RIO DE JANEIRO—Home-rental firm Airbnb Inc. is betting that its sponsorship of the Rio Olympics will cement its status as a mainstream lodging option in its fourth-largest market.
But with less than three months to go before the Olympics, the firm’s first such foray into global sports is in danger of being overshadowed by a deep economic contraction, political turmoil and a health crisis currently rocking Brazil.
Airbnb says that instead of damaging its efforts here, Brazil’s recession is helping the company in a city with huge accommodation problems.
“The economic crisis is actually one of the key drivers for our supply growth across Brazil,” said Leo Tristão, the country manager for San Francisco-based Airbnb.
Brazil’s iconic coastal city is the company’s largest market by listings after Paris, New York and London. The weak economy means that more Brazilians are traveling domestically and using Airbnb, Mr. Tristão said. Airbnb now has 25,000 listings in Rio, up from 20,000 a year ago and just 900 in 2012.
That growth is good news for local Olympics organizers facing a lodging crunch ahead of the Games.
The chief executive of Rio’s local organizing committee, Sidney Levy, said during the signing of the sponsorship deal last year that Airbnb would be crucial in helping the city overcome the “major problem” of accommodation.
Decades of underinvestment in its hospitality sector left Rio with a stable of older hotels known for small, musty rooms that still command expensive rates.
The city has made an effort to upgrade the quality and quantity of rooms, more than doubling its capacity since it won the bid to host the Games in 2009, to about 60,000 rooms. Roughly half of those rooms are booked in huge blocks by Olympic officials.
The 2014 World Cup also gave Airbnb a strong boost in Rio. About 20% of all World Cup tourists stayed in Airbnb properties, the company said, and more than 100,000 people stayed in Airbnb listings during the soccer tournament.
This year, several high-profile hotel projects that were set to be delivered before August were delayed, including two Holiday Inns in Rio’s renovated port area that now won’t be delivered until 2017. A new Trump Hotel near the city’s Olympic Park was also delayed, but the company says its contractor has assured them it will be ready in time for the Games.
Rio authorities and company executives are also trying to stave off a series of concurrent crises that could potentially scare off visitors.
A major corruption scandal involving the state-owned oil company and impeachment proceedings against President Dilma Rousseff have been an embarrassing distraction from what should be a celebratory lead-up to the Games. Ms. Rousseff stepped down from her post on May 12 after the country’s Senate voted that she should face an impeachment trial. Vice President Michel Temer assumed the presidency and likely will oversee the opening ceremony on Aug. 5.
Domestic ticket sales are sluggish as Brazil’s economy is mired in its worst recession in decades. There are also significant transportation hurdles. A vital subway extension connecting beachside areas to the Olympic Park neighborhood is still under construction. In April, a high-profile, elevated bike path collapsed just a few months after being built, killing two people. While Rio’s murder rate is much lower than other Brazilian cities, street crime is on the rise.
Epidemics of mosquito-borne diseases, including the Zika virus, have swept across the nation, straining government resources and creating scary headlines abroad. While the focal points for Zika have been mostly in Brazil’s northeast, the number of confirmed Zika cases has been on the rise in Rio in recent months.
When the World Health Organization issued Zika warnings, “we did receive inquiries about it, but we haven’t seen a drop in terms of bookings, or an increase in cancellations,” Mr. Tristão said.
To handle security issues in Rio during the Games, Airbnb said it will have a temporary office in Rio and a special task force from the company’s threat and safety team to deal with any problems.
Brazil’s hotel industry association is still predicting nearly 100% occupancy during the Games. Aside from hotels, there are a number of other nontraditional lodging options in Rio, including Brazilian companies like Hotel Urbano and AlugueTemporada, both of which offer similar services to Airbnb but have fewer listings.
“I think word has gotten out. People are seeing [Airbnb] as a viable way to make some additional money,” said Stephen Boyd, a hotel analyst with Fitch Ratings. “To pony up and be an official sponsor suggests that there is some competition out there.”
The official partner tag allows Airbnb “to be more on the protagonist side on large events,” Mr. Tristão said. Airbnb has declined to disclose the cost of its sponsorship deal with the Rio organizing committee.
Aside from the numerous crises in Brazil scaring off visitors, Airbnb likely will also have to deal with locals overcharging for rooms. That problem cropped up during the Super Bowl in California this year.
“Around the Super Bowl there was some disappointment,” Mr. Boyd said. “Some of the people on Airbnb thought they were going to be able to command some unbelievable premiums for their places. A lot of places went unrented.”
Some residents of Rio are indeed looking for their own windfall during the Olympic Games. Fernanda Sousa, 32 years old, an IT consultant, listed a room in her 750-square-foot, two-bedroom apartment near Copacabana beach on Airbnb about six weeks ago, with an eye on Olympics guests. After listing the room for $ 100 but not getting any bites, she reduced the price to $ 80.
“I have some friends that rent on Airbnb that showed me how much money they made last year, and I said, ‘Wow, that’s cool,’ ” said Ms. Sousa. Her worry now is what happens after the Games. “There are a lot of requests for the Olympics. That’s all I get. I haven’t gotten any other requests for other months.”
Write to Will Connors at [email protected]