Airbnb used to be about crashing on a stranger's couch for cheap. Now Wall Street wants in.

• Airbnb started out with all mom-and-pop hosts, but now big firms are eyeing it as a money-maker.
• Private-equity giant TPG recently started to buy up Florida homes to offer as short-term rentals.

Brian Chesky famously founded Airbnb in 2007 after he and his friends rented out a mattress in their San Francisco loft "to make a few bucks." It was during a popular conference that had left all the hotels jam-packed.

In the 16 years since, individuals have gone from putting travelers in spartan guest rooms to purchasing whole, lavishly decorated homes for the sole purpose of renting them out on Airbnb. Then came professional hosts — or megahosts — who own or manage hundreds of listings.

Wall Street wants in on the short-term rental action, too.

Private-equity firm TPG recently decided to try its hand at the short-term rental market.

It started buying up houses in Florida, and renting them out on sites like Airbnb for hundreds of dollars a night, the Wall Street Journal recently reported. TPG has since paused "most of its buying" due to mortgage rates and a limited supply, the Journal said.

TPG, which has roughly $136 billion in assets under management as of Sept. 30, joins other big names hoping to cash in on travelers' affinity for accommodations that are more spacious and more private than a hotel. Take New York-based investment firm Saluda Grade, which planned to buy $500 million in American homes to rent out to vacationers and business travelers in 2022, and Chile's WEG Capital, which signed a deal to buy $80 million in US properties that year, too, the Journal previously reported.

It makes sense: Short-term rentals can be more lucrative than annual leases because you can more easily adjust prices to reflect seasonal demand or counter inflation.

Not least, the demand from travelers is still there. This past July broke the record for the most short-term-rental stays in one month, with 35.4 million nights stayed, beating the previous high recorded in July 2022 by 9.4%, according to AirDNA, which tracks properties listed on the vacation-rental sites Airbnb and Vrbo.

The rise of 'professional' short-term rental hosts

It may have started as a venture to democratize the hospitality business, but Airbnb has since become "professionalized," Insider reported in July 2022.

Bigger players increasingly hold a more significant share of units listed on Airbnb. AirDNA found that only 38% of Airbnb's active listings were owned by someone with just one listing in total.

Airbnb has said that its share of mom-and-pop operators is much higher.

"The majority of Airbnb hosts share only one listing," according to a spokesperson. "We want Airbnb to be a place where all hosts succeed."

Investment giant Blackstone, which had over $1 trillion in assets under management as of Sept. 30, had considered increasing its exposure to "alternative hospitality lodging," travel industry website Skift reported, such as though short-term rentals and vacation rentals.

Other private equity firms Davidson Kempner Capital Management, in assets under management, and Harrison Street, with $14 billion in assets under management, had explored similar options, Skift said.

The corporatization of hosts is a mixed bag for travelers

Vacationers might welcome cheaper prices from these megahosts.

Large companies can outsource the labor of managing properties to outside businesses, which enables them to both buy more units and to price them at a less expensive rate than mom-and-pop owners, said Jelke Bosma, a Ph.D. candidate in urbanism at the University of Amsterdam who wrote a research paper about the "professionalization" of Airbnb.

But the shift in operators from mom-and-pop hosts renting their spare bedrooms to major companies renting hundreds of units out has changed the guest experience, too, according to NerdWallet.

At the end of their stays, guests were more likely to leave a lower score for a company than for an individual, AirDNA Chief Economist Jamie Lane told NerdWallet in August.

Short-term rentals can be a volatile investment

Relying on Airbnb, though, can be risky for both mom-and-pop hosts and big-money investors.

There is no guaranteed number of nights booked, no consistent source of revenue. Over the last year and a half, hosts in areas flooded with new competitors who thought setting up an Airbnb would be easy money have experienced what some call an Airbnbust.

Plus, purchasing properties right now isn't cheap, thanks to near-record home prices and high interest rates that make borrowing money expensive. Institutions would have to charge top-dollar per night to recoup their initial investments on homes.

Perhaps that's why TPG, which over the past two years bought about a dozen single-family homes in Pompano Beach, Fort Lauderdale, and other spots popular with travelers, said it had already paused buying additional homes.

"As a result of changing market dynamics and the emergence of more compelling opportunities," a spokesperson said in a statement, "we are concentrating our time and capital on other areas of the real-estate sector."