Parisian Airbnb hosts are raking it in this summer as hotels suffer

• Short-term rental listings in Paris have surged 44% since last summer.
• That's because of the Olympic Games, which Paris is hosting between July 26 and August 11.

Millions of visitors will descend on Paris over the next two weeks for the Olympic Games. Many will stay in the French capital's tens of thousands of hotel rooms, but many others are opting for short-term rentals, including Airbnbs.

That's in part because short-term rental listings during the Games have soared. There are 44% more short-term rentals listed in Paris than there were last summer, according to AirDNA, a collector of industry data. The French capital had the fastest-growing short-term rental market in the EU over the last year, according to Lighthouse, a firm that analyzes the hotel market.

This isn't by accident. Airbnb, the dominant rental platform and an official sponsor of the Olympics, has made a big push to get Parisians to rent their homes during the Games, which go from July 26 to August 11. In a recent ad campaign, Airbnb urged visitors to avoid hotels on the "touristy side of Paris" and opt for short-term rentals "on the Paris-y side of Paris." The company has also plastered ads around the city promoting itself as a way for entrepreneurs and others to make extra income. The company's efforts appear to be paying off.

The number of Airbnb listings in the Paris region during the games spiked by 40% in the first quarter of this year, according to data Airbnb shared with Business Insider. The company says the average host in the Paris region will make about €2,000 in revenue during the Olympics.

"This will be the largest hosting event on the Airbnb platform ever, and the demand has only increased," Airbnb's Chief Business Officer, Dave Stephenson, said in a statement to Business Insider. "Just last week we saw the highest amount of searches for future stays in France to date."

But Paris is one of the most expensive cities in the world, and it's facing a serious housing shortage and affordability crisis. When Parisians turn their homes into short-term rentals, that can further restrict the supply of housing and inflate rents and home prices. For this reason, Paris — like cities and tourist destinations around the world — has attempted to regulate short-term renting.

Airbnb argues it's playing a crucial role in providing accommodation to Olympics-goers, who far outnumber available hotel rooms. Now, there's such a glut of short-term rental listings that occupancy rates for short-term rentals both in Paris and its surroundings are far below what they were at the same time last summer, according to AirDNA. In the city, the occupancy rate during the Games, measured on July 15, was 46% — down from 59% during the same time period last year.

But, unlike hotels, average booking rates are rising. As of July 15th, the average booked rate was $337 — 12% higher than on July 1. And the average available rate on July 15 was $393 — 39% higher than on July 1, AirDNA said.

That surge in the supply of short-term rentals has brought down accommodation costs for everyone, said Blake Reiter, director of research at Lighthouse.

"The rate discounting that's happened, the occupancy levels, they're definitely being suppressed and compressed by the short-term rental market, without question," Reiter told Business Insider.

While hotel room prices in the City of Light are much higher than they were last year at the same time, they're not nearly as pricey as they would be without so much short-term rental availability, he argued.

Average hotel rates in Paris for the weeks of the Olympics peaked about 335 days before the Games, according to Lighthouse data. In just the past three months, prices for hotel stays during the Games have fallen about 30% as of July 16. That's a relatively bleak position for hoteliers to be in. Weeks before an event like the Olympics, they hope to be jacking prices up as room availability falls, Reiter said.

"Hoteliers are being forced to discount rate in order to actually get their hotels full," Reiter said. "which is interesting considering the breadth and magnitude and grandeur of an event like the Olympics."

Paris is facing a housing crisis

The availability of short-term rentals has made attending the Olympics more affordable for visitors and is helping some Parisians make extra cash. But the surge in new short-term rentals could further restrict the city's housing supply. The future of short-term renting in France is unclear as lawmakers impose new restrictions on Airbnb and its competitor platforms in an effort to boost the housing supply and bring down prices.

Anne Hidalgo, the mayor of Paris since 2014, has made boosting housing affordability a top priority. Her administration has spent billions of Euros on the construction of new affordable housing, with ambitious goals of making 40% of the city's housing affordable for people with lower incomes by 2035.

As part of this effort, Hidalgo has overseen new restrictions on short-term renting. She called Airbnb a "powerful" opponent in the fight to keep housing costs down in an interview with Time in May.

"It's a daily struggle to ensure that this is not a city of the very, very rich," she added.

In recent years, France passed a law allowing homeowners to rent only their primary residences on platforms like Airbnb for a maximum of 120 days a year. Paris has enforced the law, suing Airbnb for allowing illegal rentals on its platform and fining thousands for violating the rules. And Paris is considering joining several other French cities in banning the public placement of lockboxes hosts use to store their keys for guests.

National lawmakers are also poised to raise taxes on income from short-term rentals as a way to encourage homeowners to rent out their properties long-term.

Airbnb, which dominates the short-term rental market in France, has leveraged the Olympics to expand its roster of hosts and guests in France. In 2019, the company announced a $500 million sponsorship of all of the Olympic Games through 2028 — a move Hidalgo opposed. It has also urged athletes to sell experiences on Airbnb, including opportunities to go on runs with them or workshops on how to quell nervousness while competing.

The effort might have lasting effects on the tourist accommodation market. Because so much of the recent growth in the short-term rental market was a function of the Olympics, it's unclear whether Airbnb will maintain its expanded presence in the city going forward. Reiter said he wouldn't be surprised to see a contraction in the short-term rental market, but it's unlikely the city will go back to last year's numbers.

"I don't think it's going to shrink back to what it was last year," Reiter said.