5
Impact on the hotel industry.
Researchers have argued that STRs are a form of disruptive innovation that will harm the hotel
industry (Guttentag, 2015). Disruptive innovation theory describes how products can, over time,
transform a market and capture mainstream consumers. The improvement of the disruptive product
eventually causes it to become more appealing to customers and thus significantly impacts existing
businesses. Airbnb, for instance, has grown to be the largest home sharing enterprise in the world, having
hosted more than 60 million guests to date (Horn & Merante, 2017). Its rapid popularity has sparked
concern over whether STRs threaten the traditional accommodation sector. Some researchers have
discovered that the number of Airbnb listings negatively affects hotel revenue in regions where both exist,
particularly low-end hotels without conference spaces (Oskam & Boswijk, 2016). In one Texas market,
every one percent increase of new Airbnb listings caused a .05 percent drop in hotel industry revenue
(Kaplan & Nadler, 2015). An additional study strongly suggests that Airbnb provides a viable, but
imperfect, alternative for certain types of overnight accommodation. Lower-end hotels and hotels not
catering to business travelers are highly vulnerable to increased competition from rentals enabled by firms
like Airbnb (Zervas, Proserpio and Byers, 2017). Another analysis demonstrated how some hosts signaled
a preference or expectation for guests of lower income levels by self-identifying the service as a low-cost
option targeted toward frugal and less discerning guests (Lutz & Newland, 2017). Studies also
demonstrate that STRs minimally impact the hotel industry and that hotels are beginning to list vacancies
on STR platforms (Edelman & Geradin, 2015).
Economic development.
STR platforms utilize real-time market conditions to deliver efficiencies in pricing. Airbnb was
designed to address the influx of prices caused by high-demand events like conferences (Edelman &
Geradin, 2015). Research shows that Airbnb guests tend to stay an average of two days longer than
typical hotel guests (Kaplan & Nadler, 2015). During 2012-2013 alone, Airbnb guests spent $632 million
in New York City and supported over 4,000 jobs. Furthermore, Airbnb argues that its offerings expand
tourism to areas at such a rate that hotels benefit from the increased overall market demand for
accommodations (Boswijk, 2016). Moreover, STRs provide market segment fulfillment for consumers
seeking sharing (particularly of a home), practical novelty, and interaction novelty, which further supports
increased tourism in a way that hotels cannot (Guttentag, 2016). The income effect is also significant and
positive, demonstrating that guests higher in socioeconomic status are more likely to book an entire home
than consumers of lower socioeconomic status, providing further market segment fulfillment by drawing
in customers that are not attracted by hotels (Lutz & Newlands, 2017).
The capacity for individual residences in neighborhoods to offer one or more rooms via STR
platforms carries substantial potential financial benefits to homeowners in particular and the
neighborhood at large (Palombo, 2015). Airbnb contends that STR platforms and home sharing allows
visitors to stay longer, spend more money, and provide more income to the local community (Boswijk,
2016). In an Oregon study, some cities indicated that STRs provide new tax revenues and support for
tourism by providing additional lodging options and, thus, drawing tourists into areas they might not have
otherwise visited (DiNatale, Lewis & Parker, 2017). STRs also keep guests away from centrally located
hotels, which provides an opportunity for additional neighborhood improvement via homeowner revenue
increases (Kaplan & Nadler, 2015). The neighborhood improvement may also come via the shared city
initiative where owners of Airbnb properties can donate part of each stay toward supporting
community-based activities (Palombo, 2015).