Airbnb's (ABNB -4.74%) popular booking platform has been hugely successful in recent years. The company's growth has been strong even as consumers have struggled with inflation. This is a good business to invest in if you're bullish on the economy and the overall demand for travel.

But there is one big risk that investors need to be aware of now: bans and restrictions on short-term rentals. Not everyone is thrilled with Airbnb, particularly cities where rental prices are soaring and tourists have taken over. 

NYC's crackdown is leading to a drop in listings

This month, New York City took aim at its housing shortage problems, with stricter regulations on short-term rentals coming into effect. Now, it is requiring hosts to register with the city before providing short-term accommodations. And for bookings that are less than 30 days in duration, the host needs to be present. There is also a maximum of two guests allowed to stay at once.

In June, Airbnb said it would be taking the city to court over these policies as it says that they "effectively ban short-term rentals in New York City." While it may be difficult to enforce some of these rules, such as whether or not the host is present during a stay, it already appears to be having a crushing effect on Airbnb's listings in the city. According to data from travel website Skift, there were 77% fewer Airbnb listings there as of Sept. 10 compared to June 4.

Why more cities could follow suit

The rising cost of rent has been a problem in the U.S. and in cities around the world. Limiting short-term rentals could potentially free up inventory that may be accessible to renters, and thus help bring down some of these high rent prices. In some cases, cities have been struggling with an excess of tourists (or "overtourism"), and banning or putting restrictions on short-term rentals could help address those issues.

Florence, Italy, has recently announced that it wants to ban short-term rentals, as it has been dealing with overtourism in its city. Other places, including Austria and Paris, are also limiting the number of days someone can rent a property out in a year. Regardless of the reason, these are concerning developments that Airbnb investors can't afford to ignore.

Airbnb's success could be its own undoing

The past few years have been incredible for Airbnb as the travel company has been busy with bookings. Even though revenue growth appears to be slowing, it's still close to 20%, and demonstrating strong resiliency amid inflation.

ABNB Revenue (Quarterly YoY Growth) Chart

ABNB Revenue (Quarterly YoY Growth) data by YCharts

For the current quarter, which ends on Sept. 30, the company still projects between 14% and 18% year-over-year revenue growth. The big question, however, is what the growth rate will look like after taking into account the slowdown in New York City listings.

Should you buy Airbnb stock?

You wouldn't know from the stock's performance this year that Airbnb is facing any concerning headwinds. Up 67% already in 2023, it has been one of best travel stocks to own this year. And at 42 times its trailing earnings, it does come priced at a hefty premium. But given the growth it has been achieving, and with the travel industry still looking strong, it wouldn't be surprising to see the growth stock climb even higher.

Right now, it's too early to tell what impact restrictions on short-term rentals will have on Airbnb's business. The New York City crackdown will be a big test for the business. If you haven't already bought Airbnb stock, you may want to wait until a couple of quarterly reports to see what the fallout looks like and how much of a dent the restrictions put in Airbnb's business before investing in the stock. And if you're a current investor, there's no reason for panic just yet -- but you should also watch for any updated guidance on its next earnings report.