The Gentrification of Airbnb: Closing Rent Gaps Through the Professionalization of Hosting

Introduction

When asked about the introduction of boutique hotels on its platform in 2018, the President of Homes at Airbnb explained that “we’ve listened to the community and the guests are wanting that” (ITB Berlin, 2019). While guest demand may have informed this development, Airbnb’s move to list boutique hotels caused outrage among hosts who felt that it strayed from its “home-sharing” rhetoric, which distinguishes the platform from the hospitality industry by emphasizing democratized value creation and middle-class empowerment. In a thread on Airbnb’s own online “Community Center,” a host expressed their grievances about the effects of this development as follows: “The hotels, lodges and property management companies are all listing their properties and pushing the traditional hosts to the end of search results” (Airbnb Community Center, 2018). As the quote suggests, a broader development had been taking place that received comparatively less attention, namely the increasing professionalization of hosting on Airbnb. Besides introducing actual boutique hotels on its platform, Airbnb has in various ways encouraged hosts to upgrade their listings to approach the boutique hotel experience, while at the same time accommodating more large-scale commercial forms of hosting. Interestingly, Airbnb’s “boutiquing” strategy seems to take a page from an older playbook in the history of gentrification. As Sharon Zukin and colleagues have noted, boutiques were pivotal to the gentrification of the retail landscape in certain New York City neighborhoods:

“Boutiquing” is . . . part of a broad dynamic of postindustrial change and urban revitalization that may benefit certain residents while deepening economic and social polarization . . . Boutiques “mark” an area as safe for commercial investment that will upgrade services and raise rents. (Zukin et al., 2009, p. 48)

Likewise, we see Airbnb’s “boutiquing” strategy as an avenue for upgrading its services and listings, marking the company and its platform as safe for commercial investment and thereby opening the door to revenue growth as well as equity value appreciation. Crucially, this strategy is predominantly executed through a set of programs, tools, and policies that together are reshaping the practice of hosting on Airbnb according to a logic of “professionalization.” So far, the emerging literature on professionalized hosting has mainly explained this phenomenon as the result of how different types of hosts leverage the platform to pursue their own economic interests, also in response to increasingly demanding guests (Deboosere et al., 2019; Grisdale, 2019; Kadi et al., 2019). Professionalization thereby tends to be framed as the outcome of nefarious capitalist dynamics articulated through Airbnb’s platform-based marketplace. The company’s role as platform operator, or market-maker, has meanwhile received less attention.

In this article, we provide an alternative perspective on, and explanation of, professionalization on Airbnb, with the aim of highlighting how the company’s business model and platform governance shape this process. More than merely being an instrument for others to achieve their professionalizing objectives, Airbnb should be seen as an agent of professionalization. In addition, we argue that it is analytically generative to think about these developments in terms of (commercial) gentrification. More precisely, we believe that rent gap theory, pioneered by Neil Smith (1979), is helpful to advance our understanding of why and how the professionalization of hosting has become an increasingly salient phenomenon—and for centering the active role of Airbnb as a platform operator. Rather than making claims about urban gentrification induced by Airbnb, as a growing number of scholars has done (Cocola-Gant & Gago, 2019; Wachsmuth & Weisler, 2018; Yrigoy, 2019), in this article we thus inquire into the consequences associated with what one could see as the gentrification of Airbnb, that is, of the platform itself.

To be sure, we are not making the claim that what has transpired on Airbnb over the past years is a clear-cut example of gentrification. Rather, we are using gentrification as a heuristic device to engage in a thought experiment meant to open up analytical space for a critique of what has come to be known as professionalization on Airbnb. Doing so allows us to (1) highlight and contextualize the company’s ongoing push to “revitalize” (i.e., expand, revamp, and increase the value of) its platform ecosystem by professionalizing its supply side and upgrading its listings, and (2) examine how different types of hosts are unevenly affected by Airbnb’s efforts to professionalize hosting on its platform. Building on rent-gap theory, which engages the political economy of gentrification in cities, we develop the notion of platform-scale rent gaps to explain the economic logic that drives Airbnb to professionalize its hosts and gentrify its platform. Distinguishing between two modes of professionalization enabled by the platform, namely asset-based and labor-based professionalization, we then investigate the extent to which Airbnb’s programs and tools foster conditions for uneven business development among hosts in Berlin, Germany.

