Airbnb hosts feel the crunch of coronavirus short-term rental bans

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Co-founder and CEO of Airbnb Brian Chesky speaks during an interview in Langa township, Cape Town, South Africa March 17, 2017.

Mike Hutchings | Reuters

From Maine to the Coachella Valley in California, state and local governments have passed measures to prevent property managers from booking short-term rentals through websites like Airbnb, Vrbo and Booking.com. 

These measures are necessary to stop the spread of the coronavirus, according to government officials who spoke with CNBC. But hosts say the restrictions can be confusing, and they are putting additional pressure on small business-owners who rely on short-term bookings to cover their mortgages, bills and livelihoods.

For Airbnb, these government restrictions are the latest obstacle for the company in 2020 as the coronavirus pandemic has devastated the entire travel industry. Last month, Airbnb told its employees that it would institute a hiring freeze, suspend its marketing, cut executives’ salary and that it did not expect to give out bonuses for 2020.

Heading into the year, the San Francisco tech company was eyeing an entry into the public markets. The company had lined up bankers to lead the offering, which would test whether Airbnb could live up to its $31 billion private market valuation from 2017. Instead, the company is raising $2 billion in new debt funding at a valuation of $18 billion. The Wall Street Journal reported in February that Airbnb lost $322 million over the first nine months of last year, after reporting a $200 million profit in 2018, as it ramped up spending.

In response to the restrictions, Airbnb said it is making efforts to support local governments by providing guidance to hosts regarding applicable orders and advising guests to check local travel restrictions before booking. The company is also maintaining an updated travel restriction directory page where hosts and guests can check restriction orders from around the globe. 

“Airbnb has committed more than $250 million to support our host community through this global crisis which has brought the entire travel and tourism industry to a virtual standstill,” an Airbnb spokesman told CNBC in a statement. “We are also working hand-in-hand with local governments to both support temporary restrictions on travel and ensure short-term rentals are an available resource for frontline responders and those sheltering in place during this crisis.”

Vrbo and Booking.com did not respond to requests for comment. 

‘We’re just in limbo’

Short-term rentals have been banned across the entire states of Florida, Pennsylvania, Georgia, Delaware, Maine and Vermont. Numerous other counties and cities have also taken similar steps, including locations like Atlantic City, New Jersey, and Sonoma County, California. 

These temporary bans are the latest headache for short-term rental hosts, many of whom are already reeling from a wave of cancellations from vacationers who have not been able to travel as a result of the coronavirus pandemic. In some cases, these cancellations have cost hosts thousands of dollars in lost revenue, according to numerous hosts who have spoken with CNBC. 

“It’s already hard enough to operate in this kind of slower travel economy already,” said Sean Rakidzich, who manages approximately 100 Airbnb properties across the U.S. “But the moment the government says you’re not allowed to operate, there’s nothing you can do. There’s no best practices to operate your business when it’s illegal to operate.”

For Anneliese Caserta and her husband, local bans have ended bookings to their Airbnb properties in Reddington, Florida, and Myrtle Beach, South Carolina. The state of Florida and city of Myrtle Beach have both banned short-term rentals through April, although Florida is still allowing hotels and other similar businesses to operate.

“We have to decline reservations every single day. It’s unbelievable,” Caserta said. “To me it seems that the safest place to be if you’re going to go on vacation is a house. I think it would be safer than a hotel, pressing elevator buttons and sharing doors with everybody in close quarters.”

A spokesman for Florida Gov. Ron DeSantis told CNBC that the decision to suspend vacation rentals is part of his approach to deter the travel of individuals into the state and combat the spread of COVID-19.

“Under normal circumstances, vacation rentals are a great and popular way for families and large groups of people to enjoy our coastline or major attractions,” the spokesman said in a statement. “Given the need to limit these groups from traveling to the state during the COVID-19 pandemic, the Governor feels it is prudent to temporarily restrict vacation rentals.”

Caserta still has bookings for May and June. She would like to honor those reservations, but if Florida and Myrtle Beach extend their bans, she would like to know sooner than later so that she can convert her properties into long-term rentals and generate some revenue that can go toward paying the properties’ bills. 

“We’re just in limbo hoping for the best,” she said.

For some hosts, keeping up with local orders can be confusing. Liam McLaughlin, who manages 14 properties in Pittsburgh, Pennsylvania, said he understands there is an order restricting short-term rentals, but finding details has been difficult. 

McLaughlin cites an email sent by Jessica Walls-Lavelle, the southwest region director for the office of Pennsylvania Gov. Tom Wolf, that says short-term rentals for vacations are banned, but hosts may still rent to guests in the military, medical and emergency workers as well as “travelers engaged in non-vacation commercial activities.”

Now, McLaughlin said he asks his guests if they are traveling for non-vacation commercial reasons. If they say yes, he accepts their reservation. 

“How do you define someone who’s there for a non-vacation commercial activity?” said McLaughlin, noting that one of his guests is a mom who is in town to help her college-aged son move off campus. “Is that a non-vacation commercial activity?”

Georgia Gov. Brian Kemp on April 8 announced that the state would ban short-term rentals at least until April 30. 

“This action is one of many steps that we are taking to keep people safe from this dangerous virus,” Kemp said in a news conference. 

As a result of that ban, Preston Czigans said he was forced to cancel Airbnb reservations for his property in Ellijay, Georgia. Czigans had to contact Airbnb support to ensure his host rating was not affected and avoid fees for the cancellations. Now, he said he’s unsure whether to accept bookings for May at the risk that the state will extend its ban.

“I’m scared to book May because I don’t want that to hurt me,” he said

Public safety first

Government officials told CNBC they understand that property owners are feeling the crunch caused by these restrictions, but the purpose of the bans is to discourage people from breaking shelter-in-place orders.

“The whole idea is to prevent the virus from moving around,” said John McMillen, city manager for La Quinta, California. 

La Quinta, which is located in the Coachella Valley, put an order restricting short-term rentals on March 26, despite tourism being a key part of the region’s economy, especially during the months of March and April, when the it hosts the Coachella and Stagecoach music festivals. 

In nearby Palm Springs, California, city officials estimate that its tourism restrictions may cost the city government $35 million in revenue from hotel and sales taxes, said City Manager David Ready. Of that, as much as $8 million could be coming directly from transient occupancy tax revenue derived from vacation rentals, Ready told CNBC.

Ready said the city is sympathetic to what these property owners are going through, and the government is feeling the impact too. 

“We’ve spent decades building up, asking people to come visit. It’s hard to now say don’t come,” Ready said. “Right now, we have our eye on public safety, but believe me, we are focused on economic re-entry as soon as we can.”

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