Battle of the Beds: The Economic Impact of Airbnb on the Hotel Industry in Chicago and San Francisco

The sharing economy is the private redistribution of goods via peer-to-peer sharing. Since internet use has saturated the U.S., the sharing economy has become widely internet-based. Airbnb, a website and app that facilitates the short-term rental of space to stay in another person’s home, has become a major component of the sharing economy. This study includes an empirical analysis of the hotel occupancy rates in two major markets, San Francisco and Chicago, and how they have or have not changed, from the 2008 launch of Airbnb through the end of 2014. The study hypothesizes that Airbnb has had a statistically significant negative impact on the hotel occupancy rate. The results serve as empirical evidence that Airbnb’s introduction has had an insignificant impact on San Francisco hotel occupancy rates, but may have had a marginally significant negative impact on Chicago hotel occupancy rates. Major reasons why most travelers have not substituted Airbnb for hotel accommodations include the fact that nearly half of those traveling in the United States are traveling for work, Airbnb’s lack of amenities that many business travelers demand, and the absence of an Airbnb loyalty program that is similar to what many hotels have