When the coronavirus pandemic shut down bars and concert halls in March, a new phenomenon was born: the vacation-rental nightclub.

Professional party promoters started scanning Airbnb, Vrbo and other short-term rental sites for mansions and luxury condos for hire. Tickets were going for $90 on Eventbrite and TikTok for soirees with bottle service and DJs.

“People were looking to escape from their own homes and came into our tiny neighborhood to party all day, every day,” says Kristen Robinson Doe, a resident of a quiet suburban Dallas neighborhood where a party pad was being rented out for more than $1,000 a night. The five-bedroom home, with a resort-style pool, hot tub, outdoor kitchen and mini-golf putting green, was booked back-to-back through the summer. Doe watched in disbelief as strangers streamed through the gates every weekend and danced until dawn, unmasked, inebriated — and in clear violation of social distancing protocols.

Host Compliance, which gathers data on short-term rental properties in more than 100 cities in the U.S., found a 250% spike in complaints from June to September, compared with the same period last year. Party promoters quickly figured out “they can rent short-term rentals, create one-night nightclubs and make a lot of money from it,” says Ulrik Binzer, chief executive officer of Host Compliance, which helps municipalities navigate home-sharing rules. Selling tickets for house parties on Eventbrite and Instagram is “something we’ve never seen before,” says Binzer, who has worked in the industry for five years.

Airbnb and Expedia Group Inc.’s Vrbo have tried to crack down. Despite strict enforcement measures, the companies are struggling to curtail the events. If a listing is banned from Airbnb it can often still be available on Vrbo and other sites, and vice versa. If a host — or guest — is blacklisted, he or she may rent another property under another person’s name. Some professional party organizers even tell attendees to meet at a public location and ferry them to private homes so the address is never published online. Within half an hour, an empty house on a residential street can turn into a full-blown discotheque.

The spike in rental revelries comes at a bad time for Airbnb in particular. The San Francisco-based startup is planning to go public in December and hopes to raise as much as $3 billion, according to people familiar with its plans. Airbnb had originally intended to list earlier this year but the project was jeopardized after the coronavirus shut down global travel and reservations plummeted. Recently the company has seen bookings return as people seek refuge in rural areas outside of Covid hot spots and settle down for longer stays, taking advantage of flexible work options. The rebound in Airbnb’s fortunes helped get the IPO back on track. But headlines involving police, forbidden parties and a deadly disease aren’t the image the company wanted to project.

“Reputation issues can spook people, from investors to the banks underwriting the deal,” says Maurice Blanco, partner and co-head of Davis Polk & Wardwell LLP's global Capital Markets Group. “Investment banks are concerned about being associated with a company that raises red flags.”

Party houses were around before Covid-19. They drew national attention last year after a fatal shooting on Halloween at an Airbnb in Orinda, California, left five people dead. That prompted Airbnb to ban party houses and boost efforts to combat abusive host and guest behavior. “We must do better, and we will. This is unacceptable,” Chief Executive Officer and co-founder Brian Chesky tweeted at the time.

Airbnb rolled out new safety policies and risk-detection technology to hunt down nuisance listings. It removed rule violators from the site and launched a “dedicated party house” rapid response team and a complaint hotline for neighbors. Vrbo also has a “no tolerance” policy and a group tasked with ferreting out the guests who throw unauthorized parties and the homeowners who knowingly allow them. “There have been rare occasions of someone abusing the platform and we remain committed to helping our partners protect their properties with education on how to prevent bad actors from renting,” a spokesman for Vrbo said.

But a summer of coronavirus restrictions in cities has proven a challenge for enforcement.

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