I Survived the Airbnb Bust. here's how.
Summary
TLDRThe video discusses the current downturn in the Airbnb market, with high supply and low demand leading to many hosts struggling to secure bookings. The host shares business insights, suggesting that surviving the current bust could lead to future profitability as the market stabilizes. They outline their strategy to diversify their property portfolio, focusing on smaller units in various neighborhoods to gather data and adapt quickly. The speaker also highlights the importance of free rent concessions in their expansion plans and considers co-hosting opportunities to pivot during this challenging period.
Takeaways
- 📉 The Airbnb market is currently facing a downturn, with many hosts experiencing low occupancy rates.
- 🔑 Despite the downturn, there is potential for a supply-demand bottleneck as struggling hosts exit the market, which could lead to increased profits for those who remain.
- 💡 The speaker is conducting split testing to understand the mechanics of the Airbnb algorithm and plans to share findings with the audience.
- 🏠 The speaker has taken over the company and has made significant staff cuts to streamline operations and reduce costs.
- 📈 The speaker is focusing on data analysis to understand which properties are successful and why, with the aim of replicating success in other areas.
- 🛠 The company is scaling back on the number of doors per building to avoid high-risk concentration and is diversifying its property portfolio.
- 📝 Free rent concessions are crucial in the current market, as they provide a significant cost advantage and help in furnishing properties at no additional expense.
- 🔄 The speaker is pivoting to co-hosting larger properties, using surplus furniture to minimize costs and maximize revenue.
- 🚫 The speaker advises against purchasing properties at the current time due to the potential for significant market depreciation.
- 🔎 The company is considering expanding into less competitive markets, such as Midwestern cities, to take advantage of easier guest satisfaction and better margins.
- 🔄 There is an opportunity to acquire properties at a discount as people exit the Airbnb market, which could be beneficial for future expansion.
Q & A
What is the current situation of the Airbnb economy according to the speaker?
-The Airbnb economy is tanking in most places, with many hosts experiencing empty calendars and a significant drop in bookings.
What is the speaker's theory about the Airbnb algorithm and its impact on bookings?
-The speaker believes there might be a feedback loop issue within the Airbnb algorithm that could be causing a negative impact on bookings for some properties, potentially due to a winter release bug.
What advice does the speaker give to Airbnb hosts who are struggling with the current market conditions?
-The speaker advises hosts to persevere, as those who survive the current downturn may benefit from a supply and demand bottleneck, leading to increased bookings and revenue in the future.
How does the speaker plan to adapt their business strategy in response to the Airbnb bust?
-The speaker plans to diversify their property portfolio by adding properties in various areas and neighborhoods, focusing on free rent concessions, and expanding into co-hosting deals, especially for larger property types.
What is the significance of free rent concessions in the speaker's business strategy?
-Free rent concessions are important because they provide a significant cost saving, effectively covering the cost of furnishing new properties and improving cash flow during the Airbnb bust.
Why is the speaker considering co-hosting deals despite previously advising against them?
-The speaker is considering co-hosting deals because they offer a low-risk opportunity to expand into larger property types and new markets, providing valuable data and potential for increased revenue without the need for significant upfront investment.
What changes has the speaker made in their company's staffing and operations?
-The speaker has taken over the company, made significant staff cuts to reduce costs, and is focusing on cleaning house and improving operational efficiency.
How does the speaker view the potential for new cities and markets in their business expansion?
-The speaker sees potential in expanding into Midwestern markets, which are less competitive and may offer better margins due to less sophisticated host supply and more easily impressed guests.
What is the speaker's stance on purchasing property during the current market conditions?
-The speaker is against purchasing property at this time, as they believe there is no value in buying when the market is likely to drop further, and they prefer to focus on co-hosting and arbitrage opportunities.
What is the speaker's outlook on the Airbnb market in the long term?
-The speaker believes that the market will eventually normalize after the current phase of adoption and growth, leading to a more stable supply and demand situation and potentially a better environment for hosts.
