Founded in 2008, Airbnb is a home-sharing platform that invites travelers to embrace the comforts of home while on vacation. The San Francisco-based company has seen significant growth in its decade of life, with over 4 million listings in 191 countries worldwide. Recently, Airbnb added an additional 1000 cities to its profile, which is great news for consumers who stand to save up to $57 a night when they book through the platform, rather than spending their travel dollars at an area hotel. The loser in all this, of course, is the hotel industry itself.
A study conducted using 2014 data showed that in the 10 cities with the highest Airbnb market share, hotels showed a 1.5 percent loss of revenue. While this might not seem like a significant amount, it can add up quickly during holidays and other peak periods which is when hotels generally turn the highest profits. In the past, events such as Mardi Gras in New Orleans or New Year’s Eve in midtown Manhattan allowed hotels to charge premium rates for their rooms, and travelers would have no choice but to pay. With the advent of Airbnb, the lodging capacity has expanded, meaning the hotels are forced to keep their rates lower in order to remain competitive. As this data is already four years old, the effect can only have heightened in the interim.
The co-authors of the study, Harvard Business School professor Chiara Farronato and Massachusetts Institute of Technology postdoctoral fellow Andrey Franklin, zeroed in on the markets with the highest number of hotels to obtain their information. They found that while Airbnb didn’t have a direct effect on the overall number of booked hotel rooms, their presence translated into lower rates for the rooms that were occupied. In cities with a higher demand for accommodations, such as Los Angeles and New York, Airbnb had more rooms available, while listings for less-popular destinations like Oklahoma City were scant. Since hotels generally charge a great deal more for rooms at the hot spots, this is where the losses can be most keenly felt.
The worst news for the hotel chains? As Airbnb continues to grow, the hotel industry will have little recourse, outside of lobbying for stricter regulations on home-sharing platforms. In the meantime, travelers can enjoy the lower rates that have come as a result of this ongoing warfare.