Property Insight > Strategy > AirBnB: Boon or Bane?

AirBnB: Boon or Bane?

Airbnb’s meteoric rise in only a few years has established it as the largest provider of accommodation in the world with a net worth of over RM120 billion.

Airbnb has approximately three million listings and operates in 65,000 cities across 191 countries with about 80 million booked nights. By 2025, it is predicted that Airbnb will be completing 1 billion booked nights every year. This is a staggering string of numbers when viewed in perspective.

The largest hotel chain in the world, Mariott International which was founded in 1927, has 1.1 million rooms in 110 countries with an estimated brand value of RM21.6 billion.

The impact of Airbnb, which, cuts through many landscapes, is something communities and countries are grappling to come to terms with. On either end of the divide between optimists and pessimists, you will find narratives that border towards hagiography or obloquy.

The truth, as is usually the case, lies somewhere between two extreme narratives, and is geocentric. As such, this article focuses on the context of Airbnb in Malaysia.


Defining The Airbnb Concept

Airbnb represents another facet in the sharing economy – “A system in which people rent, borrow, or share commodities, services, and resources owned by individuals, usually with the aid of online technology, in an effort to save money, cut costs, and reduce waste”

The key point here is the “effort to save money, cut costs, and reduce waste.” Free markets, on the back of supply and demand, are usually pressured towards economic efficiency, which the sharing economy facilitates.

With Airbnb, anyone with a residential property can rent out a room or entire home on short-term basis to travellers or holidaymakers.

Accommodation is usually cheaper for the consumer, and costs relatively lower for the provider. Wastage in terms of residential over-supply is reduced because global demand as opposed to highly localised demand is capable of absorbing it.


Airbnb’s Impact On The Property Market

In many cities around the world, Airbnb has been identified with a shortage of affordable homes for locals. Landlords are finding it more lucrative to rent out their properties on Airbnb instead of putting it up for long-term tenancies for the local population.

This is driving up rent prices and forcing locals out.

There are two arguments to this phenomenon but for the purposes of brevity, I will stick to the facts in the Malaysian context.

In Malaysia, the rental market has been on the decline in general. Occupancy rates for condominiums are about 80% and if you go to specific locations like KLCC or specific segments like the high-end property segment, occupancy is much lower.

Rental appreciation has also not kept up with capital appreciation. So, you have a situation whereby property prices have appreciated much more than rental prices. This is inevitably bring down the yields.

Unchecked propagation of luxury condominiums right up to 2015 and global economic trends like the drop in oil prices have resulted in more supply and declining demand.

I believe even in this segment of the market, Airbnb can help cushion the luxury market effect and sustain the property market.

Airbnb’s Impact On Tourism

Malaysia is right up at the top with regards to tourism. It is the 11th most visited country in the world with 25.7 million tourist arrivals annually in 2015, and is a close candidate for the top spot in South East Asia.

Airbnb is facilitating growth in tourism and will prove to be catalyst for increased travel to Malaysia in the years to come. Like budget airlines in the airline industry, Airbnb is creating new demand for travel.

In 2016, a Sociometrica report revealed that Airbnb contributed more than RM17 billion to the Italian economy and supported the equivalent of nearly 100,000 jobs. Italy is the fifth most visited country in the world with 50.7 million tourist arrivals in 2015.

Airbnb’s owns studies have shown that its guests typically spend 2.1 times more on their travels and are likely to stay 2.1 times longer.

Airbnb’s Social Impact

There are many horror stories about Airbnb – the all-night rave party that rocked a very affluent neighborhood in London, the balcony that collapsed in Brighton and injured few people, and the guest that stuffed feminine products down a toilet bowl causing RM40,000 in damage.

Then, there are hosts who do not filter their guests and are only concerned with occupancy thereby causing avoidable grievances to their neighbours.

Many condominium owners are trying to restrict vacation rentals in their buildings due to increased nuisance and security fears.

However, there is also the other side featuring heartwarming and touching stories like the host who saved his guest from dying of a heart attack in Uruguay.

Personally, I have hosted over 3,000 guests and have plenty of uplifting experiences. I have had guests who barely know me bring really thoughtful gifts or leave beautiful notes behind.

When my guest from China became the victim of a snatch theft in Kuala Lumpur, I was the first person she contacted. I met with her within 15 minutes, brought her to a hospital, and assisted her with the police report. She was back on her feet the next day and proceeded to enjoy the rest of her stay in Kuala Lumpur.

The Verdict

On the flip side though, it is facilitating the rise in tourism, cross-cultural exchanges, better property yield and better experiences. It is also open to abuse and disrupting communities as well as the hospitality industry.

Disruption however is not necessarily a bad word. Horses were replaced by  automobiles, jobs are being replaced by machines, even as human society will continue to evolve. Change and progress is always marked by disruption.

The sharing economy is a behemoth avalanche and with so much momentum, it cannot be stopped. What is necessary is to find ways to reduce the associated risks and allow  progress it brings to flourish. In the end, it will be our collective willingness to find an equilibrium in this tidal wave that will determine whether AirBnB is a boon or bane.

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