How does the speaker plan to utilize internal data to navigate the current Airbnb market?
-The speaker plans to rely on internal data to identify the best-performing neighborhoods, property types, and design styles, allowing them to make informed decisions and pivot their strategy based on robust, forward-looking data.
Outlines
🏠 Airbnb Economy Challenges and Strategic Property Acquisition
The speaker discusses the current downturn in the Airbnb market, especially noting the challenges faced in Houston. Despite the situation, they express optimism and shares their strategy for acquiring more properties during this period. The speaker emphasizes the importance of understanding the market dynamics, including supply and demand, and how surviving the current market conditions could lead to greater profitability in the future. They also touch on the potential impact of the Airbnb algorithm on bookings and their ongoing efforts to analyze and optimize their listings.
📈 Adapting to Market Fluctuations with Data-Driven Decisions
This paragraph delves into the speaker's approach to adapting to the Airbnb market's current state by gathering and analyzing data from various properties. They highlight the importance of understanding why some properties are successful and others are not, with a focus on location being a key factor. The speaker also discusses staff cuts and changes in company leadership, which have led to significant cost savings. They express a strategy of expanding into different neighborhoods with a smaller number of doors per property to diversify their portfolio and gather more data, while also taking advantage of opportunities presented by others leaving the market.
🛠️ Revamping Business Strategy Amidst Airbnb Downturn
The speaker outlines their pivot strategy in response to the Airbnb market's downturn. They discuss plans to add properties in various areas to collect more data, which will help them identify the best-performing neighborhoods and property types. The speaker also mentions the opportunity to acquire furniture at a discount as people leave the industry. They emphasize the importance of free rent concessions in their property deals and how this can offset the cost of furnishing new places. Additionally, they explore the possibility of co-hosting arrangements, particularly for larger properties, as a way to expand their business without taking on the risks associated with property ownership.
🔮 Navigating Potential Airbnb Algorithm Issues and Future Market Insights
In this paragraph, the speaker speculates on potential issues with the Airbnb algorithm that could be affecting bookings and occupancy rates. They suggest that a negative feedback loop within the algorithm might be pushing some listings to zero occupancy. The speaker also considers the possibility of a seasonal slow-down in demand and how this might affect the market. They discuss the potential for resetting listings to regain visibility in the algorithm and the importance of being prepared for various outcomes. The speaker also shares thoughts on expanding into new markets and the benefits of co-hosting, while firmly deciding against purchasing properties due to the current market instability.
🏡 Seeking Opportunities in a Post-Bust Market for Strategic Property Investment
The final paragraph focuses on the speaker's long-term outlook and strategy following an anticipated market bust. They express a desire to see a significant drop in property values before considering purchases for long-term investment. The speaker invites others to share their strategies for navigating the market and concludes by summarizing their current activities, which include staging new properties and looking for opportunities to bolster their financial position in the midst of the Airbnb economy's challenges.
Mindmap
Keywords
💡Airbnb Economy
💡Supply and Demand Bottleneck
💡Algorithm
💡Co-hosting
💡Occupancy Rate
💡Market Adoption
💡Feedback Loop
💡Property Arbitrage
💡Free Rent Concessions
💡Diversification
💡Economic Slowdown
Highlights
The Airbnb economy is facing challenges in many places, but the speaker is still looking to expand their business.
The speaker has over 150 Airbnb properties and is currently dealing with empty calendars in some buildings.
Despite the downturn, the speaker believes that surviving the current market conditions will lead to greater profits in the future due to a potential supply-demand bottleneck.
The speaker is conducting split testing to understand the Airbnb algorithm and will share findings with the audience.
The speaker has taken over the company, made significant staff cuts, and is focusing on operational efficiency.
The strategy includes adding properties in various areas to gather data and make informed decisions about the best-performing neighborhoods and property types.
