Spatial price dependencies between the traditional accommodation sector and the sharing economy

Abstract

The emergence of peer-to-peer (P2P) accommodation (e.g. Airbnb) has steadily increased the pressure on the traditional accommodation sector. Although Airbnb listings are perceived as being more affordable than hotels, this has not yet been conclusively demonstrated. Therefore, the aim of this study is to investigate whether significant price dependencies exist between the Airbnb and traditional accommodation sectors and to analyze the underlying pricing strategies. For this purpose, the Estonian capital city of Tallinn is used as a case example. Airbnb data, prices and locations of hotels in Tallinn, as well as spatial information such as distance to points of interest (POIs), and so on, are used in hedonic price regression models. The results show that Airbnb pricing positively depends on characteristics of the listing and the number of POIs within an optimal 650 m radius, which is obtained from a simulation study. Also, prices of hotels and of other Airbnb listings within the same radius positively impact Airbnb listing prices. Finally, Airbnb accommodations are shown to indeed be the more affordable alternative.