15 Most Profitable Airbnb Cities in the World
In this piece, we will take a look at the 15 most profitable Airbnb cities in the world. If you want to skip our analysis of the hospitality market and want to check out the top profitable Airbnb cities, head on over to 5 Most Profitable Airbnb Cities in the World.
The growth in internet connectivity, aided particularly by the mobility offered by the smartphone, has disrupted several key traditional industries. Some of these are media, finance, communications, and hospitality.
Within the hospitality sector, applications such as Airbnb, Inc. (NASDAQ:ABNB) have provided travelers with opportunities to not only avail accommodations that provide a closer 'feel' to the cities that they're visiting but also enabled them to travel to more places than they might have been able to otherwise due to a lack of hotel coverage.
In fact, key markets being unserved by hotels is actually quite larger in scope than you might believe. For instance, today's economic hotshot, the Republic of India which is the world's second most populous nation and one of the biggest economies in the world is also one of the biggest underserved hotel markets on the planet. Data from Colliers Hong Kong shows that while India expects around thirty million tourists a year by 2030, the country has a mere 2.6 million hotel rooms. Mind you, these hotel rooms are not only for foreign tourists and have to also account for the needs of domestic travelers. This shortage and the resulting focus on the sector particularly by the Indian government has led hospitality giants such as Hilton Worldwide Holdings Inc. (NYSE:HLT) and the Radisson Hotel Group to significantly expand their presence in the country.
Another underserved hotel market, quite surprisingly is Japan. The world's third largest economy is also home to the most populous city on the planet, Tokyo. Yet, luxury hotels in Japan are not as numerous as the demand for them would necessitate. Out of the three thousand hotels in Tokyo in 2019, only five had been awarded five stars by Forbes during the same year. This is despite the fact that the number of foreign visitors to Japan has more than tripled between 2010 and 2018, but the hotel industry fails to meet the demand for luxury hotels since most properties are quite old and require costly maintenance to bring them up to luxury standards. As of 2023, there are 56 luxury hotels in Japan, which are quite few compared to the 117 in China or even 68 in Indonesia.
At the same time, companies like Airbnb and Expedia Group, Inc. (NASDAQ:EXPE)'s Vrbo offer travelers a chance to experience a home-like environment during their journey. Looking at the best Airbnb locations in the world, according to data from the company itself, the best Airbnb destination based on searches on the platform was Bangkok, Thailand. And for 2023, Airbnb believes that Madrid, Sydney, and Melbourne might be some cities worth checking out. But what if you were interested in buying an Airbnb and one that was away from the hustle and bustle of large city life? Well, some great small town locations for Airbnb investment that might be worth your while include Bend, Oregon; Ithaca, New York; Bay Arbor, Michigan; Grand Lake, Colorado; and Kenai, Alaska. However, as you'll find out below, it's often the big cities that have the highest rentals. So if you're looking to invest in Airbnb for 2023, its own summer travel forecast outlines that Bali, Indonesia; Barcelona, Spain; London, United Kingdom; Rouen, France; and Grindelwald, Spain, are some hot destinations right now.
However, not everyone is willing to make a significant commitment as buying a new apartment or house. Well, a capital free method of making money from Airbnb is arbitrage. This involves renting a place and then putting it up on Airbnb - allowing the renter to earn some money while also making sure to keep up with rental payments. Finding the best cities for Airbnb arbitrage is more of a science. It first involves looking at the supply of rental units in a city, then ensuring the landlord is comfortable with subletting, and finally determining the right amount of investment in furniture and other amenities to get started on the Airbnb journey. According to the Airbnb analytics site Airbtics, some of the best U.S. cities for Airbnb arbitrage are San Antonio, New York City, Las Vegas, San Diego, Chicago, and Miami.
But before considering an Airbnb investment, it's worth it to take a look at how the market is performing. On this front, the firm's management shared in its first quarter of 2023 earnings conference:
We’re building the foundation for new products and services that we plan to launch in 2024 and beyond. At the same time, Airbnb is still underpenetrated in many markets around the world. So we’re increasing our focus on these less mature markets, and we are already seeing positive results. So let me just give you 2 examples. In Germany and Brazil, we rolled out our expansion playbook for accelerated growth.