The speaker is leveraging the current market downturn to acquire properties at a discount and is looking for opportunities to co-host with property owners.
Free rent concessions are a key part of the speaker's current deals, providing a significant advantage in property acquisition.
The speaker is pivoting to larger property types and wider distribution with fewer doors per property to diversify the business.
The speaker is considering expanding into Midwestern markets due to their perceived ease of operation and potential for higher margins.
There is a possibility that the Airbnb algorithm has a feedback loop issue causing a negative impact on some listings' visibility and bookings.
The speaker is avoiding purchasing property at the moment, waiting for a potential market crash to buy at a significantly lower price.
The speaker emphasizes the importance of having robust, forward-looking data to make strategic business decisions.
The speaker is focusing on co-hosting agreements and avoiding long-term commitments to remain agile in the current market.
The speaker is looking to take advantage of the current Airbnb bust by acquiring properties at lower costs and improving them to be profitable.
The speaker discusses the potential for a market correction in the travel economy and the importance of being prepared for such changes.
Transcripts
sure the Airbnb economy is tanking in
most places but if you plan on still
being here when winter ends you're going
to want to watch videos like this I am
picking up 16 more doors here in Houston
I'm sitting in one of the buildings we
just listed this one about four hours
ago I'm going to tell you what my plan
is show you what properties we're
picking up and why what we're looking
for the terms of the deal and how we're
making lemonade from the proverbial
lemon that is the Airbnb bust and if any
of you fancy yourself business people or
want to be there's going to be a whole
lot of gems in this video Let's jump in
Welcome Back YouTube world yes I have a
150 something airbnbs and we're looking
at some empty calendars in some of our
buildings right actually we have a
couple buildings that are completely
empty right now now a lot of our
buildings are still performing fine and
I have some theories about what the
algorithm is doing and the mechanics of
it so stay tuned for that I will be
announcing my findings on some split
testing that I'm doing but in the
meantime there is a right way through
this and I think I'm gonna give you guys
the right way through this first off can
I give you some business advice advice
even if 90 of the Airbnb Community gets
their butts kicked and they all go out
of business that means that there will
be 10 of hosts left and all of the
guests that would ever be there next
year will still be coming back next year
which means that there would be a supply
and demand bottleneck that is inverse to
the one that we're looking at right now
right now there's just too much Supply
like there's honestly just too much
Supply in the market for the amount of
demand that there is meaning that a lot
of hosts won't get bookings on Airbnb
because there's just too many hosts and
not enough guests which means some
people will quit and those that quit
will cease to be here and thus there
will be less Supply and when demand
stays the same or continues to grow
which is what we're expecting in the
travel economy they'll just be less
Supply because people quit meaning that
the people who survive this right now if
you survive this right now you will make
more money in the back end just like
what happened with covid when covet hit
a lot of Supply left the market for
various reasons people just thought it
wasn't worth it they didn't think it was
safe demand dropped travel regulations
meant that people couldn't travel level
which meant there's there's no way to do
Commerce and people just left then
Revenge travel happened and the man
started to spike again because the money
was good we're in a volatile supply and
demand cycle with this and it will
eventually normalize because right now
we're still in a phase of a lot of
adoption there's a lot of new people
trying to join Airbnb a lot of people
see this as a cool opportunity they want
to get into it and so what happens is as
we go through this growth phase where a
lot of people are Moonlighting the idea
of becoming a host and enjoying the
marketplace they'll either succeed or
fail as soon as we grind through the
vast majority of people who could ever
become a host or whatever consider it
there will be a slowing of growth on the
supply side because the people who've
tried have either succeeded or failed
and left and there will be less new
people to try because it's a lot easier
to pick up adoption on the traveler side
than it is to pick up adoption on the
host side there are less business owner
entrepreneurial types in this in the
world than there are Travelers so we are
still going through this phase of
washing out on the host side what I'm
trying to tell you is that yes post
covet a lot of people joined yes 2012 14
