Impact of Airbnb on the Local Economy and Hospitality Industry

Airbnb has been considered as an essential marketplace for short-term accommodation. Recently, Airbnb has been revolutionizing the way people travel thus affecting the local economy and hospitality industry. The disruptor has enhanced the creation of a platform where homeowners can rent out their spare rooms and apartments to travelers who seek a more authentic and affordable experience. Based on research conducted by Lee and Kim (1), Airbnb has highly affected the local economy through the injection of income and tourism into neighborhoods that had been overlooked by the local economy. Through the provision of travelers with the option to stay in residential areas, Airbnb has been unlocking new revenue streams for local businesses such as shops and cafes. However, even though Airbnb has a positive impact on the local economy, it has been raising huge concerns within the hospitality industry. For instance, Airbnb mainly operates under different regulatory standards which allows hosts to avoid licensing requirements and taxes. Such disparity in regulations has been raising concerns over fairness and competition within the industry. The study therefore aims to analyze how Airbnb has affected the local economy and the hospitality industry.

Ways in which Airbnb has Affected Local Economy

Airbnb has been expanding its lodging options, especially in locations where traditional hotels may be limited or costly. According to Barron, Kung, and Prosepio (1), the increased accommodation availability has been attracting more tourists to different neighborhoods and cities and this has led to a rise in local spending of shops and restaurants. Equally, the surge in tourism has been positively impacting local businesses, particularly small-scale entrepreneurs that rarely benefit from the traditional hotel set up. In a different research, Stabrowski (329) argues that Airbnb has been opening up new income opportunities for residents as it allows them to monetize their homes and extra spaces. As a result, there has been a provision of a supplementary income stream for homeowners. Such additional income has been circulating back into the community and stimulating the local economic growth.

Through Airbnb, it has been possible to distribute tourism dollars more broadly across different cities and regions, which benefits neighborhoods and communities that had been previously overlooked by traditional hotel developments. The above has been contributing to a more inclusive and equitable distribution of economic opportunities within different localities. However, the rapid growth of Airbnb has been raising concerns about the appropriate level of regulations for short-term rentals (Nieuwland & Melik, 813). On most occasions, the local government and communities end up grappling with issues related to zoning and safety standards to ensure that Airbnb is operating within the framework of local laws. In this case, there must be thoughtful policy considerations and proactive engagement with all stakeholders such as local businesses and government authorities.

The Impact of Airbnb on the Hospitality Industry

Airbnb has widened the accommodation options available to travelers. For instance, individuals can rent out apartments or spare rooms which provides a unique and more authentic experience for visitors. As a result, visitors have been able to explore different neighborhoods and specially interact with locals. Equally, as noted by Jimenez et al (2518), Airbnb has been intensifying competition within the hospitality industry. Many hotels are becoming more innovative and customer-focused to withstand the competition from Airbnb. Due to the availability of more accommodations many hotels have been able to reevaluate their pricing strategies, thus improving their services and investing in upgrades to attract and retain guests. The quality of hotels has therefore been improving, benefitting every client even those who do not use Airbnb.

Airbnb has also been impacting the pricing strategy of the hospitality industry. For instance, it offers more cost-effective alternatives compared to hotels, particularly in high demand areas where hotel rates can be prohibitively expensive. Many budget-conscious travelers have been able to explore destinations that would have otherwise been unaffordable. However, based on research conducted by Gibbs et al (49), lower prices on Airbnb have been raising concerns about pricing transparency and fair competition as hotels are subjected to different taxes and regulations that some argue do not apply to Airbnb hosts. Equally, the rise of Airbnb has been creating challenges for traditional hotels especially for popular tourist destinations and major cities. Due to the increased availability of alternative accommodations, there has been greater competitions for hotels and this has highly impacted their occupancy rates and revenues. To respond to such competition, hotels have been rethinking their strategies such as providing unique experiences and offering competitive pricing to remain appealing to travelers.

How Airbnb Affects House Rent

Airbnb has a significant impact on the housing rental market. According to Franco and Santos (1), the platform has been enabling property owners to rent out their homes and rooms to travelers on a short-term basis thus creating an alternative to traditional hotels. Franco and Santos (1) further add that one of the significant ways in which Airbnb has been impacting house rent is through the reduction of available long-term rental housing. For instance, many property owners list their properties on Airbnb for short-term rentals rather than offering them to long-term tenants. As a result, there has been a decrease in the supply of rental properties in some markets, especially in the cities with high demand for short-term accommodation. Due to the reduced availability of long-term rentals, there has been a rise in rental prices making it more challenging for individuals to identify affordable housing.

