What happened
There will be no party getting started with Airbnb (NASDAQ: ABNB). Shares of the short-term vacation rental outfit tumbled 11.7% this week compared to where they closed last Friday, according to data from S&P Global Market Intelligence, after it announced parties at home rentals could lead to a lifetime ban.
Airbnb implemented the ban in August 2020 in a bid to help stop the spread of COVID, but it has now made the ban permanent, while also removing from its listings the filters for "event friendly" homes or locations that said, "party and events allowed."
Image source: Getty Images.
So what
One of the biggest issues Airbnb has had to deal with over the years is homeowners returning home to find their houses had been turned into Project X (that's a movie where three teens hold a house party that goes wildly out of control).
Airbnb, however, said its party house ban has been effective. It noted there had been a 44% drop in complaints, and hosts, neighbors, and elected officials have praised the move. As a result, the travel and tourism stock was making the ban permanent.
No "open invite" events will be allowed, and hosts will be prohibited from listing their properties as a "party house" property.
Yet Airbnb is also lifting the cap on the number of people permitted to stay at a location. Up til now it had been limited to 16 people, but now it will allow for an unlimited number based on the accommodation.
The property rental company said there are vineyards in the U.S., castles in Europe, and Caribbean beachfront villas that can all easily and responsibly accommodate more than 16 people at a time, so it has decided to remove the cap.
Now what
While that sounds like a positive development for Airbnb, the market seems concerned that limiting rentals might not be the best timing while the economy is dicey and there might be reduced demand as a recession looms.
An analyst also cut his rating on Airbnb precisely because of those macroeconomic headwinds.
While there could be a short-term hit, it seems like a long-term benefit as more people will willingly be hosts if the chance for parties is reduced, while Airbnb will be more welcome in communities if neighborhoods won't be subject to persistent house parties.
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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
