FORECASTING PRICES IN THE RENTAL HOUSING MARKET WITH MACHINE LEARNING METHODS

Abstract

The study of pricing factors in the market of the short-term rental has been done. Airbnb was chosen as the object of the study; it is a platform for accommodation, search, and rental around the world. At the beginning of 2021, the company offers 7 million homes from more than 220 countries. The Data Science methods play a significant role in the company's success. One of the key algorithms of the company is the pricing algorithm. Using the "Price Recommendations" feature, the homeowner can analyze which dates are most likely to be booked at the current price and which are not, it helps form a favorable offer. The system calculates the recommended cost of housing based on hundreds of parameters, some of which are easy to recognize, but there are less obvious factors that can also affect demand. The paper proposes an algorithm for identifying implicit pricing factors in the short-term rental market using machine learning methods, which includes: 1) data mining and data preparation; 2) building and analysis of linear regression models; 3) building and analysis of nonlinear regression models. The study was based on ads from the Airbnb site in Washington and New York using scripts developed in Python. The following models are built and analyzed: simple linear regression, multiple linear regression, polynomial regression, decision trees, random forest, and boosting. The results of the study showed that the most important factors are accommodates, cleaning_fee, room_type, bedrooms. But based on the model evaluation criteria, they cannot be used for implementation: linear models are of low quality, while the random forest, boosting, and trees are overfitted. Still the results can be used in conducting business analysis.