15 17 a lot of people joined now after
the air being bust there might be still
a lot of people joining because a lot of
people are prospecting for new business
ideas but these Cycles will start to end
because a lot of the people who would
ever consider becoming hosts will have
already been there done that either
failed or are currently hosting so we're
gonna see less of a boom and bust cycle
as adoption slows on the supply side and
starts to stabilize I do think that
that's going to happen that's a business
thing you guys can disagree with me yell
at me in the comments if you think I
don't know anything about business I'm
theorizing here so what are we doing
with this economy well we've got
properties that are working out we've
got properties that are not and we're
going through the data we're looking at
why some of our properties are
successful but more so also where
they're successful because I think wear
actually matters more than why right now
and then we're looking at where and why
we're not successful in some spots we're
also cutting staff I sadly have had to
take over the company I don't think I've
told any of you guys yet Haley's no
longer leading the organization and
since then I've made roughly six
thousand dollars per week in staff Cuts
that's really heartbreaking I'll be
honest I don't like having to cut back
on staff or take away a job from
somebody who's legitimately a good
person but we have had some people who
are just not doing the work we actually
even found some instances of time theft
and stuff like that that's what happens
when you take a year off things get a
little bit funky while you're gone so
I'm back in cleaning house blah blah so
we're leaning up but now we're also
adding properties we're adding
properties in more areas and more
neighborhoods near where we already
operate to get a wider base of data see
we have a lot of buildings and some of
those buildings have as many as 40 doors
in them with the airbnbust I do think
there's a mechanic here so we're
actually scaling back on size I don't
think we want to go 40 doors deep in any
building right now because of this you
know economic slowdown and what could be
a very risky Nuance in the algorithm
which I'm going to explain closer to the
end of this video we want more data
because if the economy continues to stay
rough and travel starts to lean out too
and demand and doesn't grow like it has
been or the slow season lasts longer
than normal whatever and people start to
deflate there's going to be a cool
opportunity here as long as we have the
right data if we pick up three or five
or ten properties here there and there
and just have a bunch of different
buildings with some sample size we can
look for the best performing
neighborhoods property types property
sizes based on our internal data and
with how fast everything is moving right
now looking at analytics from Air DNA or
mesh visor is not going to serve us
that's back looking data we need
forward-looking data so we need
projections on our calendars we need to
see which calendars of ours are filling
up with good lead time we need to see
what design styles are are being
responded to well and internal data is
going to be the best way to do this so
adding properties in various areas even
though the Market's scary right now
still gives us the data that we need to
Pivot and respond on robust data and as
people start to leave this industry
they're going to be letting go of
furniture I got a phone call maybe two
days ago or a text two days ago somebody
said hey I have nine units that I would
like to know if you want to take them
and I'm seeing it all over Facebook
where somebody's like hey I'm thinking
about getting the Airbnb you have any
advice and somebody's like um I actually
have a property in this location I'm
trying to get out of are you interested
so there's a lot of changing hands and
when people are changing hands in a
hurry they'll get rid of stuff at a
discount because they just need to know
that they're going to stop losing money
you know we have housekeepers we pay by
the hour we have Elegant pricing
strategy systems that might allow us to
generate slightly more Revenue at a
lower operating cost than some of our
other host partners and friends who are
getting out of the space and also we
should have the data to know that maybe
they're just missing one or two
amenities or maybe their design Styles
just missing a key element here which
will allow us to pick up properties and
to pick up properties on the cheap where
we know that we can be profitable with
those properties where someone else
would fail that's a huge opportunity for
us right now in the bust yeah we're
going to cut some doors because I don't
want to have 40 doors in one building
and have everything go you know part of
my French but we want to keep picking up
doors in other areas in other
neighborhoods and start to really
scatter our presence three or five doors
at a time into as many different
neighborhoods and property types as we
can get our hands on another key element
of our deals and it hasn't changed since
forever but it's so important right now