Berlin was one of the two field sites in a larger, cross-national comparative research project that combines analytical approaches from the emerging field of platform urbanism (Fields et al., 2020) with methods from platform and software studies (Helmond et al., 2019) as well as urban studies (Robinson, 2016). Together, these forge an integrative understanding of the interplay between Airbnb’s digital platform and the organization and governance of social reproduction in cities in relation to housing, tourism, and small business development. In this article, we draw on this research project to answer a set of questions pertaining to professionalization’s unequal distribution of value, opportunities, and challenges: What types of hosts are best positioned to use Airbnb’s resources to their advantage, and to what extent can differently situated hosts absorb the risks and costs associated with professionalization in an idiosyncratic STR market like Berlin? In answering these questions, we contribute to scholarly debates on home-sharing and the (professionalization of the) short-term rental industry by drawing on insights from platform studies and political economy research to critically examine Airbnb’s objectives in pursuing host(ing) professionalization. Furthermore, our argument may attune gentrification scholars to the digital dimensions and extensions of contemporary gentrification, in particular the role of platforms and processes such as datafication in growing the value of STR properties.

Berlin presents itself as an interesting case to study professionalization, as homeownership rates were lower than 16% in 2019 (Investitionsbank Berlin [IBB], 2021), making Airbnb’s ideal of middle-class of home owners “sharing their homes” untenable for most. At the same time, housing rents have skyrocketed as rents for existing tenancies increased with over 56% between 2010 and 2020 (IBB, 2021). Tenants looking to offset these rising rents by making their apartment available on the STR market face a set of restrictions, however. Beyond needing permission from their landlord, the city of Berlin requires permits to rent out entire homes for a short term, which are only granted for primary residences (no time limit specified) or secondary residences (with a yearly cap of 90 nights a year). Rooms, meanwhile, may be rented out year-round but have to obtain a registration number with the city district (ZwVbG, 2013). This means that residential housing cannot be legally turned into year-round STR properties, which is only possible for spaces with a nonresidential/commercial designation. This gives professionalization on Berlin’s STR market a highly particular dynamic and begs the question of whether and how hosts are able to grow their business under such conditions.

Before we discuss our research findings and formulate answers to our research questions, we first review the literature on hosting professionalization on Airbnb and identify existing gaps. We then make our own theoretical intervention in this literature by providing an explanation for professionalization from the perspective of platform owners, drawing on rent gap theory. We subsequently provide an overview of the empirical research that grounds our argument, addressing its methods of data collection and analysis. The following two sections then first present the results of our analysis of professionalization programs and tools offered by Airbnb, before detailing the extent to which these resources can be integrated into the daily practices of two different types of hosts in Berlin. We close the article with a brief set of concluding reflections on where these findings might lead us in terms of theorization and future research.

Explaining Professionalization on Airbnb Through Rent Gap Theory

While the sharing economy gained momentum by celebrating the democratizing potential of peer-to-peer production and exchange, the “collaborative consumption” of “under-utilized resources” such as cars or rooms proved to be just a part of the story. In 2014, activist Tom Slee was one of the first critics to show that, in popular urban tourist destinations, a large number of listings on “home-sharing” platform Airbnb are operated by what he called “multi-listers,” who manage more than one property on the platform. Since this divergence between Airbnb’s home-sharing narrative and actual hosting practices was first noted, a number of studies has explored who makes the largest revenues on Airbnb and how this is achieved. Working with scraped data on listings hosted on the platform, this research has examined in particular how listing characteristics, geographical location, and the way listings are managed affect nightly rates, thus aiming to understand what factors are most important in determining listing revenue (Kwok & Xie, 2019; Oskam et al., 2018; Sainaghi et al., 2021). They have also explored the distribution of revenues among hosts to determine whether and to what extent Airbnb should be considered a tool for “inclusive tourism” (Kadi et al., 2019).

