The influence of Airbnb
Airbnb is a platform where supply and demand for accommodations all over the world come together. The idea for Airbnb was born in San Francisco in 2007. Former classmates Joe Gebbia and Brian Chesky share an apartment in that city and can barely pay the rent every month. When a major convention is held in San Francisco and all the hotel rooms turn out to be full, they decide to put three air mattresses in the living room and rent them out through a makeshift website called “Airbed and Breakfast.” The name Airbed and Breakfast has now been changed to Airbnb and it is no longer about three air mattresses, but about three million accommodations. Although there are also quite a few B & Bs and hostels that have registered their rooms on Airbnb, the vast majority of the accommodations are owned by private individuals who try to earn extra pocket money by renting out their house or room. In 12 years, Airbnb has grown into one of the largest accommodation booking sites in the world and is known as a site where you can book very nice and original accommodations, often at a very reasonable price.
Influence on hotels
Many hotels in the Netherlands say they are suffering from the rise of Airbnb and other forms of private holiday rental of rooms or houses. According to a KPMG survey, 40 percent of hotels face competition from private individuals. Hotels in the three-star segment and hotels in the lowest price range with room prices up to 65 euros experience the most competition from this. In 2013, they saw both the occupancy rate and the average room price fall. The average room price of more luxurious hotels also fell last year. The occupancy rate of 4- and 5-star hotels still increased slightly. But also chic hotels are now saying that tourists are more likely to opt for an Airbnb apartment instead of a hotel room.
Influence on house and rental prices
The presence of Airbnb is likely to lead to higher home prices and rents. The first reason is that commercial landlords buy up houses and rent them out to tourists. Second, homeowners can rent out their home or a room for part of the year and earn extra money. The first reason is certainly bad news for local tenants, who now have to move or pay more due to the increased rents.
Several reports have already surfaced suggesting that neighborhoods with many Airbnb are experiencing significant price increases. An analysis by New York University found that in the Williamsburg and Greenpoint neighborhoods, prices have risen between 1.2 and 2.3 percent as a result of rentals through online platforms. The renowned online magazine The Real Deal calculated that rents in these neighborhoods would drop between $37 and $69 if the homes were used normally. Based on an estimated average rent of $3,055, that would mean a price drop of 1.21 and 2.25 percent.
It is very special how a fairly simple technical business model can have such a huge impact on an industry. Hotels that have been established for decades are faced with fewer bookings. Neighborhoods are faced with higher housing and rental prices. Airbnb had such a great influence in Amsterdam that the municipality entered into a partnership with the company. This indicates how great the influence of Airbnb can be.
Hi Abdannor,
Interesting read! I agree on the points that you made, I personally use Airbnb as well when traveling instead of booking hotels. Not only because it is more cost efficient, I feel that you get much more of the local vibe when staying at a person’s residence than at a hotel for example.
I like that you wrote about the influence of Airbnb on both hotels and on houses and rent prices. Indeed as you wrote, with the presence of Airbnbn, the rent prices of apartments and house prices have seen an increase, which makes it increasingly difficult for students or starts to find an affordable apartment or house. There are also other economic implications. For instance, as travelers choose more and more Airbnb over hotels, as you pointed out, discussions have sparked whether Airbnb should also be subject to the same tax regime as hotels.
There is an interesting read from the Economic Policy Institute about the economic costs and benefits of Airbnb, which you might find interesting as well.
https://www.epi.org/publication/the-economic-costs-and-benefits-of-airbnb-no-reason-for-local-policymakers-to-let-airbnb-bypass-tax-or-regulatory-obligations/
Hi,
I completely agree with you. It quite impressive how such a simple idea of Airbed and Breakfast has transformed into one of the largest accommodation booking sites. Indeed, the rise if Airbnb is having a major impact on the hotel industry. I can also understand that the hotel industry is not happy about this at all. But let’s be honest! If you plan on going on vacation somewhere it does not even matter whether you have chosen a cheap or expensive destination, the hotels are always expensive. So, I don’t think it’s weird that more and more consumers are turning to Airbnb as an alternative method. Airbnb provides its consumers with everything they need, its simple, its easy and most importantly it can be extremely cheap, especially in comparison the huge hotel chains out there. It’s nice to see that Airbnb is able to compete with the hotel industry on such a high level. But do you see Airbnb taking over the hotel industry in the near future? Personally, I don’t think this will happen, I think that Airbnb is a great addition to the accommodation industry. Yes, the hotel industry will need to push back and experience their losses here and there. Nonetheless, they shouldn’t remain all too concerned. There are so many people out there seeking accommodations and a lot of people that value hotels just that tiny bit more in terms of quality, luxury and service. And don’t get me wrong I’m not saying Airbnb doesn’t provide these values but there are people who value a more ‘qualitative accommodation’ in their eyes. If anything, Airbnb is a good addition as it will prevent the hotels from dominating the industry. On the other hand, it would be harsh to see further increases in home prices and rents. Take a look at cities such as Amsterdam and Rotterdam, housing shortage is extremely high and if you do find something it’s also very expensive. Do you think that Airbnb might have a bigger impact on housing rather than hotels? Nonetheless, I do like the Airbnb concept. It brings many great things.
Hi!
Interesting piece you write on Airbnb. I agree with you on most parts and acknowledge the influence Airbnb has on the hotel industry. What is your take, however, on the fact that more and more cities are imposing restrictions on renting houses or apartments on Airbnb? In Amsterdam for example, you can only rent your place for a maximum of 30 nights per year. This reduces the incentive for wealthy people to flip houses and rent them on Airbnb. In cities like Rotterdam and Utrecht, you need a rental permit to be allowed to rent your place as a vacation home. This is essentially not different from what other holiday rental sites are offering. I think that it is mainly the ease of use and wide availability that Airbnb offers that has caused the massive demand increase. I also think it is kind of good that the hotel industry faces competition, as previously they were ruling the market and could set prices accordingly. Now, competition brings down the prices of both Airbnb and hotels, increasing the benefit for consumers. I wonder what you think about these ideas!
Best,
Cas
Hi, It is an interesting topic that talks about the rise of the sharing economy. Airbnb and Uber are the two typical examples that are accused of disrupting the traditional hotel and taxi industry. Digital-platforms enables operators to utilize spare resources and achieve efficient resource allocation in general for society. However, it has brought damages to the market as well, especially for the supply side. For example, Uber and Didi’s platforms are accused of treating their employees unethically. They can leverage the algorithmic labor distribution and information asymmetries to control how drivers do their jobs indirectly. Thus, the legal status of the sharing economy needs to pay more attention.
Despite that, as a consumer, I consider Didi and such platform-based industries decrease the cost of traveling, which is the main factor that attracts me to participate in the sharing activities. However, I have seen that traditional taxi drivers are suffering from unfair competition and COVID-19. Hopefully, regulations towards the sharing economy will be established and well-defined.