is free rent concessions we got nine
weeks of rent for free on this property
right here that's important because nine
weeks of free rent on 16 doors which we
could do up to six zero at this building
I just don't think we're gonna go that
big but we could we've got this
open-ended agreement and if this
property slams then yeah we'll keep
picking up 30 40 50 maybe as many as 60
max if you get nine weeks of rent for
free and your rent is fifteen hundred
dollars a month then you're looking at
nearly forty five hundred dollars in
free rent per property you pick up and
the average cost of furnish a place not
including like doing paint and other
Decor stuff would be about forty five
hundred dollars this is essentially
getting us our furniture for free when
we get nine weeks of rent for free this
is an important part of the deal here so
as we continue to expand and have free
rents this will add to our cash balance
and having a stronger cash position is
always good when people are looking to
get rid of stuff so yes even in a scary
economy some deals will just look too
good to let go of because of the literal
cash mechanics now because we will be
changing out locations one thing that we
are doing as we like downsize some
properties and then spread more thin
which sounds bad but it's actually less
bad because you're more Diversified
across more properties is we will have
an abundance of furniture in some cases
so we're going to start co-hosting under
a modified agreement we actually want to
go up in property size we want to do
more three beds more four beds because
we have a lot of one beds in studios
right now so as we diversify our mix
we're going to be looking for more three
bedroom or four bedroom floor plans so
we could get some three bedroom
apartments we're working on negotiations
with some of our current landlords right
now for those three bedroom and four
bedrooms tend to be more single-family
home and since we have a lot of
furniture that we could put into play we
can find homeowners who don't have
furniture but want to be an Airbnb we'll
co-host for them and provide the
furniture everybody wins that's another
element of our pivot here in the
airbnbust and as you guys know I say
everybody should fire their co-host the
reason why is because the deal is just
too good for the co-host with that said
we're not dumb enough to not take a
co-host deal right it's probably the
best deal you can get as an Airbnb
operator is to have somebody trust you
and not really have you take on any of
the risk as an operator with a track
record we can get homeowners who will
let us operate we don't have to pay
their mortgage we don't have to pay any
rent we just take a cut of the revenue
that's a really good deal for us so
we're expanding into larger property
types wider distribution with less door
counts per property and getting into
more co-host deals now this could go a
couple different ways depending on what
really is at play here now Airbnb could
very well have just this weird winter
release related bug that is starting to
squash some of our buildings right we've
got two or three total apartments that
just have really Grim occupancy at the
moment and it's weighing down our total
occupancy where we normally have an
average occupancy of over 90 percent
then we've been operating more in the
low 80s as a whole and even last week I
think we dropped into the 70s 70 percent
something as an average percentage
across our whole portfolio so some of
our buildings are weighing down our
total occupancy which is really really
bad but we're going to try to fix it and
if it is an Airbnb bug it might just
remediate itself when Airbnb updates
we've had reports from hosts that claim
the last time that there was a summer
release that they just had two months
without a single inquiry and then they
called Tech at Airbnb and they reset
something and all of a sudden they were
booked again now this could be because
the Airbnb algorithm has a feedback loop
type of data problem inside of it which
is where if you don't get any views you
don't get any bookings if you don't have
bookings you don't have occupancy and if
you don't have occupancy then you can't
get any views or bookings because the
algorithm thinks that you're not
interesting because you don't have
anybody booking your place and so this
kind of negative feedback loop could
cause a need for a reset where you go
and either snooze your listing and
update it or get Airbnb to do a hard
reset on your listing in order to reset
its position within the algorithm
something like that and so if the winner
release is causing a lot of people to
lose their heads it could be very well
just as easy as waiting it out six or so
weeks waiting for a bunch of people to
shut down their listings and then have
Airbnb reset your presence in the
algorithm and give you another fresh
shot something like that now people do
need to legitimately quit to lower the
amount of Supply in the space before you
went and tried to swing for the fence
like that but that is potentially one of
the outcomes here otherwise this could