Together, these studies confirm the prevalence of what has come to be known as “professionalization” on Airbnb, with multi-listing, the listing of entire apartments rather than rooms, and high yearly availability rates as primary characteristics (Deboosere et al., 2019). Such professionally managed apartments do not only generate the largest individual revenues, they also account for a disproportionate segment of the total revenues accumulated on the platform (Deboosere et al., 2019; Grisdale, 2019; Kadi et al., 2019). Building on this research, Bosma (2022) has additionally suggested that professionalized hosting commonly entails the separation of property owner and listing host. Rather than being part of “home-sharing,” hosting is increasingly a commercial service around which has emerged a cottage industry of providers operating within or in close vicinity to Airbnb’s platform ecosystem.

While existing research gives a convincing account of the value of professionalization for property owners and other third parties, for whom it can result in increased revenues, the role and interests of STR platforms like Airbnb has notably received less attention. This is problematic to the extent that such an account misses the prevalence of professionalization as an overarching platform logic (Bosma, 2022). From YouTube to Uber and Airbnb, platform companies have increasingly come to rely on a steady, professionally organized supply of “complementors” who produce and maintain value-adding applications, services, performances, and/or assets (Caplan & Gillespie, 2020; Nieborg & Poell, 2018).

That host professionalization is indeed considered to be crucial to Airbnb’s business model and long-term profitability is illustrated in the company’s recently published S-1 documentation, which the company submitted in preparation of its then upcoming IPO (Initial Public Offering). Under the heading “Risk Factors,” the company explains to its present and future shareholders that “historically, we have seen an increase in the number of, and revenue from, professional hosts on our platform” (Airbnb Inc., 2020, p. 31). Accordingly, Airbnb identifies the following risk:

If we are not able to effectively deploy professional tools, application programming interfaces, and payment processes, work with third-party channel managers, ¹ and develop effective sales and account management teams that address the needs of these professional hosts, we may not be able to attract and retain professional hosts. If our fee structure and payment terms are not as competitive as those of our competitors, these professional hosts may choose to provide less inventory and availability with us. (Airbnb Inc., 2020, p. 31)

This quote confirms that professional hosts are indeed seen as important to Airbnb’s future and, accordingly, the company finds it necessary to develop its platform in a way that both retains and expands this group. However, what the quote does not elucidate is why and how, exactly, professionalization forms an appealing strategy for Airbnb to increase its revenues and appreciate the value of its platform business. To better understand how the upgrading of properties listed on Airbnb leads to higher revenues not only for hosts but also for Airbnb itself, and how this results in what we conceptualize as the gentrification of its platform, we turn to rent gap theory.

The “rent gap” concept, first coined by Neil Smith (1979), has been central to the theorization of gentrification. He stressed that gentrification does not happen because of changing “consumer preferences,” as neo-classical understandings would argue, but that the logic of capital is fundamental to gentrification (Smith, 1979, also see Slater, 2018). Smith (1979) defines the rent gap as the difference between the “capitalized ground rent”—the actual rent generated by a particular plot and the buildings on it under its current use—and “potential ground rent”—the potential rent for that same plot but under its “highest and best use” (p. 545). Rent gaps open as this difference increases and, once they have been identified, they form an incentive for landlords to evict current occupants, reinvest in their property, and attract new occupants who can afford to pay higher rents—a process known as closing rent gaps.

