Airbnb's Struggles Go Beyond People Spending Less. They're Losing Some Travelers To Hotels.

iStock; Rebecca Zisser/BI

• Airbnb stock tumbled 14% in one day after the company predicted slowing demand.
• Some former Airbnb diehards say they now prefer the consistency of hotels.
• Airbnb said it might increase travelers' ability to book hotel rooms through Airbnb.

Duane Brown jets off to international destinations seven or eight times a year.

After staying in his first Airbnb in London in 2011, the 42-year-old digital marketer was so enamored with the concept that he became a host himself. He welcomed guests to his two-bedroom apartment in downtown Toronto for a year and a half.

But Brown told Business Insider that more recent disappointing experiences with short-term rentals have led to a change of heart.

On one trip to Budapest in 2019, Brown booked an Airbnb whose listing photos were shot at strategic angles that hid a dilapidated bathroom and damaged walls. Brown said he now stays in hotels, which he believes have a more consistent "standard of care."

"If there are no independent hotels or Marriotts, well, then maybe I'd go to Airbnb, but there's always been at least one of those in a city I go to," he said.

Brown is just one traveler, but in an earnings call last week, Airbnb cautioned investors to temper expectations for the third quarter due to waning customer demand. Even after announcing growth in bookings, the short-term-rental giant lowered its projected third-quarter earnings to between $3.67 billion and $3.73 billion, below the $3.8 billion analysts expected.

Wall Street flinched and Airbnb stock took a tumble last week, dropping 14% in one day. The company also warned of a global dwindling of lead times, or the number of days in advance travelers book their stays, a sign of less enthusiastic demand.

It's a far cry from the record-setting demand Airbnb saw immediately following COVID-19 lockdowns, when travelers craved private homes and acres of outdoor space. New data shows traveler demand for short-term rentals is stalling or waning in some parts of the US and for certain types of accommodation. Combined with some consumers' gripes over burdensome cleaning fees, lists of checkout chores, increasing prices, and a lack of quality control, the short-term rental giant has some convincing to do in order to retain its loyal customers.

Part of the issue is that travelers' perceptions of what makes a good travel deal have changed. Airbnb used to have a stronger upper hand for budget-conscious tourists. In 2019, hotels commanded an average of 49% more per night in large cities, according to March data from short-term-rental analytics firm AirDNA. That gap shrunk to just 26% in 2022, AirDNA found.

On the earnings call with investors last week, CEO Brian Chesky mentioned competing with hotels is central to the company's strategy. Chesky teased a possible expansion of hotel rooms available to book on Airbnb, tied to the company's ownership of last-minute accommodation platform HotelTonight.com. Last month, an Airbnb executive hinted that Airbnb guests could soon add hotel-like extras, like spa treatments and personal chefs, to their stays.

"We are still investing in hotels," Chesky said on the earnings call, explaining that there are opportunities in the future to "sell new things, including hotels."

Hotels are winning over travelers in some areas

Demand for Airbnbs is stalling or slipping in some categories where hotels are competitive, according to AirDNA.

In cities and suburban areas, traveler demand for Airbnbs and Vrbos is no longer rapidly rising like it was immediately following 2020. Instead, the share of demand for short-term rentals in suburban markets has remained flat over the past year, staying at around 9%, compared to this time last year. In urban markets, the share of demand for short-term rentals still hovers around 7%.

AirDNA analyzed a group of five popular vacation spots in Florida, including Daytona Beach and Sarasota, and found demand for short-term rentals was weakest in the categories most likely to compete with single hotel rooms.

Demand for one-bedroom short-term rentals in the five Florida markets grew by only 1% from 2023 to 2024, and demand for private rooms inside shared homes actually fell 8.7% compared to last year.

AirDNA chief economist Jamie Lane said the fees associated with short-term rentals can be more of a burden for some travelers booking short stays or with smaller groups.

"It may make more economic sense to stay in a hotel, depending on how high the hotel rates are," Lane said.

An Airbnb spokesperson said the company believes its offerings provide an elevated experience.

"Airbnb listings can provide travelers with amenities that can drive additional value and comfort — bedrooms for everyone, a kitchen to prepare a meal, a space to work, a backyard to socialize and play with pets and much more, unlike most traditional accommodations," a company spokesperson said in a statement to Business Insider.

Some avid travelers are falling out of love with Airbnb

Seattle-based startup founder Adam Burgh, 40, booked his first Airbnb in Rio de Janeiro over New Year's Eve 2012. For seven years, he traveled South America, mostly staying in Airbnbs.

Recently, however, Burgh said a recent experience with cleaning fees has turned him off from the site entirely.

Earlier this summer, he was looking into a short getaway with his family to Whidbey Island, a ferry ride from Seattle. It was a last-minute trip and he checked the available Airbnbs, gawking when he saw listings with cleaning fees as high as $200 for the two-night stay.

"What do you do with a $200 cleaning fee? There's no way it should cost that much," Burgh told Insider.

Instead, he scrapped the trip altogether and decided to put the money toward a longer vacation later this year.

Burgh said he has recently preferred to cash in points for Marriott stays. In the past, he might've defaulted to booking on Airbnb. Now, he thinks twice.

"I'm going to go check hotels and see if this is actually the best value," he told Business Insider.