Worries Grow Over High Costs of Airbnb Vacation Rental

Real Estate stakeholders and housing analysts have expressed concerns over the spike in Airbnb-style apartments in Nigeria and the continuing rise in short-term rental apartments, which they said was influenced by factors ranging from high operational cost, dollar exchange rate, high cost of diesel, high cost of maintenance, currency depreciation, which has squeezed profit margins and eroded profitability.

Despite high returns, the industry faces challenges, including fluctuating demand, high operational costs, and the need for high-end professional maintenance to ensure guest satisfaction on vacation rentals.

Checks from LEADERSHIP reveal that vacation rent in short-term rental apartments has spiked in notable market nodes such as Victoria Island, Ikoyi, and Lekki, indicating that the sector is on an inflationary trajectory, with travellers and investors paying as much as $1,030 for a three- to four-day visit.

Property analysts explained that the hike in Airbnb-style flats is heavily influenced by inflation and high operational costs, which have forced developers and property owners to increase booking fees by over 50 per cent to ensure profitability.

No doubt, the short-term rental sector has witnessed a growing wave of expatriates, multinationals, diaspora investors, and an increased rate of tourism, which is driving demand for short-term homes and Airbnb apartments to become a fast-growing destination for property investment, but the sector is stifled by high living costs and inflation.

Nigeria’s booming short-term rental market, driven by platforms like Airbnb, is facing mounting pressure as rising costs and economic challenges begin to erode its once-lucrative appeal.

In cities such as Lagos, Port harcourt and Abuja, short-term rentals and serviced apartments had, until recently, become a preferred investment strategy. Property owners capitalised on high nightly rates, often earning more from short stays than from traditional annual leases.

However, surging inflation, currency depreciation, and escalating operational costs are now forcing a major shift in the sector.

Industry operators say the cost of running serviced apartments has increased sharply, forcing many operators to rethink business strategies.

They equally stressed that the expenses tied to diesel for generators, electricity, maintenance, and staffing have surged, squeezing profit margins.

Speaking to LEADERSHIP, Lagos-based property manager, Tunde Afolabi said “Running a serviced apartment today is almost like running a hotel, noting that “Energy costs alone can wipe out profits.”

To offset these expenses, many operators have doubled their prices. Mid-range apartments that previously charged between N35,000 and N50,000 per night now go for N150,000 to N250,000. While this helps hosts stay afloat, it is significantly altering demand.

Managing director of Financial Derivative Company, Bismarck Rewane said, “We expect rents to soar further even as security and traffic considerations are also pushing demand and rents higher. “We expect higher rents as interest rates on real estate loans climb.”

A growing number of local users are being priced out of the market. Middle-class Nigerians who once relied on short-term rentals for business trips or temporary stays are increasingly turning to hotels as a more affordable alternative.

“I used to book short-term apartments regularly, but now hotels are cheaper,” said Lagos-based marketing consultant Adaeze Nwankwo.

This shift is forcing operators to rely more on expatriates and high-income travellers, narrowing their customer base and increasing their vulnerability to fluctuations in international travel.

Beyond pricing, the expansion of short-term rentals is also tightening the supply of long-term housing. Analysts warn that as more landlords convert residential properties into short-stay units, fewer homes are available for permanent residents.

“This is one of the unintended consequences of the boom,” said real estate analyst Musa Bello. “Landlords are prioritising higher returns, which is pushing up rents across the board.”

The situation is creating a feedback loop: rising rents push more people out of the housing market, while investors continue to favour short-term gains, further reducing supply.

Despite the perception of high returns, experts say the profitability of short-term rentals is no longer guaranteed. High vacancy rates, maintenance costs, and platform fees are eroding income stability.

“Many investors underestimated the risks,” said real estate consultant Blessing Adeyemi. “Revenue looks attractive on paper, but the costs and uncertainties are significant.”

The impact is also being felt in Nigeria’s tourism sector. Some international travelers now consider the country relatively expensive compared to destinations offering better infrastructure and value.

“I’ve stayed in similar apartments in East Africa for less, with better service,” said British- Nigerian traveler James Ogunleye.

Adding to the uncertainty is the absence of clear regulations governing short-term rentals in Nigeria. Unlike other global cities that have introduced restrictions, the market remains largely unregulated, raising concerns about housing inequality and potential future policy crackdowns.

Urban planner Halima Sadiq noted that “without proper oversight, the market risks becoming unsustainable.”

In response, some operators are adapting by exploring hybrid rental models or investing in alternative energy solutions such as solar power to cut costs. Meanwhile, customers are becoming more price-sensitive, demanding better value for money.

As economic pressures persist, Nigeria’s short-term rental sector appears to be at a turning point. What was once viewed as a guaranteed high-yield investment is now a more complex and uncertain venture, shaped by broader economic realities.

Stakeholders agree that the future of the market will depend on how effectively it adapts to rising costs, shifting demand, and the eventual introduction of regulatory frameworks.