By repurposing housing property as short-term rental units that can be marketed to tourists via platforms such as Airbnb, property owners are able to close rent gaps without having to do major reinvestments first (Wachsmuth & Weisler, 2018). This forms a strong incentive to transform regular housing into STR, often in places with already dramatic housing shortages and skyrocketing rents. As such, holiday rentals have been argued to constitute a “new gentrification battlefront” (Cocola-Gant, 2016) and the large-scale acquisition of apartments for deployment on the STR-market has led to the phenomenon of “buy-to-let gentrification” (Cocola-Gant & Gago, 2019). The opening and closing of rent gaps, however, does not stop with buy-to-let investments and the conversion of long-term rental contracts to short-term tenancies. Once these properties are listed on Airbnb, there is a variety of ways to further identify and close rent gaps or, phrased differently, to optimize the revenues that housing assets can generate when rented out via the platform.

Indeed, these practices and strategies are essentially what “professionalized hosting” is all about, which is to say that professionalization to a large extent takes shape through the use of various tools and services that help to identify and close rent gaps. Some of these are developed and provided by Airbnb itself (as we show below), while others are offered by companies such as AirDNA—a STR data analytics firm. AirDNA’s products, derived from scraped Airbnb data, promise to help hosts benchmark their “short-term rentals against competitors and learn what knobs to turn to dial up financial performance.” ² The comparison with competitors is crucial here as it might provide evidence that higher rents are extracted from similar listings, suggesting higher potential rents for the AirDNA client. To reiterate, we argue that it is thus not just the turn to STR itself that has enabled property owners to close rent gaps; the management of STR listings through Airbnb allows for new rent gaps to open up and be closed.

At this point, however, we should ask why Airbnb condones the business model and practices of a company like AirDNA—Why does it not object to the scraping of data on its platform? To answer this question, we should first establish the critical role of rent in the platform economy. In what some scholars refer to as rentier capitalism, digital platforms such as Airbnb should be understood as corporately owned assets (Christophers, 2020). As is the case for other types of assets, legal ownership of and practical control over of a platform asset are essential preconditions for the ability to extract rent from it. Platforms govern the terms of economic exchange between different sides of their multisided marketplace in a way that, ideally, allows their owners to maximize network effects and thereby scale their business. In return for (differentiated) market access, a platform owner like Airbnb charges its users rent in the form of commissions (i.e., its “take rate”). Accordingly, Sadowski (2020) likens platform operators to mall owners: “Don’t think of the platform as the landlord who owns a rental home. Think of it as the owner of a shopping mall who invests in property in order to facilitate productive activity” (Sadowski, 2020, p. 568). The mall owner, in this case Airbnb, subsequently takes a cut of the total value generated by this productive activity on the platform—both in the form of money and, importantly, data. These are Airbnb’s returns on its investments in proprietary platform infrastructure.

This, then, brings us back to AirDNA. While this firm is not a rent-paying end user of Airbnb’s platform, it certainly functions as a “platform complementor” (Nieborg & Poell, 2018), or a third party that provides value-adding services supporting not only the general growth of productive activities taking place within Airbnb’s platform ecosystem but also the rising returns on individual listings. This, in turn, increases the total amount of rent Airbnb’s platform asset can generate. Beyond money rent, moreover, Airbnb captures immense amounts of data on all activities and transactions happening on the platform, which constitutes another form of rent that can subsequently be turned into a new asset class (Sadowski, 2020; van Doorn & Badger, 2020). As platform owner, Airbnb will ultimately be better capable of exploiting and assetizing these data than AirDNA, which in this respect presents no threat to its business. For example, data can be used to identify where—and from what types of listings—the largest revenues are generated, and to estimate whether and how optimal revenue growth may still be realized from “underperforming” categories of listings. ³ Consequently, this is where what we call platform-scale rent gaps emerge, which exist on an analytical level only accessible to and actionable by Airbnb, and whose identification and closure is vital for ensuring the continued growth of the company’s revenues, profitability, and financial value.

