Abstract

http://ssrn.com/abstract=2366898
 


 



The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry


Georgios Zervas


Boston University School of Management, Marketing Department

Davide Proserpio


Boston University - Department of Computer Science

John Byers


Boston University - Department of Computer Science

February 11, 2015

Boston U. School of Management Research Paper No. 2013-16

Abstract:     
Spurred by technological advancement, a number of decentralized peer-to-peer markets, now colloquially known as the sharing economy, have emerged as alternative suppliers of goods and services traditionally provided by long-established industries. A central question surrounding the sharing economy regards its long-term impact: will platforms like Lyft and Airbnb materialize as viable mainstream alternatives to traditional providers, or will they languish as niche markets? In this paper, we study Airbnb, a sharing economy pioneer offering short-term accommodation. Combining data from Airbnb and the Texas hotel industry, we estimate the impact of Airbnb's entry into the Texas market on hotel room revenue, and study the market response of hotels. To identify Airbnb's causal impact on hotel room revenue, we use a difference-in-differences empirical strategy that exploits the significant spatiotemporal variation in the patterns of Airbnb adoption across city-level markets. We estimate that each 10% increase in Airbnb supply results in a 0.35% decrease in monthly hotel room revenue, translating to an impact exceeding 13% of revenue in Austin, where Airbnb supply is highest. We find that Airbnb's impact is non-uniformly distributed, with lower-priced hotels, and hotels not catering to business travel being the most affected segments. Finally, we find that affected hotels have responded by reducing prices, an impact that benefits all consumers, not just participants in the sharing economy. Our work provides empirical evidence that the sharing economy is making inroads by successfully competing with, and acquiring market share from, incumbent firms.

Number of Pages in PDF File: 28

Keywords: sharing economy, Airbnb, hotels, competition


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Date posted: December 14, 2013 ; Last revised: February 12, 2015

Suggested Citation

Zervas, Georgios and Proserpio, Davide and Byers, John, The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry (February 11, 2015). Boston U. School of Management Research Paper No. 2013-16. Available at SSRN: http://ssrn.com/abstract=2366898 or http://dx.doi.org/10.2139/ssrn.2366898

Contact Information

Georgios Zervas (Contact Author)
Boston University School of Management, Marketing Department ( email )
United States
HOME PAGE: http://people.bu.edu/zg
Davide Proserpio
Boston University - Department of Computer Science ( email )
Boston, MA
United States
John Byers
Boston University - Department of Computer Science ( email )
Boston, MA
United States
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