price appreciation has remained high and stickier.”

The rate increase came during the same quarter that Airbnb reported 102.1 million room nights and experiences booked — the first time reservations surpassed the 100-million mark in company history. The company anticipates this year will also be Airbnb’s first full year of profitability in company history, Stephenson said.

A bulk of demand in the first quarter came from North and Latin America as well as Europe, the Middle East and Africa. The number of room nights and experiences booked in North America alone, driven by the U.S., was 55% higher in the first three months of this year compared to the same time in 2019. It was 25% above 2021 levels.

As for why rates are getting so high, Airbnb chalks this up to interest veering more toward stays in North America, for entire homes and in non-urban destinations. All three of these generally command higher rates that stays in urban residences, often just a single room in a host-occupied home, that were a much larger share of the company’s business prior to the pandemic.

It is in the whole-home segment of the market where, while Airbnb is a leader, the home sharing and vacation rental platform faces some of its biggest competition.

Traditional hotel companies like Marriott International and Accor have kicked the tires on vacation rental platforms to various degrees. Marriott executives this week provided an update on their Homes & Villas platform, which at roughly 60,000 listings is significantly smaller than the 6 million found on Airbnb.

Marriott leaders are fully self-aware of the scope of their product in this space and even label it “extremely small” relative to their own company when it comes to financial impact. But even they seem to detect the financial sweet spot in this segment of hospitality entails renting out entire homes, as travelers continue to show they are willing to pay more for a stay.

“[Homes & Villas is] still tiny relative to some of the peers in that space,” Marriott CEO Anthony Capuano said on an investor call this week. “But again, I think it’s distinguished a bit because the composition of our portfolio is 100% multibedroom, full homes. These are not spare rooms or couches or anything else. These are full, multibedroom homes.”

Featured image courtesy of Airbnb.

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