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

45 Pages Posted: 14 Dec 2013 Last revised: 19 Nov 2016

Georgios Zervas

Questrom School of Business, Boston University

Davide Proserpio

Marshall School of Business, University of Southern California

John Byers

Boston University - Department of Computer Science

Date Written: Nov 18, 2016

Abstract

Peer-to-peer markets, collectively known as the sharing economy, have emerged as alternative suppliers of goods and services traditionally provided by long-established industries. We explore the economic impact of the sharing economy on incumbent firms by studying the case of Airbnb, a prominent platform for short-term accommodations. We analyze Airbnb's entry into the state of Texas, and quantify its impact on the Texas hotel industry over the subsequent decade. We estimate that in Austin, where Airbnb supply is highest, the causal impact on hotel revenue is in the 8-10% range; moreover, the impact is non-uniform, with lower-priced hotels and those hotels not catering to business travelers being the most affected. The impact manifests itself primarily through less aggressive hotel room pricing, an impact that benefits all consumers, not just participants in the sharing economy. The price response is especially pronounced during periods of peak demand, such as SXSW, and is due to a differentiating feature of peer-to-peer platforms -- enabling instantaneous supply to scale to meet demand.

Keywords: sharing economy, Airbnb, hotels, competition, peer-to-peer markets

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 (Nov 18, 2016). Boston U. School of Management Research Paper No. 2013-16. Available at SSRN: https://ssrn.com/abstract=2366898 or http://dx.doi.org/10.2139/ssrn.2366898

Georgios Zervas (Contact Author)

Questrom School of Business, Boston University ( email )

United States

HOME PAGE: http://people.bu.edu/zg

Davide Proserpio

Marshall School of Business, University of Southern California ( email )

701 Exposition Blvd
Los Angeles, CA Los Angeles 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~proserpi/

John Byers

Boston University - Department of Computer Science ( email )

Boston, MA
United States

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