Ever since it was founded, Airbnb has rocked the hospitality and hotel industry to its core. And while there has always been speculation about the negative impacts of Airbnb on local hotels, a new study provides tangible evidence to support it.
Florida State University Research on Airbnb vs the Hotel Industry
Researchers at Florida State University set out to explore Airbnb’s market share and its impact on hotel revenues. The study notes that the popularity of the home-sharing industry has been rapidly growing across the globe. Airbnb listings have grown by 100% every year. Currently, the home-sharing platform has 6 million listings in 81,000 cities around the world. Airbnb’s market share is taking over that of the hotel industry, and the study found that this has resulted in decreased revenue for hotels as well as a decrease in room prices and occupancy rates.
According to Tarik Dogru, assistant professor at FSU’s Dedman School of Hospitality, Airbnb’s growth has quickly led it to become a disruptive innovation in the industry.
“This is the first study confirming the negative impact on those three key metrics in the hotel industry. Increased competition from Airbnb is mainly affecting hotel prices and revenues, but occupancy rates are also down slightly.”
Dogru’s study looked at the effects of Airbnb in 10 major cities in the US between 2008 and 2017 and quantified the negative impact of Airbnb: for every 1% increase in the supply of Airbnb rentals in a location, hotel revenues were lowered by 0.02-0.04%. Looking at New York City, specifically, this amounted in an estimated loss of around $91-$365 million in 2016. The sectors that seem to have taken the largest hit were the economy and the luxury hotel industry. This is a new finding which Dogru attributes to Airbnb treading into the realm of luxury experiences for its users. In terms of the economic impact, the struggle to implement and enforce Airbnb regulations has led to a loss in revenue for local economies.
The study also found that midscale hotels are negatively impacted by Airbnb. Past studies found that the two sectors were so similarly priced that users were not willing to switch to home-sharing rentals. However, new findings from this study show that more and more consumers are gravitating toward Airbnb rental properties for the local and authentic experiences these lodgings provide.
While opposition to Airbnb may be quick to say ban all short-term rentals of this kind to minimize the negative impacts on local hotels and the economy, the study points out that this is not a feasible solution. Airbnb rental properties do have a positive impact when it comes to local restaurants, entertainment and leisure businesses, and consumers. Dogru also points out how Airbnb helps to add a supply for the industry when there is excessive demand and proposes regulation as the solution to these issues:
“You need Airbnb, especially when there is excess demand for rooms, but there must be regulation without killing innovation. Airbnb is still in its infancy, and more hosts are being added to its supply every day in many markets. Airbnb is indeed a disruptor, and it is here to stay.”
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