A tough year for Airbnb landlords

Dec 18, 2020

What a year 2020 has been. The COVID-19 pandemic has affected every industry in various ways, but those working in the field of tourism and hospitality know all too well how severely their sector has been impacted.

Research by Aldermore back in May showed that SMEs in the hospitality and leisure sector lost more than half of their monthly business income as a result of the crisis.

As travel ground to a halt and customers rushed to cancel their bookings, owners of holiday rentals, including Airbnb hosts, saw their previously lucrative businesses dry up almost overnight.

Airbnb’s financial losses at the start of the year meant it had to raise $2 billion in emergency funding, make 25% of its staff redundant and cut its top executives’ pay by a half in May.

It also suffered various PR crises over illegal lockdown parties that were hosted through the platform, as well as controversy around the way it introduced a new refund policy without consulting its hosts first.

After all of this, there were fears that Airbnb might not survive the pandemic at all – but there are some signs the company is bouncing back.

On 16 November 2020, Airbnb filed to become a publicly listed company in the US, arguing that its ability to recover from such adverse conditions was evidence of its resilient business model.

Airbnb’s financial records, included in the company’s filing for its initial public offering (IPO), showed that its gross booking value rose to $8 billion in Q3 2020 – still lower than the $9.7bn recorded at the same time a year earlier, but a significant recovery compared to the $3.2bn recorded in Q2 2020.

Airbnb said pent-up demand after national lockdowns had contributed to the rise, and domestic travel had become more popular as people holidayed closer to home.

It also said longer stays had increased because more people had the option to work remotely.

“We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere,” said Airbnb in its IPO document. “Our platform has proven adaptable to serve these new ways of traveling.”

The company also predicted that, as a result of the pandemic’s wider economic effects, people might be encouraged to turn to hosting as a way of earning extra income – like they did when Airbnb was founded during the recession of 2008.

“We believe that as the world recovers from this pandemic, Airbnb will be a vital source of economic empowerment for millions of people.”

In the short term, however, hosts have a difficult time ahead. With restrictions in place at various levels across the UK, and very little certainty over how things might change in 2021, it’s going to be difficult to maintain a steady income.

What can you do?

Foremost on your guests’ minds will be hygiene. Airbnb rolled out mandatory safety practices that hosts had to comply with by 12 October 2020, but it also recommends explaining your cleaning process in your listing’s description to instil confidence in prospective guests.

In some ways, Airbnb still has an advantage over hotels and other group accommodation, as it allows guests to isolate away from home. Showing your guests that you take health and safety seriously could help you to put them at ease and tap into that demand for isolated staycations.

There’s only so much you can do if the demand just isn’t there, so you might need to plan for reduced profits. Forecast your cashflow over the next few months and assess how you might be impacted in different scenarios – however scary the figures look, it’s always better to know where you stand.

From there, you can look at where there are opportunities to cut costs. Tax planning is one area we can help with, so talk to us if you’re not sure whether you’re taking full advantage of your allowances and reliefs.

What are your other options?

If, after assessing your financial situation, you’ve come to the conclusion that hosting on Airbnb isn’t the right option for you anymore, you might be thinking about other ways of using your property.

Managing holiday lets directly, instead of through a booking platform, could reduce costs by cutting out the middleman, but you’re likely to need a strong online presence to continue attracting guests.

It also means you won’t get the protection offered by Airbnb’s host guarantee in the event of damage to your property, so you’d need to look at your insurance options instead.

Alternatively, you might be thinking about converting to long-term rental. This can provide more stability than holiday lettings, and depending on how you decide to manage it, it can be a bit more hands-off.

Now that an increase in remote working has given people more freedom when they’re choosing where to live, you may find rental opportunities that weren’t there before the pandemic.

Switching to long-term lets will come with various tax implications, however, and it’s always best to get professional advice beforehand. You can find more information in our UK Property Tax Guide – or just ask us if you have any questions.

Finally, at the end of a hard year, we at UK Landlord Tax want to say well done to all the Airbnb landlords who’ve stuck it out. However you’ve been affected, and whatever your next steps are, we’re on your side with specialist property tax advice.

Talk to us about your property.

Related blog posts

Got a question for our landlord tax experts?

If there’s a property tax issue that has you puzzled or worried, get in touch. Everyone on our team loves to talk, especially when it helps people like you find peace of mind.