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

Airbnb is an online community marketplace facilitating short-term rentals ranging from shared accommodations to entire homes that has now contributed more than ten million worldwide bookings to the so-called sharing economy. Our work addresses a central question facing the hospitality industry: to what extent are Airbnb stays serving as substitutes for hotel stays, and what is the impact on the bottom line of affected hotels? Our focus is the state of Texas, where we identify Airbnb’s impact by exploiting significant spatiotemporal variation in the patterns of adoption across city-level markets. Using a dataset we collected spanning all Airbnb listings in Texas and a decade-long panel of quarterly tax revenue for all Texas hotels, we develop a nuanced estimate of Airbnb’s material impact on hotel revenues. Our baseline estimate is that a 1 % increase in Airbnb listings in Texas results in a 0.05 % decrease in quarterly hotel revenues, an estimate compounded by Airbnb’s rapid growth. To further isolate Airbnb’s impact, we employ hotel segments that consumers are less likely to substitute for Airbnb stays as additional control groups. We find that the impacts are distributed unevenly across the industry, with lower-end hotels and hotels not catering to business travelers being the most affected. Finally, by simulating various regulatory interventions informed by current events, such as limiting Airbnb hosts to a single listing, we find only a moderate mitigating impact on hotel revenues. †The authors thank the participants and organizers of SCECR’1