What’s the deal with the Airbnb collapse? As far as we can tell, it still works fine. In fact, bookings from some of our clients were made this morning! Airbnb is not collapsing; it previously went through a few growing pains, and just like everything in the media these days, it’s been sensationalized, and its problems are magnified to a much greater extent than they should be. So, how is Airbnb doing, and why is everyone talking about a collapse? Let’s go through the details below.
What is the “Airbnb collapse”?
The phrase “Airbnb collapse” gained traction on platforms like X (formerly Twitter) and Reddit in late 2023, as hosts began publicly sharing screenshots of empty booking calendars. Viral posts with hashtags like #AirbnbBust described a dramatic shift from the post-COVID boom in short-term rental profits to what many now call a saturation crisis. Remember, Airbnb had become a publicly traded company semi-recently and thus was prime for public scrutiny, which resulted in the above hyperbole.
While dramatic, the term “collapse” may not reflect a complete fall of the STR model; what is happening is more of a recalibration. The pandemic created a temporary boom in travel and remote work, which boosted Airbnb demand. But as demand normalizes and supply balloons, returns are thinning out, especially for new, inexperienced hosts or those in highly saturated urban markets.
Key factors behind the Airbnb slowdown
Several converging factors have triggered the market’s retreat from its peak, creating a challenging environment for short-term rental hosts. A rapid increase in listings has led to oversupply in many cities, while shifting traveler preferences and growing frustration with fees and inconsistent experiences have pushed some guests back toward traditional hotels. At the same time, new local regulations and economic pressures, including inflation and rising interest rates, are squeezing margins and forcing many property owners to reassess their strategies.
Too many short-term rentals
In many metro areas, too many investors rushed into the Airbnb space during the post-2020 boom. Cities like Phoenix, Nashville, and Miami saw a massive spike in listings, leading to aggressive pricing competition and thinner margins.
Shifting consumer behavior
Travelers are getting pickier. Many prefer hotels again, valuing reliability, cleanliness, and consistent check-in protocols. Meanwhile, frustration over high cleaning fees and long checkout instructions has made some users question Airbnb’s value.
Increased competition from hotels and boutique stays
Hotels have adapted. Many now offer flexible check-in, extended-stay packages, and competitive rates that undercut many Airbnb properties, especially in urban centers.
Local regulations and zoning crackdowns
New laws are forcing many hosts out of business. Cities like New York and San Diego have passed laws limiting short-term rental activity to primary residences only, eliminating many investor-owned units.
Economic pressure: Inflation, interest rates, and recession fears
Higher interest rates are pushing up holding costs for investors. Combine that with declining revenues, and many Airbnb hosts are no longer breaking even.
Is the Airbnb market crashing or stabilizing?
Data shows a noticeable drop in both occupancy rates and nightly prices since 2022, signaling a broader shift in the short-term rental market. As more listings flood popular cities and guest demand softens, many hosts are earning less per night while facing longer vacancy periods, especially in oversaturated or highly regulated areas.
How demand is shifting by region
While urban markets are cooling, rural and suburban Airbnbs near national parks or seasonal destinations are holding up better. These properties tend to face less regulation and draw steady weekend or vacation traffic.
We spoke to Joe Hawtin of Marin County Visitor about his thoughts on the market.
“From an investment angle, the biggest headache is the constant regulatory uncertainty from city to city. What works fine in Phoenix could get you in trouble in Barcelona or Boston. I’ve seen investors lose big when places like Santa Monica and New York rolled out strict rules. Profitable properties turned into money pits almost instantly, and the platform didn’t lift a finger to help. These days, the sharpest short-term rental investors I know take a “platform-agnostic” approach.”
Are hosts exiting the market?
In the cities with excessive regulation, it’s true; hosts are exiting those markets. Cities with aggressive legislation have seen Airbnb inventory drop sharply. Below are some of the drops resulting from tax-related and compliance-related legislation.
| City | % Decrease in Listings (YoY) | Primary Reason |
|---|---|---|
| New York, NY | -74% | Strict new STR laws |
| San Diego, CA | -42% | Licensing limits |
| Austin, TX | -38% | Oversupply, local crackdowns |
| Denver, CO | -33% | City permit restrictions |
| Portland, OR | -31% | STR tax hikes |
Airbnb profitability trends from 2017 to 2025
Short-term rentals have been one of the best real estate plays over the past decade, but they’ve also been a wild ride. From explosive growth in the late 2010s to the COVID crash and now the new wave of regulations and inflation pressure, Airbnb’s profitability hasn’t moved in a straight line. If you’re serious about investing in STRs today, you need to understand how we got here and why the strategies that worked five years ago aren’t a guaranteed win anymore.
Here’s a look at how Airbnb host profitability has shifted year-over-year over the past eight years:
What this timeline tells us
Airbnb has survived a lot: a global shutdown, a revenge-travel boom, and now an oversaturated and heavily regulated market. The reality? STR profitability today is harder to capture, but not impossible. You just can’t coast like you could back in 2018.
Hosts who are still crushing it are treating their properties like full-scale businesses: strong branding, smart automation, targeting longer stays, and locking in tax strategies like cost segregation to boost net returns even when gross revenue slips. Understanding where the market’s been helps you position your rentals, and your bottom line, for where it’s heading next.
Real estate investor impact: What this means for Airbnb hosts
Decreased rental income and ROI pressure
Falling occupancy and nightly rates mean hosts are seeing lower cash-on-cash returns, especially those who bought in at peak home prices in 2021–2022.
Cash flow challenges and rising holding costs
Inflation, rising interest rates, and higher utility costs are all eroding profitability. Those with adjustable-rate mortgages are especially vulnerable.
