Decisions and prospects of short-term rental hosts under uncertainties

Abstract

ABSTRACT Despite discussions on the rise of short-term rentals and their socioeconomic consequences, there are limited theoretical underpinnings explaining suppliers’ decisions to join or leave the short-term rental market. On the basis of prospect theory, we analyze the economic gains and losses involved in decisions (not) to host short-term rentals and the impact of such gains and losses on market actors’ decisions. Using a panel dataset of short- and long-term rental markets in Manhattan, New York (2017–2022), we analyzed increases and decreases in Airbnb supply using spatial panel model. We find that increases and decreases in Airbnb supply have different elasticity to gains and losses. A risk-seeking attitude is observed in decisions to join the short-term rental market, whereas decisions to leave the market exhibit a risk-averse attitude. The findings highlight actors’ different attitudes toward gains and losses and the heterogeneity of their decisions.