Ben Parks and his wife have operated an Airbnb out of their basement in Chandler for the past year, averaging between $700 and $800 a month in revenue.
In February, when customers began canceling bookings in the early days of the coronavirus health crisis, Parks said they thought it might be a fluke.
But on March 11, the World Health Organization officially designated the coronavirus threat a global pandemic, prompting Airbnb to allow its guests to cancel reservations for a full refund.
That's when the cancellations became "no holds barred," Parks said.
While Parks and his wife use their short-term rental earnings as supplemental income, more than 50% of Airbnb hosts across the country rely on the money to pay their bills and afford their rents or mortgages, according to the company.
Some Phoenix-area Airbnb hosts and realtors say they've seen the number of available listings drop by 40% as tourism has ground to a halt.
Loss of revenue
Revenue for Airbnb hosts dropped 74% from the end of February through the middle of April, according to short-term rental analyst AirDNA. Revenue fell 69% in Scottsdale, and 67% in Sedona, two of Arizona's biggest tourist destinations.
Airbnb hosts in Maricopa County saw 734,500 visitors in 2019, netting $140.2 million. In Coconino County, which includes Flagstaff and parts of Sedona, hosts welcomed 503,300 guests and made $58.2 million last year.
The lion's share of that income comes in March. Four out of five of the highest grossing weekends for Airbnb operators last year were in March, according to the company, with hosts welcoming more than 90,000 visitors and earning $37.3 million.
Parks said he sets higher prices from February through April to accommodate the huge influx of people. Now, that money is gone.
While Airbnb hosts typically can set strict policies to prevent last-minute cancellations, Airbnb's most recent policy change allowed guests to receive full refunds due to coronavirus.
Parks called it a poor decision made too quickly.
"If the people running the rentals can’t afford to keep their rental going, Airbnb loses out on their suppliers," he said. "It wouldn’t have hurt Airbnb to take a little bit of a loss."
Airbnb CEO Brian Chesky sent a letter to hosts apologizing for the way the decision was handled. The company also made a commitment to pay 25% of what hosts would have received for their cancellations.
"While I believe we did the right thing in prioritizing health and safety, I’m sorry that we communicated this decision to guests without consulting you — like partners should," Chesky wrote. "We have heard from you and we know we could have been better partners."
Are short-term rental operators selling their homes?
Patrick Tice, the founder of short-term rental management firm VacayAZ, said his company has seen a 40% reduction in short-term rentals in the Phoenix area.
Neither Airbnb nor AirDNA could provide listing numbers specific to Arizona. But the company has pushed back against claims that hosts are deactivating their listings and moving to other platforms, saying there are more listings on the Airbnb platform than there were a year ago.
"Put simply, changes in the housing market amidst the COVID-19 pandemic are the result of forces much greater and larger than Airbnb’s community of hosts and the spaces they share," the company said in a statement.
Tice said that supply of short-term rentals in Phoenix had become oversaturated with amateur hosts.
"So many people got into the vacation rental industry in 2019 that probably shouldn’t have got in," he said. "They didn’t do it properly."
Realtor Christie Ellis said a spike in sales listings on the market at the end of March seemed to indicate short-term rental operators were selling their homes to mitigate their the losses during the pandemic.
Of the 483 fully furnished homes currently for sale in the Phoenix market, 36% were listed in the last 45 days, Ellis said.
But Ellis said that's since leveled off.
Short-term rental operators selling their homes likely would have done so regardless of the pandemic, she said, due to the money short-term rentals require for marketing, overhead and upkeep.
"People view it as an easy score," she said. "They think it's easy money but it’s a lot more than that. There are other things you have to do. People don’t understand that."
Ellis said more recent numbers seem to suggest that rather than selling, short-term rental owners are instead pivoting to marketing their properties as long-term rentals.
"After the initial panic, I think people realized (selling) is a long-term solution to a short-term problem," she said. "Next year the odds are pretty good that we’re going to be able to rent these as vacation rentals again."
Pivot to long-term rentals and short-term deals
Of the 655 long-term fully-furnished rentals currently available in the Phoenix market, 37% have come onto the market in the last 45 days, Ellis said.
Half of Airbnb’s active listings also are providing discounts to people who book stays of one month or longer, according to the company.
Ed Gorman is the owner of MZ2, an 11-unit luxury townhome development in downtown Scottsdale. The units were originally billed as for-sale condos, but Gorman ultimately contracted with a company to market the apartments as short-term rentals after seeing the high demand.
MZ2 was fully booked through March for spring training, but Gorman lost half of his income when MLB canceled spring training. He lost another 45% following the stay-at-home order.
But Gorman said half of those units have since been filled by people looking for long-term stays: from out-of-town executives to MLB and NFL players, all looking for a home base to work remotely.
"Right now, we have tenants staying 6-12 months, tenants staying for a week, tenants staying 2-3 months," Gorman said. "From a business perspective, that gives you a lot of stability."
While monthly revenue can be higher in the peak months with short-term rentals, Gorman said property managers can eliminate a lot of the cleaning and management costs that come with frequent visitor turnover.
Today, his property serves as a safe option for people needing to stay long-term in the Valley, but who still want to feel like they're in their own home.
Just as his company shifted to accommodate short-term rentals after seeing the spike in demand, Gorman said MZ2 will continue offering long-term leases as long as the demand is there.
"As business people we’re always trying to react to the market, Gorman said. "Having lived through the last downturn, we've always been prepared for downturns in the market."
Have a tip out of Scottsdale? Reach the reporter Lorraine Longhi at llonghi@gannett.com or 480-243-4086. Follow her on Twitter @lolonghi.
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