Dear Guests, Please Pay for my License – Analyzing the Heterogenous Cost-Pass-Through of Commercial and Non-Commercial Rental Suppliers in Response to Regulatory Policies

Peer-to-peer rental markets have been shown to adversely impact the traditional hospitality industry and housing affordability, fueling the demand for regulation. While localities have implemented policies to address these issues, little is known about how rental suppliers respond to those regulations. Analyzing a policy implemented in New Orleans, which introduced annual bring-to-market costs while simultaneously banning listings from one city-center neighborhood, we reveal that hosts increase their prices as a result of the policy. We show that non-commercial hosts completely pass their additional costs onto their consumers. By contrast, commercial hosts with legalized listings located in the city center only partially pass on their costs to their guests, while decreasing prices in the rest of the city. Our results indicate that the policy falls short of reducing pressure on housing affordability in the city center, as peer-to-peer renting remains attractive when bring-to-market costs can easily be passed through to consumers