Situating the Study: Research Design and Methodology

As noted above, this article derives from a larger, cross-national comparative research project. The research substantiating the specific arguments developed here consisted of two parts. First, our analysis of the professionalization tools and programs offered by Airbnb is based on a variant of the walkthrough method (Light et al., 2018), which was employed to gather data on the functionality and evolution of Airbnb as a digital platform. A walkthrough analysis allows for the critical study of software and apps by systematically examining the functionalities offered and is particularly suitable for studying relatively closed systems such as the Airbnb app, as an interface of the platform (Light et al., 2018). While the intended usage of such tools was examined by analyzing documentation from Airbnb’s Resource Center, ⁴ their actual usage and reception was analyzed via online discussions forums for Airbnb hosts, including local Facebook groups and Airbnb’s Community Center. Here, we used a purposive sampling technique focusing on threads and posts mentioning professionalization and/or the tools and programs discussed in the next section.

Second, data were collected during 8 months of ethnographic fieldwork conducted by Bosma in Berlin in 2019. Ethnographic methods here allowed [them] to further examine the impacts of Airbnb’s tools and features in Berlin-based hosts’ daily lives and work. During the fieldwork period, Bosma participated in events, meetings, and social gatherings of Airbnb hosts and conducted 35 semi-structured, in-depth interviews that on average lasted between 1 and 2 hr. As Airbnb does not allow users to be contacted through the platform for research purposes, respondents were recruited through a wide variety of digital channels (including neighborhood platforms and social media), at social events for Airbnb hosts, via accidental encounters, and by snowballing from already recruited participants. Most respondents in the sample were Airbnb hosts, but also included local politicians, activists, neighborhood residents and store owners. Interviews with hosts (n = 16) focused on their motivation to use the platform, their everyday use of the platform, and the income derived from STR in relation to their overall income. In age, hosts ranged from their early 20s up to their late 70s. Overall, the gender balance among respondents was roughly equal, but, notably, those who ran large-scale businesses via Airbnb were all men.

From this respondent sample, this article highlights the stories of two hosts who are characteristic for Berlin’s STR market. Irena, like most people in Berlin, lives in rental housing, which means that without permission from her landlord (which she does not have) she cannot legally sublet her home. Like most small-scale hosts in Berlin, the only way she can “grow her business” and increase her income is by taking on more hosting duties—also for others. Gaith, in contrast, shows how asset-based professionalization can still take place in Berlin, by running an STR property management firm. While neither of them owns the properties they maintain and rent out, the latter entered Berlin’s restricted market with enough experience and capital to carve out a space in the city’s transforming STR landscape. Before we focus on their stories, however, we first turn to the tools and programs that Airbnb makes available to them.

Airbnb’s Tools for Professionalization and Uneven Business Development

Our walkthrough analysis resulted in two main findings: (1) while certain resources that Airbnb makes available support asset-based professionalization, others facilitate labor-based professionalization; (2) although these resources are nominally accessible to all hosts, some programs and tools cater primarily to “home-sharing hosts” while others can only be meaningfully utilized by commercial hosting services that manage multiple listings. Moreover, asset-based professionalization tools, which aim to maximize the revenues generated by listed properties, have the potential to be much more profitable than labor-based professionalization tools seeking to advance the quality and quantity of hosting activities.

This, we argue, sets the conditions for uneven business development on the platform, whereby the professionalization efforts of small-scale “home-sharing” hosts receive less substantial support from Airbnb (e.g., in terms of attention and material resources) compared with the activities of multi-listing property managers. Here we briefly discuss the most pertinent programs and tools that stimulate professionalization via Airbnb’s platform, starting with those incentivizing and supporting modes of labor-based professionalization before turning to asset-based professionalization. For each program/tool, we explain what it does, who can (meaningfully) use it, and how it supports different classes of hosts seeking to professionalize their business.

