July 25, 2022 by Adam Hoeksema
Starting a business during a recession might seem counterintuitive, but many of the most powerful and successful businesses were started in the heart of a recession. Specifically, we think there are some compelling reasons to start an Airbnb business during a recession if you do things right. Before we jump into the reasons to start an Airbnb business during a recession, I want to highlight what type of Airbnb business I think you should consider starting.
Types of Airbnb Businesses
I think there are different types of Airbnb businesses and some will do better than others during a recession. Here are a few types of short term rental businesses and how I think they should fair during an economic downturn.
- Airbnb for Business Travelers - If your Airbnb unit is in a city and targeted toward business travelers, I think you could have more of a challenge during a recession. Business travel is often one of the first things to get cut during a recession. Companies think, maybe a Zoom meeting will work instead of traveling, or maybe we can just go to the conference next year. This all translates into less demand for Airbnb rentals that are focused on business travelers.
- Airbnb for Premium Vacations - Although I think there will always be demand for the best of the best Airbnb units, I do think there could be more risk if your Airbnb is high end, but not the most luxurious option. You might find yourself stuck in no-man's land where your Airbnb is too expensive for most people, but not nice enough for the truly wealthy customers.
- Airbnb for “staycations” - The last type of Airbnb I want to mention is a short term rental unit for “staycations.” During a recession families will still want to go on vacation, but may look to downsize their vacation plans. Instead of heading to the beach or the mountains, maybe you decide to just get a cabin in the words nearby, or a Airbnb on a lake that is close to home. I think properties that are outside of major cities that allow people to feel like they are getting away without having to travel too far could be the perfect type of Airbnb to start during a recession.
So now that we know what type of Airbnb to start, why is a recession a good time to start an Airbnb business?
Reasons to Start an Airbnb During a Recession
- Lower Purchase Prices for Homes? - Typically during a recession, prices of assets go down. In 2022 we have seen prices of most assets like stocks and bonds go down rather dramatically.
But so far the prices of homes continue to increase in the US according to the Zillow Home Value Index. You can see below that after the 2008 recession home prices did decrease quite substantially, but we just don’t know whether that will happen again in the 2022 recession.
If we do see home prices start to drop, that is likely to be a good time to purchase a home as an Airbnb unit.
- Lower Supply of Airbnb Units - Although we don’t know for sure whether home prices will decrease during this recession, we can be more certain that overleveraged Airbnb hosts will go bust which will decrease the supply of Airbnb units available to rent on the market. Lower supply could mean that there is an opportunity for you to fill that gap between supply and demand.
I actually made a little video to show you what I think will happen to Airbnb hosts if interest rates keep rising.
- Airbnb Businesses Make for a Great Side Hustle - An Airbnb can make for a great side hustle. If you have a little extra time, maybe you are picking up less hours at work during the economic downturn, then you can do the work to manage your own Airbnb and do the cleaning, maintenance, and customer service. If you do a lot of the work yourself it will make a huge difference in your ability to generate positive cash flow with your Airbnb business. You can see the impact with our Airbnb Cash Flow Calculator video. Long story short, if you hire out a property management service, a cleaning crew etc then an Airbnb is likely to be a breakeven business, but if you are willing to do some of the work yourself as a side hustle, it can make for some extra spending money during a recession.
- People still Want to “Get Away” during a Recession - If you are used to going on Spring Break or Fall Break vacation, or you always take a trip over Christmas break, you aren’t going to want to stay home just because of a recession, but the budget realities might mean you need to stay closer to home. This seems like the perfect opportunity for an Airbnb that is focused on the “staycationer” that wants to get away, but stay close to home on a budget.
If you are serious about jumping into the Airbnb business, we think there are some good reasons to do it during a recession, but we also want to make sure you run the numbers and truly understand what you are getting yourself into. Check out our Airbnb Startup Financial Model to create a set of projections for your specific property and see if you think you can make a go of it!