When Airbnb Competes with Hotels, Miami Travelers Pocket Extra Cash, Claims Study by MIT and Harvard
Dylan Jackson | The Miami Herald | August 10, 2018 1:00am
Aug. 10--An ongoing study authored by MIT and Harvard researchers has confirmed what many analysts have been saying for a while now: Airbnb is taking a sliver out of hotel revenues, and travelers are reaping the rewards of lower costs, especially during New Year's Eve or Art Basel when thousands flock to Miami.
For Miami-Dade, competition from Airbnb translated to a 1 percent decrease in hotel revenues per year from 2011-2014. For travelers, that means slightly cheaper rooms and a consumer savings of $37 per night, measured in the difference between what consumers are willing to pay and what they actually pay.
While previous studies have explored Airbnb's impact on the hotel industry, this is the first independent academic study based on Airbnb's own data. The research was funded by MIT. Andrey Fradkin, an economist who co-authored the study once worked at Airbnb but left the company before the study.
The study uses data on transactions, room pricing and availability provided by Airbnb. Previous studies scraped data from the site, which experts say is less accurate.
Although the most recent data is four years old, the overall trends in Fradkin's study are still valid, he says. Previous studies by other researchers found similar patterns.
Airbnb and other home-sharing sites add additional inventory in a market, meaning hotels may lose out on those guests. To compete, those hotels may lower rates. The combination resulted in a 1.5 percent decrease in revenue, $412 million, a year nationwide, according to the study. The Miami area is a top-five market for the short-term rental company, and 800,000 travelers stayed in Miami-Dade Airbnbs over the past year, according to the company.
The effect isn't uniform, though. Airbnb's biggest impact occurs during events when inventory is tight and prices skyrocket, as during December 's Art Basel and February's boat show. But, the study found, these high-demand nights are the most attractive and lucrative nights for home-sharing hosts, so the number of listings rise and expands options for travelers.
Henry Harteveldt, a travel industry analyst with the Atmosphere Research Group, said that because hosts are setting their own prices and looking to just make a little cash on the side, Airbnb can be much cheaper than a traditional lodging. Hosts are less responsive to profit margins and surge prices that come with high demand.
"An oceanfront hotel room may be $500 on a busy weekend," said Harteveldt, "But a homeowner looking to make a little bit of money could easily put up their house with the same view for $250."
In total, Airbnb guests in the 10 cities with the most hotels (which included Miami, New York, Boston and Portland) netted a total of $276 million in consumer surplus -- the difference between what they were willing to pay and actually paid -- in 2014.
For Miami's hotel industry, the impact appears to be relatively negligible. Miami hotels brought in just shy of $3 billion in revenue in 2017, according to STR, a data and analytics specialist. Aside from a 1.5 percent dip in 2016, when the region was hit with a Zika outbreak, hotel revenues have been growing steadily since 2012.
Another finding: just because a visitor chose a home-sharing platform doesn't necessarily translate into a lost hotel booking. Some 49 percent of Miami Airbnb guests would not have booked a hotel room regardless, opting instead for a stay with family, another home-sharing platform or foregoing travel altogether. The reason, say researchers: Airbnb and hotels offer significantly different experiences.
Airbnb spokesperson Ben Breit agrees. Some people need a full kitchen due to dietary restrictions, others want to stay outside of Miami's hotel districts.
"Some people want to not only stay in somebody's home, but stay with a local," said Breit. "Many want to experience a city from a native's perspective."
Conversely, a 2015 study out of Boston University's School of Business found that high-end hotels are almost entirely unaffected by Airbnb because they offer amenities unavailable at an Airbnb, such as a spa and chef-run restaurant.
Business travelers who use amenities such as conference rooms also are less likely to turn to Airbnb, especially when travel expenses are reimbursed by their company, the researchers found.
The BU study also corroborates Fradkin's findings on peak demand pricing.
Fradkin hopes that academic research like his can help address the patchwork regulatory environment that has arisen nationwide.
In Miami-Dade, short-term rentals are banned in some local suburbs and in most areas of Miami Beach. Those caught in violation of Miami Beach's law are hit with the highest fines in the country -- $20,000 for the first violation.
Last October, Miami-Dade passed a series of regulations that includes a limit on overnight guests, registration and a requirement that hosts live on the property for at least 6 months out of the year.
Miami-Dade and AirBnB reached a tax agreement in March of last year; as of June, the county has collected $8.4 million from the company. Broward County has collected $3.7 million in its first year levying the resort tax on Airbnb. Unlike Miami-Dade, Broward also collects the 6 percent tax on short-term rental rival HomeAway.
Opponents -- a cast of city officials, neighborhood leaders and hotel heads -- allege that short-term rentals buttress sleepy neighborhoods with party houses.
Former Miami Beach Mayor Philip Levine considered Airbnbs commercial enterprises, likening the service to a hotel rather than an occasional room for rent.
Fradkin looks at his study as a way to bring compromise: Since the benefits to consumers are most pronounced during popular events, why not limit hosting to popular holidays or festivals?
"Imagine you're somebody that travels a few weeks out of the year and wants to make a little money on the side," he said. "Registration and entry fees may drive out the casual hosts as many are sensitive to small differences in their returns."