Airbnb could have a key advantage during the next recession

·Senior Reporter
·4-min read

Inflation is starting to cool, according to data released Wednesday. But Minneapolis Fed President Neel Kashkari cautioned that day that a recession could still occur in the "near future," as Reuters reported.

So, what companies are best prepared to weather a possible downturn?

It might not be the companies you'd expect. Notably, Airbnb (ABNB) could be primed to weather a recession well, analysts and company watchers have told Yahoo Finance. That's counterintuitive because you'd think consumers might cut back on travel when money is tight.

But experts point out that Airbnb can bolster consumers' incomes, which is an option homeowners are especially likely to explore if a recession hits. While the income Airbnb hosts generate varies substantially, the company said last year that the average annual earnings for hosts who had at least one guest was $9,600.

"You've got to remember, if you take a step back, that the company was founded during the 2008-2009 financial crisis," analyst Jed Kelly of Oppenheimer told Yahoo Finance last week. "You would actually potentially see more people list their homes or their rental properties on Airbnb, increasing the supply, which should make volume all right."

Benefits for both hosts and guests

Some sector experts agree that, though Airbnb wouldn't be totally recession-proof, the company might hold up relatively well during a downturn. For instance, Luca Zambello, CEO and co-founder of hospitality tech company Jurny, agrees that there could be a massive spike in host supply if the economy sinks into a recession. If more consumers are listing their homes as Airbnbs, that increased supply could create more competition among rentals, generating lower costs for consumers.

Brian Chesky, CEO and Co-founder of Airbnb, speaks to the Economic Club of New York at a luncheon at the New York Stock Exchange (NYSE) in New York, U.S. March 13, 2017. REUTERS/Mike Segar
Brian Chesky, CEO and Co-founder of Airbnb, speaks to the Economic Club of New York at a luncheon at the New York Stock Exchange (NYSE) in New York, U.S. March 13, 2017. REUTERS/Mike Segar

"The idea of listing your home or short-term rental property as a micro-entrepreneur is appealing today because it is incentivized for you to make some extra money," he told Yahoo Finance. "As more people feel the pressure of a mortgage with less income growth, they may turn to Airbnb as a side income source. Guests would benefit from lower prices if there were more availability on the market."

Those lower prices would be a welcome development as Airbnb's rental rates have skyrocketed as travel demand has rebounded from its pandemic lows. Airbnb's average daily rate for the second quarter of 2022 was $164 — a steep 40% increase from the same period in 2019, before the pandemic.

There are still possible downsides, but Airbnb's looking pretty solid

While soaring rates might put off some travelers, M Science analyst Michael Erstad said Airbnb's latest round of earnings was fundamentally encouraging. "Things were pretty healthy," he told Yahoo Finance.

Still, analysts have some lingering concerns with the company. While Airbnb reported solid results last week, meeting analysts' revenue expectations and slightly beating them on earnings per share, the number of bookings fell short of expectations. The number of nights and "experiences" (tours and events organized through Airbnb) booked came in at 103.7 million actual versus 106.1 million expected.

If there's a dramatic recession, there's always the possibility that U.S. consumers might, in fact, cut back on travel. That happened during the last major downturn.

As the Great Recession hit the economy starting in 2008, consumers' travel spending declined sharply, according to Bureau of Labor Statistics data published in 2012. Even by 2011, travel expenditures were still lower than their peak in 2007. However, if a recession should officially come to pass, history may not be destined to repeat itself this time. The reason is simple: COVID-19, which kept consumers homebound for so long. Even if money's tight, it's highly possible that consumers will continue to prioritize getting away and visiting family.

There's evidence that people are spending money on travel even amid historically high inflation. Even though travel's been far from easy this summer, it's still where people are spending money. The U.S. Travel Association reported on Aug. 4 that travel spending had surpassed 2019 levels for the third straight month in June.

"Global travel declined during the last recession, which would likely affect guest demand," said Zambello. "However, many speculate that the pandemic has created so much pent-up demand that people will continue to travel regardless."

If we do land in a recession, how Airbnb fares will also be tied to how severe that downturn is, if it happens at all, Erstad added.

“I generally buy into the narrative that if things get tougher for the consumer, some homeowners might think about renting out a vacation home they have never really wanted to rent out before," he said. "While it’s a bit hard to quantify, I can see some inventory coming online from that dynamic.”

Allie Garfinkle is a senior tech reporter at Yahoo Finance. Find her on Twitter @agarfinks.

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