And as a result, we are now 2 — they are now 2 of our fastest-growing markets. And this playbook has, in fact, worked so well. So we are now expanding it to other markets around the world. Now before we go to questions, I want to talk a little bit about our 2023 Summer Release. Last week, we introduced the most extensive set of improvements ever to Airbnb, and it was all based on feedback from our community. We took a design-driven approach to perfecting our core service. We created a blueprint of the entire experience: every screen, every policy and every interaction with customer service. We then analyzed millions of calls and thousands of social media posts. And we hosted listening sessions with guests and hosts all over the world. And we mapped all this feedback against our blueprint and we prioritized the most common issues.
With these details in mind, let's take a look at some of the most profitable Airbnb cities in the world.
Our Methodology
To compile our list of the most profitable Airbnb cities in the world, we first made a list of more than sixty cities popular across a multitude of web sources for Airbnb investment. Then, the approximate average rental for a one bedroom apartment in each of these was calculated. The top 25 Airbnb cities were then selected. Then, the approximate average one bedroom apartment price in each city was determined. Finally, the number of years that would take to recover the average apartment price was determined and the cities with the lowest years were selected as the most profitable Airbnb cities in the world.
15 Most Profitable Airbnb Cities in the World
15. Ann Arbor, USA
Number of Approximate Years To Recover Investment: 13.44
Ann Arbor is a city in the U.S. state of Michigan. It houses more than a hundred thousand people, and some popular hotels in the area belong to InterContinental Hotels Group PLC (NYSE:IHG) and Marriott International, Inc. (NASDAQ:MAR).
14. Charleston, USA
Number of Approximate Years To Recover Investment: 12.21
Charleston is the largest city in the U.S. state of South Carolina. It houses a little more than 150,000 people and is the port hub for its state.
13. Montreal, Canada
Number of Approximate Years To Recover Investment: 12.19
Montreal is one of Canada's most developed cities. With a population of nearly two million, it ranks second in Canada and is also an economic hub in the country.
12. Brisbane, Australia
Number of Approximate Years To Recover Investment: 11.32
Brisbane is the capital of the Australian state of Queensland. It houses 2.5 million people, and one of its top luxury hotels is the JW Marriot belonging to Marriott International, Inc. (NASDAQ:MAR).
11. Boston, USA
Number of Approximate Years To Recover Investment: 10.63
Boston is one of the most developed and prosperous cities in America. Naturally, it has its top pick of luxury hotels, including Marriott's Ritz Carlton.
10. Hilo, USA
Number of Approximate Years To Recover Investment: 10.34
Hilo is a settlement in the U.S. tropical state of Hawaii. It is quite a small area, with a population of 44,186 - making it ripe for an Airbnb especially as few big hotel players have a presence there.
9. Canmore, Canada
Number of Approximate Years To Recover Investment: 10.24
Canmore is a Canadian town in Alberta. It's a small town with a population of roughly fifteen thousand.
8. Chula Vista, California
Number of Approximate Years To Recover Investment: 9.96
Chula Vista is a city in the U.S. state of California. It houses more than a quarter of a million people and has a sparse presence of big hospitality giants.
7. Copenhagen, Denmark
Number of Approximate Years To Recover Investment: 9.52
Copenhagen is the capital city of Denmark. Naturally, Marriott International, Inc. (NASDAQ:MAR) has a presence in the city and so does Radisson.
6. Washington, D.C., USA
Number of Approximate Years To Recover Investment: 8.79
Washington, D.C. is the capital of USA and has a strong presence of hospitality giants such as Hilton Worldwide Holdings Inc. (NYSE:HLT) and Marriott International, Inc. (NASDAQ:MAR).
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Disclosure: None. 15 Most Profitable Airbnb Cities in the World is originally published on Insider Monkey.