Economic Impact of the ‘Sharing Economy’

A recent research study from the Boston University School of Management helps us better understand the economic impact of the sharing economy. Focusing on the state of Texas, a group of marketing and computer science professors analyzed data from over 22,000 Airbnb stays from 2008 to 2013 and tax revenue data from over 4,000 hotels. They estimate that every 1% increase in Airbnb listings in Texas results in a 0.05% decrease in quarterly hotel revenues. Airbnb, an online marketplace that connects hosts with guests for short-term apartment rentals is now being used by over 50,000 renters per night.

This research adds some needed quantifiable date to the ongoing debate over the impact of the sharing economy. Proponents of Airbnb, which was founded in San Francisco in 2008, argue that a supply of inexpensive accommodations can increase tourism spending and be an overall net positive producer of new jobs. While Airbnb does generate demand that did not previously exist, there are costs involved with lowering the barrier to entry for online suppliers in relation to traditional suppliers. In Texas, the impacts are distributed unevenly across the hotel industry, with lower-end hotels and hotels not catering to business travelers being the most affected. These businesses have reason to be concerned as Airbnb continues its rapid growth and consumers increasingly see it as a better value than lower-end hotels.

The growth of Airbnb and similar services is getting a lot of attention, and there are efforts under way to slow it down. Cab drivers in Paris recently turned violent against Uber drivers, and New York Attorney General Eric Schneiderman issued a subpoena to Airbnb last October, demanding information on New York City’s 15,000 hosts and 25,000 listings. With so much at stake, this debate is not going to end soon.

Dan Steinberg