Welcome to Hochatown, the town created by Airbnb

The tiny town of Hochatown, on the shores of Broken Bow Lake in the southeast corner of Oklahoma, was created exactly one year ago. And it’s almost entirely thanks to Airbnb.

“Airbnb built this town 100 per cent,” said Dian Jordan, the mayor of Hochatown. Last November, Jordan and 128 fellow residents successfully fought to incorporate a narrow 11-square-mile strip of bumpy dirt roads, modest log cabins and enormous modern mansions that sits within the territory of the Choctaw Nation of Oklahoma.

During the week, Hochatown has a population of just 219 people, but on weekends, as many as 50,000 visitors, mostly from Dallas, a three-hour drive away, flock there to kayak, fly-fish and hike among the waterfalls, rapids and thick forests of pine and pawpaw trees.

Before the pandemic, Hochatown had roughly 400 cabins for rent on Airbnb. There are now more than 2,400 – a staggering 413 per cent increase in five years, according to AirDNA, a short-term rental business site that tracks Airbnb data. In September, the town collected its first month’s sales tax, totalling US$456,000, and hopes to eventually reap as much as US$1 million in tax revenue a month.

“For a town of a few hundred people, this number is astronomical,” said David Francis, the business registration manager at the Oklahoma Tax Commission. “The town is basically one giant Airbnb.”

At the height of the pandemic, the number of Airbnb listings in small towns and rural areas exploded, as city dwellers fled to the country. At the same time, urban areas have cracked down on short term rentals, among them New York City, which rolled out strict new rules in September about who can – and cannot – rent out their homes to short-term guests. Since its implementation, the company’s short-term listings in New York have fallen by 77 per cent, according to AirDNA.

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Some predicted that these regulatory changes would spell Airbnb’s death knell, and there were reports that its revenue was dropping precipitously as the waning pandemic changed travel patterns. But on Nov 1, the company posted better-than-expected third-quarter results. According to the company, it added nearly 1 million active listings this year, and in the first half of 2023, Airbnb guests stayed in more than 94,000 cities and towns – a record, the company said.

“The dispersal of tourism, often to places where there are no hotels, has major economic benefits,” said Jay Carney, the global head of policy and communications at Airbnb. “Areas that might be seeing population declines or industries moving out, can now generate tourism dollars for the first time.”

But the company’s report also contained a data point that is reverberating through Airbnb boom towns like Hochatown: For the first time since the pandemic recovery, Airbnb’s supply of rental homes is outpacing demand, with supply increasing 19 per cent year over year, compared with just 14 per cent for demand. That gap can spell disaster for hosts, particularly those who bought houses at the peak of the market with the idea of renting them out. In extreme cases, they are being forced to sell at a loss.

“Five percentage points between supply and demand is very significant,” said Bjorn Hanson, an adjunct professor at New York University’s Jonathan M Tisch Center of Hospitality, and can cause hosts to drop their prices, in what can quickly become a race to the bottom.

What might be called the Airbnb effect has transformed the landscapes – and the economies – of countless small towns across the United States. In Northport, Alabama, Airbnb listings jumped 47 per cent in the past 12 months. In Eagle Pass, in east Texas, Airbnb listings grew more than 168 per cent year over year.

Perhaps no place has been transformed more than Hochatown. US Highway 259, a two-lane road, is the only way into and out of town. On weekends, it is a traffic jam of long-haul trucks, tribal buses and tourist vehicles, including streams of RVs. Hochatown does not have a single police officer or professional firefighter. There is no sewage system, no garbage collection, not even sufficient water to handle the proliferation of people and new homes.

As its popularity grew, Hochatown’s push to become an official town accelerated. Because it was an unincorporated area, decisions about its resources for services and utilities were made by the McCurtain County. For instance, as Airbnbs spread, and one-room cabins transformed into US$1 million rental homes, Hochatown’s roads remained unpaved and riddled with potholes, many impassable without four-wheel drive; homeowners often paid to pave their own roads.

Water was another pressing problem. Most Airbnbs in the area boast hot tubs, which use an inordinate amount of water. “If you don’t have a hot tub, you can’t rent,” said Leo Winegar, a cabin owner in Hochatown. “But if a pipe breaks, because of the lack of redundancy and infrastructure, half the town has no water for days.”

Some assistance has come from the Choctaw Nation, the country’s third-largest Native American tribe. It is constructing Choctaw Landing, a US$238 million resort and casino in Hochatown, which is expected to bring 443,000 visitors annually when it opens this spring. To facilitate this, the tribe is widening portions of US Highway 259 and upgrading some of the area’s rural water infrastructure.

In 2015, Jordan, a volunteer mayor who is as rugged and can-do as her town, helped lead the effort to incorporate. Like almost everyone in Hochatown, the 61-year-old, who retires next month as a senior lecturer at the University of Texas Permian Basin, is also a cabin owner, with three rental properties.

The past few years were a frenzy of buying and building. “The Covid thing was both a blessing and a curse,” Todd McDaniel, a builder who also manages 60 rental properties, said as he drove to the store for sardines to lure a raccoon that had lodged itself in the roof of a cabin. “When it first hit, we were refunding tens of thousands of dollars to guests. Then somebody flipped the switch, and we were running at 95 per cent occupancy.”

Land prices doubled, and cabins, many built speedily, without adhering to building codes, were repeatedly flipped. One home, called “California Dreaming,” was sold in 2020 for US$590,000, then again in 2021, for US$1.1 million.

With the influx of people and profits, chaos ensued. “It’s the Wild West,” said Jason Ward, a cabin owner in Hochatown. “When there is that much money on the line, things get crazy.”

In the spring, the gold rush began to slow. Occupancy rates plummeted to 55 per cent in March and dipped to a low of 40 per cent in August. “For Sale” signs were posted, and listings that once sold in hours took months. The “California Dreaming” cabin, which had doubled in value in a single year, was re-listed in 2022 for US$1.299 million. After repeated price cuts, it is now asking just US$899,000.

Winegar was caught up in the slowdown. He bought land at the end of 2021, when the bubble was peaking, but by the time he finished construction and was ready to rent his cabin, the bubble had burst. What he expected to be a sure moneymaker was an instant loser.

“We scrimped and saved to buy a plot of land and get a construction loan,” said Winegar, who lives in Dallas with his wife and three children. He built the home with a dream of recreating for his family the memories he had of going to his uncle’s cabin in Idaho as a boy. “At the time, the numbers were so amazing, it seemed like there was no way I could lose.”

This summer, Winegar was laid off from a job in tech. He’s now working nights at a Dallas Costco and starting a handyman business in Hochatown, despite a lack of experience.

One recent morning, Winegar was exhausted after driving from his night shift to Hochatown. His only food for the next two days was carrots and cans of tuna fish, and he was busy watching YouTube to figure out how to flush a tankless water heater.

Jordan is friends with Winegar and is sympathetic to his misfortune. But as mayor, she welcomes the real estate dip. “It is a blessing,” she said, “a chance to catch our breath and catch up.” NYTimes