Inflation isn’t necessarily bad news for all companies. When hosting platform Airbnb published its latest results on 15 February, chief executive Brian Chesky said rising prices and the pressure on household finances might drive more individuals to list their homes on the site.

This begs the question of where these hard-pressed homeowners might stay while they rent out their properties and opens something of an ethical can of worms around Airbnb’s operating model which could add to the regulatory concerns facing the company.

Airbnb has what many people look for in a business. It can grow rapidly without requiring lots of investment on its part. It doesn’t own any properties itself – it just markets them on behalf of the property owners or hosts using the platform.

It does have marketing costs and clearly needs to ensure its web platform is up to scratch but there is limited meaningful competition to the niche it has carved out since being founded in 2008.

In 2019, before Covid hit, statistics from consumer data consultancy Second Measure showed Airbnb accounted for 20% of the entire US lodging market.

This dominant position creates a network effect, another attribute widely prized by investors. The more properties on the platform, the more it is used by potential guests and the greater the incentive to be on the platform in the first place.

The company was hit hard by the pandemic with its ‘professional hosts’ – who have perhaps themselves rented out several properties to list on Airbnb – badly affected when stays were cancelled, and the income stopped coming in.

There was fury at Airbnb on the part of hosts when it allowed guests to cancel bookings with a check-in date between 31 March and 31 May 2020 without any penalty.

Nonetheless Airbnb enjoyed a strong start to life as a public company after joining Nasdaq in December 2020 – a well-timed market listing which came just after the development of viable coronavirus vaccines which allowed investors to look forward to a recovery in travel.

The shares went from an issue price of $68 to $144 on its first day of trading but the momentum has stalled, and it is now only a little higher at $174.90.

Now travel bookings are recovering Airbnb faces the challenge of getting enough decent options on the platform to meet demand, hence Chesky’s comments about a stream of individual households putting their pads on the platform.

Chesky is an enthusiastic user of the platform he helped create, living permanently in a rotation of Airbnb properties. Longer-term lets, particularly for people looking for interesting places to work from home, are increasingly a key driver for Airbnb.

However, these longer stays are exacerbating the impact Airbnb has on local property markets. This may still be at the margin – a 2017 study by US academics found that a 1% increase in Airbnb listings led to a 0.018% increase in rents and a 0.026% increase in house prices – but perception also plays a part and could lead to stricter rules being imposed on the business.

The EU and several US cities are among those ramping up the pressure and if Airbnb is perceived as a place for rich people to stay and as callously driving up local property and rental prices it could see that pressure become more unrelenting.

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