Adding evidence to the debate: Quantifying Airbnb's disruptive impact on ten key hotel markets

Abstract

Airbnb's entry into the lodging landscape has dramatically increased the available supply of rooms for accommodating prospective visitors at a destination. In a competitive market, an increase in supply while keeping demand relatively constant would decrease prices and revenues. While Airbnb is expected to negatively impact the hotel industry, the effects of Airbnb on the performance of the hotel industry have not been extensively quantified. Also, existing studies on Airbnb's economic impacts are limited in their inferential, temporal, and/or geographical scope. In view of this gap in the literature, the present study examines the effects of Airbnb supply on key hotel performance metrics: room revenues (RevPAR), average daily rates (ADR), and occupancy rates (OCC) in ten major U.S. hotel markets for the period between July 2008 and June 2017. The results demonstrate that an increasing Airbnb supply negatively impacts all three performance metrics within the hotel industry. Moreover, while previous research has demonstrated a negative impact on lower-end hotels, our findings provide evidence of Airbnb's growing impact on the mainstream market across hotel class segments, signaling a high level of consistency with the tenets of the theory of disruptive innovation. The magnitude of these effects is not only statistically but also economically significant. Theoretical and practical implications are discussed.