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

Georgios Zervas, Davide Proserpio, and John W. Byers
Article Snapshot
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Rise of the Sharing Economy
Key Takeaways

​What? AirBNB is disrupting the established hotel industry across the world.

So What? New research pinpoints where disruption is having a financial impact.

Now What? Independent hotels that do not have the brand power of large chains must be careful to avoid price wars with AirBNB during peak price periods.

Article Snapshot​s: Executive Summaries from the Journal of Marketing Research

The sharing economy has recently emerged as a disruptive force in long-established service industries and new research shows how established providers may be able to navigate marketing strategies.


Research Question
Our hypothesis is that some stays with Airbnb serve as a substitute for certain hotel stays, thereby affecting hotel revenue, and that this impact is differentiated by geographic region, by hotel market segment, and by season.

Methods
For our study, we collect and combine data from various sources including the Airbnb website, the Texas Comptroller Office, STR, county demographics from the U.S. Census Bureau, airport passenger counts from the U.S. Bureau of Transportation Statistics, the Current Population Survey from the U.S. Bureau of Labor Statistics, and hotel reviews from TripAdvisor.

Findings

Of particular interest to marketing professionals, we find that independent hotels, hotels that do not cater to business travelers, and lower-end hotels are all more heavily affected by Airbnb than our respective reference categories, hotels without these characteristics.

Implications

Our results have direct implications for hotels, travelers, and policy makers. For hotel managers, the competition their firms face from peer-to-peer platforms has several unique features that differentiate it from competition with other firms. First, the Airbnb platform has near-zero marginal cost, in that a new room can be incrementally added to (or removed from) the platform with negligible overhead. Because of this, Airbnb can scale supply in an almost frictionless manner to meet demand, even on short timescales. By contrast, increasing hotel room supply involves buildout, causing significant marginal costs for hotel chains. As we have shown, this unique feature of Airbnb has already significantly affected hotel’s pricing power during periods of peak demand. Second, Airbnb offers a much wider range of products and services than hotels: Airbnb users can rent anything from an apartment to a yurt. More importantly, because Airbnb leverages existing housing inventory, it can potentially expand supply wherever houses and apartment buildings already exist. This is in contrast to hotels, which must be built at locations in accordance with local zoning requirements. Therefore, competition by Airbnb is potentially harder for incumbents to adapt to, compared with competition by other hotel firms.

Article Citation: Georgios Zervas, Davide Proserpio, and John W. Byers (2017) The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry. Journal of Marketing Research: October 2017, Vol. 54, No. 5, pp. 687-705

doi: http://dx.doi.org/10.1509/jmr.15.0204 


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Georgios Zervas, Davide Proserpio, and John W. Byers
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