Airbnb's growth driving down lodging prices: Study

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IANS | 20 Apr, 2019
Global hospitality services provider Airbnb is shaking up the hotel industry by driving down the lodging prices and revenues for traditional hotels, a new study suggests.

The Florida State University researchers suggest that Airbnb's exponential growth worldwide is devouring an increasing share of hotel revenues and also driving down room prices and occupancy rates.

"This is the first study confirming the negative impact on those three key metrics in the hotel industry," said co-author Tarik Dogru, Assistant Professor at the varsity.

"Increased competition from Airbnb is mainly affecting hotel prices and revenues but occupancy rates are also down slightly," Dogru added.

For the study, published in the journal Tourism Management, the researchers examined the effects of Airbnb in 10 major US cities between 2008 and 2017.

They found one per cent increase in Airbnb's supply lowered hotel revenues between 0.02 and 0.04 per cent, which he estimated in New York City alone would have amounted to a loss ranging between $91 million and $365 million in 2016.

The lost revenues came mainly from economy and luxury hotel listings, the study noted.

It also found Airbnb negatively affecting mid-scale hotels and suggests an increasing demand for authenticity in lodging. Travellers felt Airbnb properties were more authentic than franchised hotels, the study noted.

According to the researchers, Airbnb's business model has flourished for many reasons. Customers like having access to an enormous supply of properties and rooms at a wide variety of prices, often more competitive than hotels, and Airbnb collects commissions on every booking.

In addition, the company does not follow conventional rules, the researchers pointed out.

"Airbnb does not ensure the security of guests, it's not taxed in some jurisdictions, and it has flexibility to add new supply because of a lack of regulation," Dogru said.

"Those are some reasons why Airbnb has a significant competitive advantage against the hotel industry because adding a new hotel to the market can take several years," Dogru added.