Revenue Inequality Among Airbnb Hosts in Europe
The evolving definition of what it means to be a host is one of the primary concerns in regards to the impact of Airbnb and other hosting platforms on metropolitan cities. Airbnb’s humble beginnings of 20-somethings renting spare rooms are long gone, and the now multi-billion-dollar company has, for some, transformed the hosting experience into an impressively lucrative pursuit.
Today, while the Airbnb market still has its fair share of mom-and-pop hosts renting granny flats and spare bedrooms, much of the total revenue is only earned by just a handful of hosts. In London, the top Airbnb host owns and operates over 1,000 properties in the city. In Lisbon, nearly 70% of Airbnb hosts own multiple listings. Vacation rental property management has developed into a booming industry suited towards bullish investors who finance far more properties than they could ever manage on their own.
With these trends in mind, our team at AllTheRooms Analytics has tracked and analyzed the revenue inequality among certain Airbnb hosts. This inequality lies at the root of why many consider the platform controversial. As the argument goes: renting out the occasional room is one thing, but repurposing entire blocks of apartment complexes is another.
Taking a data set of 46 European capitals from April 2018 to April 2019, we’ve unearthed some interesting takeaways. Not to mention, cross-referencing our findings with the regulations enforced in these cities has shown us which efforts have worked (and which haven’t) in ensuring home sharing grows responsibly and sustainably. These case studies paint the picture as to how revenues are really distributed among Airbnb hosts:
Note: Much of our analysis references the Gini coefficient, an important metric of inequality that stands as a number between zero and one. A Gini coefficient of zero is a perfectly equal market (where all hosts earn the same amount), while a Gini coefficient of one is a perfectly unequal market (where one host earns all the revenue). We also ranked cities by the Gini coefficient of listings per host — i.e., according to how many listings hosts own in each city.
Cities with the Highest Rates of Revenue Inequality
Coming in at number one on our list of European capitals with the highest rate of revenue inequality is Ukraine’s Kiev. While not an overwhelmingly large market (only 1,225 registered hosts), Kiev’s Gini coefficient of .81 is extremely high. What’s more, Kiev also tops the list in terms of the listings per host Gini index.
Taking into account Kiev’s occupancy rate (only 31%, 9th lowest on this list) and ADR ($148, 5th highest), it becomes clear that while few hosts earn most of the revenue, they also earn it over a small time frame. Kiev’s hosting of big events like the UEFA Champions League Final in May 2018 has undoubtedly highly influenced these key performance indicators. For the night of the final, booked ADR jumped up to $267 and occupancies surged to 83%.
Moscow is a close second on our list of European capitals with a high host inequality and a Gini coefficient of .76. The total amount of money earned by hosts in Moscow over the previous 12 months was just shy of $25 million – good enough to rank in the top 10 among all European capitals. However, the average revenue earned per host is below $7,000 for the year, or 11th-worst in the continent.
Moscow’s low occupancy rate of 27% (4th-lowest) further echoes Kiev’s theme of hosts earning their keep over short time frames – which had much to do with the impact of Russia’s World Cup.
These trends in Kiev and Moscow come as little surprise, as neither Eastern European capital has done much in the way of regulations. Neither Kiev nor Moscow currently have any majorly-limiting short-term rental regulations in place.
Cities with Regulations and Moderate Revenue Inequality
Besides Chișinău and Tirana (the respective capitals of Moldova and Albania with fewer than 200 hosts in each location), London follows with curiously high rates of host revenue inequality. Despite efforts to regulate the market and limit over-investment in vacation rentals, London still has a Gini coefficient of .72, and ranks in the top 15 in terms of most listings per host.
London instituted a 90-day limit for short-term stays, but there are a number of ways to circumnavigate the law. Hosts can divide their homes’ rooms into individual listings and create separate bookings, or opt to use their home solely for long-term stays.
Regardless of these efforts, nearly half (46.6%) of hosts manage multiple properties in London, and host revenue disparities have largely run amok. With respectable occupancy rates (51%), high ADRs ($115), and high RevPARs ($65), London is an excellent market for those with the capital to invest in numerous properties.
Berlin and Paris
When it comes to the overall profitability of the vacation rental market, Berlin and Paris rank among the world’s highest. Coincidentally, they have also both been subject to some of the most restrictive regulations.
Paris – the world’s largest market with some 218,000 total vacation rental listings – has a 120-night limit, significant permitting fees and rental taxes, and the city has even entertained the idea of outright banning home sharing platforms. When looking at the data, Paris’ Gini coefficient is high (.72), but is low in terms of listings per host (only 19% have multiple listings). The top hosts in Paris own less than 50 properties. This suggests that while there is significant inequality in terms of revenue earned, in Paris, it’s largely due to the ADR discrepancies of individual properties, rather than differences in the number of listings.
The data from Berlin paints a similar picture: a high Gini coefficient (.71), but a relatively low number of listings per host. What’s more, Berlin ranks 9th in terms of total revenue earned with an impressive $26 million, but is one of the worst in terms of average revenue earned per host – totaling just $8,000 for the year. This imbalance implies that many hosts in Berlin have been unable to truly capitalize on the vacation rental market boom.
Northern Europe and Scandinavia: Strong Regulations, Low Revenue Inequality
Amsterdam, Oslo, Stockholm, and Copenhagen
To little surprise, the vacation rental landscapes in the capitals of the Netherlands, Norway, Sweden, and Denmark largely mirror their economies and politics. Amsterdam, Oslo, Stockholm, and Copenhagen have all taken progressive action towards reigning in the short-term rental market – and it’s worked. Amsterdam has a 60-night limit, Copenhagen has a 70-night limit, and Oslo restricts any single investor from buying more than two units within the same residential association.
Respectively, these four European capitals rank 41st, 39th, 42nd, and 43rd in Europe in terms of listings per host. And these places certainly are profitable – Amsterdam and Copenhagen rank 6th and 7th in terms of overall revenue earned. High ADRs, well-designed accommodations, and smart property management strategies ensure hosts are maximizing revenues while complying with regulations.
Coastal Outliers: High Profitability and Low Revenue Inequality
Lisbon and Valletta
Lisbon and Valletta (the capital of the island nation of Malta), are two very interesting outliers. AllTheRooms Analytics data shows Lisbon as one of the most lucrative markets in the world. The Portuguese capital ranks second in terms of revenue per host ($24,666) and second in terms of occupancy rate (66%). Valletta is even more extreme, as topping both the list of revenue per host ($35,505) and occupancy rate (70%). These are snapshots of ideal vacation rental destinations to invest in.
In terms of inequality, both Lisbon and Valletta are markedly equal – precisely because everyone is making money. Even though there are few hosts with extensive property management networks, they aren’t crowding out other hosts. The ritzy Mediterranean coastal destination of Monaco is another excellent example showing similar trends.
When looking into data on revenue distribution among vacation rental hosts, some interesting themes become clear:
- Low regulation often correlates with high inequality
- Popular, one-off events like the UEFA Champions League Final and the World Cup largely impacted earnings, occupancy rates, and inequality in Kiev and Moscow
- Regulations in London have only been moderately successful in controlling inequality
- Hosts in Paris and Berlin are highly unequal in terms of overall revenue earned but equal in terms of listings per host
- Amsterdam and Copenhagen have managed to remain extremely profitable while taking restrictive regulations in stride
- Revenues in traditional vacation rental destinations like Lisbon, Valletta, and Monaco remain high, and they’re shared equally among hosts