Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Airbnb is Disrupting Small Town America One Bedroom at a Time

Airbnb might disrupt small-town America in the same way Uber is changing life in the big city. Even though most studies of Airbnb concentrate on big cities like New York, its impact in rural areas might be far greater.

A recent sampling of Airbnb listings revealed the service is taking off in small towns at an astounding rate. When I typed the names of a number of small towns I am familiar with into the service’s search feature, I turned up a surprising number of listings in some unexpected places.

Airbnb Listings in Small Town USA

  • Salida, Colorado, (population: 5,409) – 190 rentals.
  • Canon City, Colorado, (population: 16,318) – 36 rentals.
Canon City
Canon City
  • Alamosa, Colorado, (population: 9,562) – five rentals.
  • Buena Vista, Colorado, (population: 2,736) – 214 rentals.
Buena Vista
Buena Vista
  • Farmington, New Mexico, (population: 45,426) – 16 rentals.
  • Lake City, Colorado, (population: 392) – 54 rentals.
  • Lake Havasu City, Arizona, (population: 52,844) – 156 rentals.
  • Christiansburg, Virginia, (population: 21,041) – 300 rentals.
  • Fairplay, Colorado, (population: 1,042) – 300+ rentals.
  • Cripple Creek, Colorado, (population: 1,169) 300+

It must be pointed out that Airbnb’s listings include both the town itself and the surrounding area. Despite that it still points to a major disruption in small town life.

There is the impact on existing businesses particularly motels. Large publically-traded hotel companies like Hyatt (NYSE: H) and Hilton (NYSE: HLT) can survive the competition from Airbnb, but what about the immigrant trying to eke out a living from a roadside motel.

The motel owner might find himself in a situation where his only guests are stranded travelers, prostitutes and the very poor. His or her business might become uneconomical or turn into a modern day flop house. Okay the smarter motel owners will simply go on Airbnb and list their services there, but how are they supposed to compete with carriage houses and homes with washing machines?

A related problem is the trouble Airbnb has integrating with the established economy. Many banks will not lend to Airbnb hosts, forcing them to turn to alternative sources of finance such as Payfully. That makes it hard for local small businesses to cater to Airbnb hosts, even they are the fastest growing business in town.

Airbnb and the Housing Shortage

A greater problem that Airbnb makes far worse is the housing shortage already gripping many rural communities.

Short-term rentals are potentially far more profitable for landlords; many of whom are barely making a living off their properties, than month to month leases. That gives property owners a strong incentive to convert regular rental units to Airbnb listings.


Taking 300 units off the rental market in a city of 21,041 creates a huge problem; particularly if there’s already a shortage of affordable rentals in town to begin with. In a community of 1,000 people it can lead to a crisis.

It also creates a serious problem for low-wage workers (almost everybody in some towns) in many communities. They can longer find an apartment or a small house because they’re all listed on Airbnb.

Will Airbnb Destroy Small Town Economies?

The only places for those people to stay are the homeless shelter, their cars, the trailer park or a tent in the woods. Some Colorado towns such as Telluride are now plagued by transient camps similar to the Hoovervilles of the Great Depression where hundreds of people live in tents or shacks in the woods.

This will undoubtedly lead to pressure to ban Airbnb or severely restrict its use in some areas. Particularly in resort towns which already face serious housing shortages. Small town newspapers; such as Salida’s The Mountain Mail, are already filled with articles blaming short-term rentals for the housing crunch.

Historic Downtown Salida
Historic Downtown Salida

It will also drive up operating costs for businesses and make some of them unviable in many communities. How is Walmart, Kroger or McDonald’s supposed to make a profit when it has to pay workers $30 an hour? Can even upscale restaurants stay in business when they have to pay a dishwasher $30 an hour? What happens to the local tax base if McDonald’s or Walmart shuts down and leaves town because it cannot afford to pay the prevailing wage?

Another related problem is the migration of working and increasingly middle-class families out of some communities. In Colorado, much of the working class from towns like Fairplay is slowly migrating to places like Canon City because they can still afford a house there.

The Cultural Effects of Airbnb on Main Street

How is a community; especially a small town that relies on organizations like volunteer fire departments and part-time school boards, supposed to survive when its population base is hollowed out? The kind of people who stay at Airbnb units, are not the type to join the Kiwanis or serve on the volunteer fire department.

Beyond that there is the cultural divide the new economy is bringing to some smaller towns. Case in point, Salida, Colorado, downtown Salida has become a hipster’s paradise of high-end pizza parlors, boutiques, brew pubs, bicycle shops, loft apartments and ethnic restaurants – a sort of Brooklyn in the Rockies.

All the businesses that cater to the working class (and locals) have been driven out to Highway 50. That area is filled with liquor stores, restaurants advertising $9 steak dinners, used car dealers, pawnshops, fast-food joints, convenience stores, feed stores, dollar stores, liquor stores, auto parts stores, seedy motels and the ubiquitous Walmart.

Salida has become two different towns with a social divide as stark as that in many big cities. Just a few hundred feet from the brew pubs a pedestrian encounters the standard features of rural poverty in Salida; rundown small houses and broken down 20 year old cars. One has to wonder how long that can last and what sort of social tensions it will breed.

Like it or not, Airbnb is changing the face of small town America. Those changes will be profound and disruptive and they are poorly understood.