Due to the reduced supply of long-term rentals, Airbnb has highly been associated with an increase in housing costs in several areas. As there has been an influx in short-term rentals in popular tourist destinations, the demand for housing has been rising thus causing an upward pressure on housing prices. According to Sheppard and Udell (43), many house owners have been capitalizing on the potential for higher short-term rental income through platforms such as Airbnb which has led to increased competition for available properties. Equally, Airbnb has highly been linked to changes in neighborhood dynamics and community affordability. Due to the huge concentration of Airbnb in certain neighborhoods, there have been huge concerns about the transformation of residential areas into commercial zones and this has impacted the quality of life for permanent residents. Equally, the residents have been priced out from certain neighborhoods due to high demand for short-term rentals as the housing costs have been rising due to the potential for higher short-term rental income.

How Airbnb Affects Land rates and Real Estate Rates

Based on research conducted by Perez-Sanchez et al (4596), Airbnb has a substantial impact on real estate prices and land rates in different locations. Through the platform, there has been the creation of new opportunities for property owners to profit from short-term rentals, and has also transformed the way people have been utilizing and investing in real estate (Perez-Sanchez et al, 4596). Even though Airbnb has been unlocking economic potential for property owners, it has highly influenced land and real estate rates and this has led to both positive and challenging implications for different stakeholders. For instance, Airbnb has affected land rates in certain areas due to the availability of short-term rentals. Many investors have been recognizing the potential for higher returns from short-term rental properties, particularly in popular tourist destinations and urban centers. As a result of increased demand for properties suitable for short-term rentals, there has been a rise in land rates in different areas as individuals have been seeking investment opportunities in locations with high tourist traffic.

The impact of Airbnb on real estate rates has been significant, especially in markets where the platform has been gaining widespread adoption. As noted by He (1), the property values in areas with strong demand for short-term rentals have been experiencing upward pressure as many investors end up vying for real estate that can be leveraged for Airbnb income. As short-term rentals offer greater returns on investment, there has been increased competition for properties and the prices have been driven higher for some markets. However, Airbnb carries huge implications for land use and zoning regulation thus affecting the real estate. For instance, many local governments have been grappling with how to regulate short-term rentals such as addressing zoning restrictions and permitting requirements. Equally, the changes in regulations can easily affect the feasibility and profitability of leveraging properties for short-term rental purposes.

Conclusion

In summary, Airbnb has a huge impact on the local economy. For instance, it has been contributing to increased economic opportunities and diversified lodging options; however, it has led to issues related to housing shortages and displacement. Equally, Airbnb has a transformative impact on the hospitality industry as it offers travelers more accommodation options and also provides economic benefits for individual hosts. However, Airbnb has been creating challenges concerning pricing transparency and regulatory issues. Equally, Airbnb has a multifaceted impact on land rates and real estate pricing as it shapes investment opportunities, market dynamics, and housing affordability in different locations. Even though the platform has been presenting new avenues for property owners to generate income, it has also been raising important considerations regarding housing availability and regulatory framework.

Works Cited

Barron, Kyle, Edward Kung, and Davide Proserpio. “The Sharing Economy and Housing Affordability: Evidence from Airbnb.” (2018).

Franco, Sofia F. and Carlos Daniel Santos. “The impact of Airbnb on residential property values and rents: Evidence from Portugal.” Regional Science and Urban Economics (2021).

Gibbs, Chris, et al. “Pricing in the sharing economy: A hedonic pricing model applied to Airbnb listings.” Journal of Travel & Tourism Marketing 35.1 (2018): 46-56.

He, Symon. Rental Property Investing QuickStart Guide: The Simplified Beginner’s Guide to Finding and Financing Winning Deals, Stress-free Property Management, and Generating True Passive Income. ClydeBank Media LLC, 2021.

Jiménez, Juan Luis, Armando Ortuño and Jorge V. Pérez-Rodríguez. “How does AirBnb affect local Spanish tourism markets?” Empirical Economics (2021): 2515–2545.

Lee, Seonjin, and Hany Kim. “Four shades of Airbnb and its impact on locals: A spatiotemporal analysis of Airbnb, rent, housing prices, and gentrification.” Tourism Management Perspectives (2023).

Nieuwland, Shirley, and Rianne Van Melik. “Regulating Airbnb: how cities deal with perceived negative externalities of short-term rentals.” Current issues in tourism 23.7 (2020): 811-825.

Perez-Sanchez, V. Raul, et al. “The what, where, and why of Airbnb price determinants.” Sustainability 10.12 (2018): 4596.

Sheppard, Stephen, and Andrew Udell. “Do Airbnb properties affect house prices?” Williams College Department of Economics Working Papers 3.1 (2016): 43.

Stabrowski, Filip. “‘People as businesses’: Airbnb and urban micro-entrepreneurialism in New York City.” Cambridge Journal of Regions, Economy and Society 10.2 (2017): 327-347.