Revenues from Airbnb and other short-term rentals sinking in San Antonio, other hotspots

A flood of Airbnb properties may soon hit the market in San Antonio, along with other regional tourist spots and pandemic boom towns, as owners are forced to sell money-losing properties, a real estate expert warns.

Nick Gerli, CEO of property analytics firm Reventure Consulting, last week shared a data set on Twitter showing that revenue for Airbnb owners dropped nearly 50% in markets including San Antonio , Phoenix and Austin between May 2022 and May 2023.

"The Airbnb collapse is real," he cautioned.

The Airbnb collapse is real.

Revenues are down nearly 50% in cities like Phoenix and Austin.

Watch out for a wave of forced selling from Airbnb owners later this year in the areas hit hardest by the revenue collapse. pic.twitter.com/xjGkj7bFC5

— Nick Gerli (@nickgerli1) June 27, 2023

In a Youtube video analyzing the data, Gerli said the steepest declines in short-term rental revenue are primarily in regional tourist hubs, including Myrtle Beach, S.C.; Asheville, N.C.; and Sevierville, Tennessee, the Smoky Mountains resort area where Dollywood is located.

Pandemic boom towns such as San Antonio, Austin and Phoenix — or places where housing prices soared during the COVID-19 crisis — also are experienced steep revenue plunges.

"With Airbnb revenue down 46% in Austin and as well as 44% in nearby San Antonio, clearly not as many people are interested in visiting Central Texas as they were two years ago, and it's showing up in this data," Gerli said in the video.

Reventure Consulting compiled its data from short term rental analytics website AllTheRooms.

In part, Airbnbs rentals are down due to the end of COVID-19 restrictions, which were more relaxed in Texas than in other parts of the country, Gerli said. That created artificial demand for rentals as travelers visited states with fewer restrictions.

At the same time, short-term rental investors snapped up risky Debt Servicing Coverage Ratio (DSCR) loans to finance their acquisitions. Those loans don't require income or asset verification. Instead, lenders use the projected hypothetical income from a short-term rental to decide whether to loan money to an investor.

In one extreme case, a 29-year-old former grocery store manager in Columbus, Ohio, borrowed $1.1 million using DSCR loans to buy four short-term rental properties near Sevierville, Tennessee, according to a Bloomberg article.

"All that debt and those high mortgage payments to buy the vacation rentals wasn't a big deal a year ago because the revenues were still good," Gerli said. "However, now in a place like East Tennessee, the revenues have absolutely crashed."

Due to the sudden downturn in Airbnb revenues in specific cities, and a chunk of the underperforming properties being owned by people with DSCR loans, Gerli expects to see a wave of properties being put up for sale.

That means median home prices in the Alamo City — now hovering around $324,000 per the San Antonio Board of Realtors' latest market report — could decline. The rent for single-family homes could also come down as some struggling investors opt to convert short-term rentals to long-term leases.

"It's not going to happen everywhere across America, and it's not going to happen everywhere across a given city," Gerli said.

Even so, he compared the impending sell-off to a "freight train" tearing through the housing markets of cities where Airbnb rentals were artificially high.

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