What hosts are doing: Selling, converting, or re-strategizing
In 2024, many hosts are pivoting:
- Switching to mid-term stays (30+ days) to meet traveling nurse or corporate housing demand
- Selling off underperforming properties
- Returning to long-term leases to stabilize income
- Cutting nightly prices to maintain bookings
| Strategy | % of Hosts Using |
|---|---|
| Mid-term rentals (30+ days) | 32% |
| Selling property | 27% |
| Returning to long-term tenants | 24% |
| Lowering Airbnb prices | 17% |
“From an investment standpoint, the biggest downside with Airbnb is dependence. Relying solely on one platform exposes you to sudden policy changes, increased fees, or even deactivation. Investors lose pricing power and guest data, and in some markets, Airbnb can be banned or restricted with little notice. Also, Airbnb optimizes for the guest, not the host. That means service disputes often tilt toward guests, leaving investors with chargebacks or unjust penalties.”
Austin Hair, Managing Partner, Leaders Real Estate
How hosts are staying ahead
While plenty of hosts are just trying to hang on, shifting to long-term tenants or slashing prices, others are leveling up and pulling ahead. These are the operators treating short-term rentals like an actual business, not a side hustle. Instead of just reacting to downturns, they’re building smart systems to stay cash-flow positive no matter what the market throws at them.
The most successful hosts are doubling down on sharp branding, automating guest experiences, and diversifying their booking platforms. They’re also targeting guests who stay longer and complain less, like remote workers, travel nurses, and corporate relocations, and they’re not leaving money on the table when it comes to taxes. Cost segregation, bonus depreciation, and tight expense tracking are helping them keep more of what they earn.
Bottom line? In a tighter market, it’s not about who has the best location, it’s about who runs the smartest operation.
Future predictions for the Airbnb and STR market
Recovery outlook in urban vs. rural markets
Looking ahead to late 2025 and beyond, urban Airbnb markets like New York, San Francisco, and Los Angeles are likely to stay under pressure due to strict regulations, high compliance costs, and oversaturation. In contrast, rural and vacation-driven markets, such as the Smoky Mountains, Lake Tahoe, and parts of Florida, may see modest recovery thanks to steady tourism, fewer regulations, and demand for space and privacy.
For investors, location will be critical. Markets with strong tourism infrastructure and favorable STR laws offer better long-term value, while overregulated or crowded areas may not be worth the risk.
Tech, travel trends, and the return of experience-first stays
Airbnb is doubling down on experience-first stays, trying to move beyond just being a listing platform. Through its “Airbnb Categories,” “Airbnb Experiences,” and curated stay types like “Design,” “Cabins,” and “Luxe,” the platform is nudging both guests and hosts toward story-driven, themed, or experiential properties.
This shift benefits hosts who invest in:
- Strong interior design and unique spaces (e.g., converted airstreams, eco-lodges, design-forward cabins)
- Automated check-ins and smart home tech, which streamline the guest experience
- Branding their rental across social media, niche travel sites, and direct booking platforms
The takeaway for investors is clear: cookie-cutter STRs are dying. The future belongs to creative, boutique-style offerings that stand out from traditional hotels and other rentals. In a slower market, differentiation isn’t just helpful, it’s essential for survival.
Will Airbnb’s business model evolve?
Airbnb’s business model is expected to change as it tries to keep both guests and hosts happy. We’ll likely see smarter pricing tools that adjust based on demand, better ways to screen guests to avoid problems like parties or damages, and possibly perks for Superhosts like lower fees or more visibility. There’s also growing pressure to rethink how Airbnb handles fees, especially cleaning fees, which could push them to make changes. All of this comes as smaller platforms start gaining traction by offering hosts more control or lower costs.
At the same time, Airbnb faces increased competition from niche STR platforms like:
| Platform | Primary Focus | Target Audience |
|---|---|---|
| Furnished Finder | Mid-term rentals (30+ days) | Travel nurses, remote workers, medical professionals |
| Blueground | Upscale, furnished corporate housing | Business travelers, digital nomads, corporate clients |
| Zumper & Zillow | Simplified short- and mid-term rental listings | General renters seeking flexibility or shorter leases |
As guests look for more transparent pricing and value, and as hosts seek more control over their listings, Airbnb may not remain the default platform forever. Investors should monitor emerging platforms and consider diversifying their booking channels.
FAQ
Will Airbnb lower its fees to stay competitive?
It might, but there’s been no formal change yet. Many travelers are fed up with surprise service fees and high cleaning charges. If that frustration keeps growing, and alternatives keep gaining traction, Airbnb may have to simplify or reduce fees to stay relevant. Until then, guests are getting smarter about comparing prices across platforms.
What will happen to local housing markets if too many Airbnb fail?
It depends on the city. In places with a tight housing supply, those units might get converted back to long-term rentals, which could help renters. But in tourist-heavy towns, a flood of failed Airbnbs might mean more inventory sitting empty or getting sold under pressure, especially if they were bought with high-interest loans or no backup plan.
Are vacation rentals safer than city Airbnb right now?
Yes, in most cases. Rural cabins, beach homes, and mountain lodges tend to have less government interference, steadier seasonal demand, and fewer competitors nearby. On the other hand, city rentals are getting squeezed by hotel deals, stricter rules, and more listings than demand can handle.
Could Airbnb as a company actually fail?
Not likely. The company still has strong revenue and global reach. What’s changing is how it operates. Airbnb is putting more effort into improving the guest experience and nudging hosts toward better-designed, longer-stay listings. The collapse people are talking about is mostly affecting individual hosts, not the company itself.
