Airbnb and Vrbo Struggle With a Supply-Demand Imbalance

Demand for Vacation Rentals Surging

Airbnb (ABNB) and Expedia’s (EXPE) Vrbo are working to entice homeowners in coveted areas to list their properties on their websites. The companies are making it much easier to become a host and are launching referral programs to turn guests into hosts. These changes are taking place as US occupancy rates for short-term rentals hit 61.6% in April—a record for the month.

Demand for home rentals near beaches, national parks, and other rural locations has been surging since the pandemic. That trend is accelerating as COVID-19 restrictions ease and the economy reopens. Making the supply situation more complicated, a number of hosts have taken their homes off the rental markets to use them for personal use during the pandemic.

Airbnb, Vrbo Work to Attract More Hosts

Airbnb is making it easier for new hosts to sign up, reducing the process from dozens of steps to just 10. It has also upgraded its platform to include more help for hosts including one-on-one mentoring. To increase its supply, Airbnb launched a referral program which pays users who get others to list their properties on the platform.

Meanwhile, Vrbo launched its Fast Start program in March, aimed at luring hosts away from its main competitor, Airbnb. The program enables people with Airbnb experience to transfer their ratings to Vrbo. The initiative has been effective, with Vrbo adding thousands of hosts as a result. Vrbo even launched an advertising campaign targeting Airbnb hosts directly.

Hosts Weigh Costs

Hosts are being aggressively courted by both Airbnb and Vrbo. As they make decisions about which platform to use, hosts typically look at how much of a cut is taken, the type of guests the platform attracts, and the effort it takes to get paid back for damages. Airbnb charges a 3% fee while Vrbo charges 5%. The latter also tacks on a 3% payment processing fee.

Demand for hotels is also increasing in cities, but alternative lodging is in the lead outside of urban settings. The pandemic has changed the way Americans vacation, which bodes well for the likes of Airbnb and Vrbo, as long as they can deal with the current imbalance between supply and demand.

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