Estimating the impact of Airbnb on the local economy: Evidence from the restaurant industry

Abstract

In this paper, we study the effect of Airbnb on restaurant revenue in the state of Texas. Using a difference in difference strategy that exploits the geographical and temporal variation of Airbnb diffusion in Texas, we show that a 1% increase in Airbnb reviews in a zipcode is associated with a 0.011% increase in restaurant revenue in the same zipcode. Considering the median annual Airbnb growth in each zipcode, this result implies that Airbnb can explain about 12% of the median annual restaurant revenue growth. Moreover, we show that this increase in revenue is driven by an increase in restaurant demand that stems from additional tourism demand generated by Airbnb. Finally, we show that the positive effect of Airbnb is more pronounced for independent restaurants and in less commercial—and therefore with less economic activity—zipcodes. Overall, our results provide evidence that home-sharing platforms like Airbnb can increase economic activity for businesses and in neighborhoods that are more likely to need it the most.

Keywords: Sharing Economy, Peer-To-Peer Markets, Airbnb, Restaurant Revenue, Local Economy