be really just a much lower slow season
for some people than anybody predicted
and we won't find that data out until
Airbnb does their Q4 reporting and I
think sometime in January maybe February
they're like hey here's what happened in
December possibly because this could be
just a lower relative slow season due to
the fact that there's more total Supply
in the market but just as low of a
demand as last year right where there's
literally the same net number of
customers but maybe now twice the number
of hosts yeah it'll feel really really
bad but then it'll snap back more to a
corrective space where where more people
will get bookings in a month or two when
slow season starts to remediate itself
now I do think that it's possible that
the Airbnb feedback loop could have a
bug inside of it where with a lower than
expected market-wide demand it could
take some of the middling listings and
cause us infinitely negative feedback
loop that pushes listings from 70 60
occupancy all the way down to zero
because it just doesn't quite get the
performance metrics that the algorithm
is built for and this is now because
Airbnb is like well we'll always have
this much Demand right and then we don't
and so then the algorithm doesn't have a
sustainable enough amount of interest to
keep these listings afloat because
Airbnb does call their algorithm and
interest algorithm which means that they
push listings Up and Down based on
interest metrics and so since we have
low demand and too many listings many
more listings will have a sub sufficient
amount of interest and just get pushed
down which means a lot of people quit
and when a lot of people quit and the
listing account starts to normalize you
could literally get back into search
again just by resetting your position
within the algorithm because we're going
to be doing more co-hosting with houses
it could be possible with the way that
we're generating leads for these houses
that will end up in non-core areas we
might end up in just really weird Middle
Market Oklahoma City Boise Idaho just
random places we'll be looking for more
Midwestern markets to start to get our
foothold in and to remotely manage some
co-host properties could be fine for us
because we have so much experience in
being a multi-city contender that we
could operate probably 10 or 12
different new cities that are like like
easy markets right Midwestern markets
tend to be more easy because there's not
really elegant host Supply out there
which means the guests are more easily
impressed you get better total margins
stuff like that I do think that managing
10 or so new cities and Midwestern
markets that are less competitive is a
good idea and this could increase of
course our robustness and everything
else as we do expand into larger
property types and coasting I do expect
you'll find my name in less major busy
urban areas where of course we've always
been Dallas Fort Worth Houston Austin
Philadelphia you're going to see things
more like like I said Oklahoma City or
smaller but as you've noticed I still
have avoided the word buy or purchase
we're getting into co-hosting because
that's good cash flow we're staying in
Arbitrage because that's allows us to be
Scrappy get into new places and get data
fast and really spool up or spool down
our listings as needed but we're still
not going to buy anything and not to
talk bad about anybody who wants to buy
a property but right now there is no
value in purchasing a property where
you're going to lose the equity of your
down payment when the home loses value
you know I am considering purchasing
property for its long-term depreciative
you know advantages and all the other
cool stuff that comes with buying
property eventually you know I am
getting old now I'm 36 you know I can
start looking at boring stuff as much as
the fast stuff it still won't be a good
time to buy a property in my opinion
until we see everybody get their necks
broke and if BlackRock is going to done
billion millions of dollars of assets
back in the market and other people are
going to let go and people are going to
quit hosting on Airbnb fire their
co-hosts shut it down turn them back
into long-term rentals or just sell the
properties because they are butt hurt
about it this could lead to a great area
of Cheaper property over the next two or
three years and that's what I'm looking
for Tesla's down 60 something percent
that's what I want for my house is I
want to see a house down 60 percent and
then maybe I'll buy it so if you my
friends my loved ones if you guys have
any plans for the bust if you have
anything that you think is cool that
you're trying to pull off or do feel
free to throw in the comments I would
love to know what you guys are up to in
the meantime I'm going to finish staging
these ones getting them listed and
hopefully this part of the Houston
Market will pump some cash and allow us
to continue to play an aggressive game
stay tuned of course for that thank you
so much for watching and as always I'll
see you on the other side
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