Uneven Host Professionalization in Berlin

Concluding Reflections

It is important to repeat here that, while Airbnb still forms an important platform for Gaith’s operations, he is not entirely dependent on it. His STR business preceded the platform and will likely manage without it if it would disappear. This is because true professionalized hosting at scale exceeds the purview of any single platform. One could even argue that Airbnb is more dependent on businesses like Gaith’s than vice versa, insofar as its future seems to be tied up to multi-listing property management firms that help their clients to close newly identified rent gaps on their housing assets and thereby increase the rents Airbnb can extract from its platform asset. As we have argued here, this development can be understood as resulting in the commercial gentrification of Airbnb’s platform, whereby the company engineers the conditions under which property managers like Gaith can thrive while less capitalized home-sharing hosts like Irena survive on the platform’s margins. Although not completely displaced or excluded from the platform, she nevertheless is unable to grow her business to a level at which she would be able to compete with full-service STR firms that increasingly dominate Airbnb’s listings.

But why invoke a fraught term like gentrification here and not just stick to an analysis of professionalization? The extant literature on the latter topic has usefully shown that Airbnb’s home-sharing rhetoric does not correspond to the actual practices on its platform. Still, as we have noted, it has not yet properly addressed what dynamics drive professionalization or what Airbnb’s role and interest is in this development. A gentrification lens, in contrast, stimulates a critical investigation into the political economy of STR, which is fundamentally a platform-governed industry. While this lens has recently been used to critique the dominance of big tech companies and their platforms more broadly, under the header of a purported “gentrification of the internet” (Lingel, 2021), we have drawn on rent gap theory to explain how the professionalization of hosting and the closing of (platform-scale) rent gaps results in the commercial gentrification of one platform in particular: Airbnb. Data-intensive professionalization forms an overarching platform logic that Airbnb is strategically developing to grow its platform ecosystem, its revenues, and the value of its platform asset, with consequences for the class composition of its variegated host population and the distribution of opportunities and challenges among them.

While this article has focused on the gentrification of Airbnb’s platform rather than urban gentrification induced by Airbnb, we would like to close with some speculations regarding the connections between the two. An apt starting point would be to briefly return to Gaith, who had developed an ambiguous feeling toward the company. Although he certainly benefited from its existence, he was also very aware of how Airbnb was catalyzing Berlin’s rapidly rising real estate prices and rents. Over the last decade, he had seen around him how intergenerational wealth transfers and transnational buy-to-let investments had become more salient in the city, where a growing number of rental homes have been sold and transformed into (ostensibly) owner-occupied housing (IBB, 2021). Many of these new homeowners subsequently turn to firms like Gaith’s to help them close rent gaps on the STR market in a way that fully complies with local regulations.

Moreover, we have reason to question the effectiveness of these regulations, as registration numbers were missing from over 90% of Airbnb listings in the city and public enforcement remained highly problematic (Abgeordnetenhaus von Berlin, 2021b). This is perhaps unsurprising, given the lack of data, resources, and skills that cities worldwide face when trying to enforce STR regulations (Nieuwland & van Melik, 2020). Even in a relatively strict regulatory context such as Berlin, Airbnb-led gentrification appears to proceed relatively unimpeded. So what can be done to prevent the professionalization-induced gentrification of Airbnb’s platform from spilling over into the cities that embed its listings? How to break the rent gap-closing chain that profitably bridges digital and physical real estate? While regulations in Berlin were amended in 2021 to improve enforcement, now requiring a registration number for all listings on STR platforms, success is far from ensured. As Senator Katalin Gennburg noted in her response to the changes, they still permitted the “lucrative business of marketing of so-called second homes” as holiday rentals, even if only for part of the year (Abgeordnetenhaus von Berlin, 2021a, p. 10004, translation by authors). To really halt the negative impact of Airbnb-led gentrification on Berlin, more radical measures are needed. Such measures may include a renewed (public) investment in the principles and practices of home-sharing and an attendant ban on corporate STR platforms like Airbnb. But, more fundamentally, they will have to reaffirm housing as a human right and disincentivize or abolish its monetization as a financial asset.