Is an Airbnbust happening?

Originally published on Real Estate Remodeled

I sometimes joke with my four-year-old daughter that when she grows up she can be anything she wants to be - with one exception: a social media influencer.

I don’t really mean that. That’s why it’s a joke. Or as my wife might call it, a “joke”. But it’s also a “joke” because, like many jokes, there’s some truth to it. The truth in this instance being that I, as an unrepentant curmudgeon, tend to cast a suspicious eye towards the social media influence game.

I’ve got nothing against those who have developed the valuable and marketable skills needed to build an audience digitally. And it does seem likely that the present and future of digital marketing is probably driven in large part by micro-influencers in an increasingly fragmented and content-saturated media environment.

It’s just that we humans have long struggled with the fact that a lie can get halfway around the world before the truth can get its shoes on, as the quote long attributed to Mark Twain goes (an attribution which - irony of ironies - turned out to be not true). And social media has made this dynamic immeasurably worse.

Which brings me to the following, er, Tweet?…or is it an X? Who even knows anymore. Anyways:

This Tweet from Nick Gerli, a real estate YouTube influencer, has over 35 million views. It did serious numbers, as they say.

Speaking of numbers, the data in the Tweet looks…scary? It looks like there’s been a severe collapse in Airbnb revenues. An Airbnbust is happening! But is there? As you can probably guess, the answer is no. Twitter, alas, is not real life.

Other credible industry observers were more than happy to share their own analysis of the same data, which showed a…slightly different picture.

As Bob Uecker says in the legendary sports comedy film Major League, that ball’s juuuust a bit outside:

Understandably perhaps, Mr. Gerli has not shown the work underlying his analysis, so it’s hard to know exactly what’s going on here. From a data sourcing perspective, he uses data from All the Rooms. I’ve used data from All the Rooms in my own work, and I’ve never seen a discrepancy between their data and that of their competitors this large before.

The more likely source of the discrepancy is that when someone’s invested in a particular narrative, they’re inclined to torture the data until it confesses.

And this particular narrative has made the rounds before. This is actually the second time in the last 12 months that this topic - a dire financial outlook for short-term rentals - has been infected with a bad case of social media virality. Here’s another mega viral Tweet from late last year:

There are two main reasons why I think the Airbnbust narrative has such potency:

First, for many hosts, it probably does feel like their own personal Airbnbust is happening. There are a lot of folks who bought their first or second (or third) short-term rental property in the Covid-era boom, which peaked in 2022. And during that boom you could get decent bookings in a so-so property in a so-so market. Those days are over, so a fair amount of inexperienced operators are feeling the pinch.

Second, there are a lot of people out there who want an Airbnbust, or something like it, to happen. There are a few threads to this phenomenon. Some people blame Airbnbs and other short-term rental platforms for the housing shortage and affordability crisis. Others are mad that so many hosts have done quite well for themselves and may feel like they missed out on the action. Some peoples’ brains were broken by the 2008 housing and mortgage collapse and see another one coming around every corner. Some people just want to watch the world burn.

When it comes to commenting on the economy, the financial system, or housing, you don’t go viral by saying things like, “there’s a modest year-over-year reduction in Airbnb revenue in select markets.” You go viral by prophesying the gathering storm, the coming deluge. Fear, doom, and carnage are the coin of the realm.

And here’s where Mr. Gerli’s analysis really jumps the shark: He’s not just predicting a collapse in the Airbnb economy. His main prediction is that the Airbnbust going to cause severe distress in the housing market more generally. Never mind the fact that every metric for the short-term rental sector looks healthy right now. Never mind the fact that even if you assumed that every single one of the nation’s approximately 1.5 million short-term rental properties hit the market right now, it would only push active inventory up to historically normal levels in our current supply-constrained housing market. 

Look, my main point here is not just to dunk on someone who’s wrong on the internet.

My main point, which you’ll be pleased to know I’m now coming around to, is three fold:

First, when it comes to financial or economic advice, don’t confuse audience size with credibility. The “influence” that’s derived from the ability to get a lot of online attention may or may not be packaged with credibility or genuine expertise.

Second, when it comes to making decisions about housing or finances in your own life, base them more on what’s right for you, your personal situation, your personal goals, and your personal risk tolerance, and less on “macro” stories you see in the newspaper or online.

And third, when it comes to making decisions around housing and personal finance, like whether to invest in a short-term rental property, it pays to seek out the advice of a variety of qualified professionals like a financial planner, a mortgage broker, and other rental investors, and less on the social media accounts with big followings who want to sell you an online course or expensive “consulting” services.

Credit to Mr. Gerli – he’s good at what he does. I’ll probably never post a Tweet that gets 35 million views. But as the generation that grew up with social media continues to make big financial decisions amidst all the online noise, don’t be surprised if there’s a surge of renewed interest in seeking the counsel of calm and credible voices. Or at least that’s the bet I’m making.