BU Today

In the World

Airbnb Not Hurting Boston Hotel Sector

BU study finds robust market for both


The growth of Airbnb has had little effect on the Boston hotel market, and Airbnb customers will pay more for features that hotels can’t always provide.

Those are the findings of two studies by BU School of Hospitality Administration researchers that were published in the spring 2017 edition of the Boston Hospitality Review, a journal published by the school.

Despite the explosive growth of the sharing-economy lodging service, data from January 2015 to September 2016 show that Boston’s hotel sector maintained or increased its room rates and revenues per room, even as the supply of hotel rooms has increased.

In Boston, at least, “Airbnb did not affect the hotels at all. Hotel supply continued to grow, hotel ADR [average daily rate] continued to grow, demand increased dramatically,” says Tarik Dogru, an SHA assistant professor of hospitality finance and accounting, who wrote the paper “Comparing apples and oranges? Examining the impacts of Airbnb on hotel performance in Boston” with Makarand Mody, an SHA assistant professor of hospitality marketing, and Courtney Suess-Raeisinafchi, an SHA assistant professor of hospitality administration.

Airbnb does for the hotel industry what Uber and Lyft do for taxis and limousine companies, exchanging a guest-hotelier transaction for a peer-to-peer transaction through its website. Users can search the site for a room, an apartment, or an entire house with the desired location, amenities, and price, then book a stay, and Airbnb takes a piece of the rental fee. Guests and hosts later rate one another on the site.

“The emergence of companies like Airbnb, representative of the broader idea of the sharing economy, are changing the rules of the game,” says Mody.

airbnb logoAirbnb is no longer just people renting out a spare bedroom; many properties on its site are now owned expressly as rentals by entrepreneurs seeking a bigger piece of the action. Legislators are taking notice at both the state and local level, considering issues from taxation to guest safety and fire codes. And academics are assessing issues from pricing policies to the experience a private rental offers compared to that of a hotel or motel.

The “apples to oranges” paper examines key performance metrics for Airbnb and the hotel industry, such as supply, occupancy rates, average daily rate, and revenue per available room. It is based on information from Airdna, a company that provides data and analytics on Airbnb to entrepreneurs, investors, and academic researchers, and STR, a standard source for hotel industry data.

The researchers report that the Boston hotel industry’s occupancy rate was 85.4 percent in September 2015 and 83.1 percent a year later, while the supply of rooms increased slightly, to just over 1.6 million room/days per month. But the average daily room rate increased from $209 in September 2015 to $219.26 a year later.

During the same period, Airbnb’s supply of room/days in Boston roughly tripled, from 128,730 to 390,270 per month. Perhaps as a result, the occupancy rate dropped from 40.2 percent to 27.6 percent, while its average daily rate decreased from $183.34 to $159.41.

In sum, the explosive growth for Airbnb has not damaged the hotel industry. In fact, the authors say, it’s possible that Airbnb has expanded the lodging market in the Boston area, either by bringing additional travelers to the market or by attracting customers who would otherwise have chosen alternate accommodations, such as the couch of a friend or family member.

It’s possible that Airbnb has expanded the lodging market in the Boston area, either by bringing additional travelers to the market or by attracting customers who would otherwise have chosen alternate accommodations.

“Key performance metrics for Airbnb and hotels indicate a strong positive correlation, indicating that Airbnb demand is potentially different from hotel demand (i.e., they target different customer segments), and thus, Airbnb’s negative economic impacts on the hotel industry are, at best, marginal,” the report says.

Understanding what’s happening here is important because “the sharing economy isn’t just accommodations,” says Suess-Raeisinafchi. “It could be the sharing economy for cars, if you’re renting your personal vehicle out, instead of just Uber. I play polo, and we’ve got a sharing economy of horses now, thanks to an app. You can connect with your fellow members where you can lease horses and organize transportation. We’ve got sharing economy with fashion, where you can rent each other’s wardrobes. That’s going to disrupt the fashion market.…It’s all new.”

A second paper, “What do guests value most in Airbnb accommodations? An application of the hedonic pricing approach,” written by Dogru with Osman Pekin (SHA’17), found that people often pay more for Airbnb lodgings than they do for hotels.

“In some months, the average price on Airbnb was higher than hotels,” Dogru says. “When I started to look into this, I was thinking people would be more into Airbnb for economic reasons. But either they are not rational in their decision-making, or they are looking for unique experiences and features, and they don’t care about the price differences.”

The researchers found that the price of Airbnb rentals increases 10 percent over other units if a listing is handicapped accessible, 11 percent if the listing is family friendly, and 11 percent if a free breakfast is offered. “The results showed that Airbnb guests place more value on space, cleanliness, number of photos, handicap accessibility, family friendliness, free breakfast, location, and unique experiences,” the paper concludes.

Mody is interested in the consumer psychology surrounding Airbnb and the accommodation experience, and also in what sort of rethinking that forces from hotels. Companies like Airbnb are changing the nature of the traveler’s experience outside the accommodation itself, he says.

“I think this is where the fight between hotels and Airbnb is going to be played out in the near future,” he says, “and in terms of the overall experience of place.”

The papers are part of an ongoing series from researchers at the school, who say there’s much still to mine from Airbnb’s approach to the lodging business.

“For the economy, for the industry, it is disruptive,” says Dogru, “but for the researcher, it’s a great opportunity.”

Joel Brown, Staff Writer for BU Today, Bostonia and BU Today Marketing & Communications
Joel Brown

Joel Brown can be reached at jbnbpt@bu.edu.

6 Comments on Airbnb Not Hurting Boston Hotel Sector

  • Jacquelyn Smith on 06.21.2017 at 11:37 am

    It would be informative to extend the research to Air B&B’s impact on the housing market. I live in Cambridge where the proliferation of Air B&B’s has decreased the available housing stock to the community: individuals, families, anyone unable to pay the high cost of the luxury housing boom. Apartments that in the past would be part of the rental stock as well as entire triple deckers are being converted to Air B&B’s. Consequently, a once diverse community is losing that quality and is becoming a community for the affluent and the transient.

  • Nancy Ryan on 06.21.2017 at 1:02 pm

    It is telling that some 390,270 room/nights per month in Boston are being used by AirBnB customers. And since this is nearly triple from one year earlier, this number must be growing. Not all, but many, of these rooms were once in the rental market for families and individuals. As the article states, “Airbnb is no longer just people renting out a spare bedroom; many properties on its site are now owned expressly as rentals by entrepreneurs seeking a bigger piece of the action.” With little or no regulation and huge financial incentives, our rental housing is being turned into tourist housing, driving rents up and ordinary renters out. No wonder Boston has the highest economic inequality rate in the country. We need researchers to be looking into what will happen to our cities if housing becomes focused on business people and tourists with money.

    • Aldon on 06.21.2017 at 3:52 pm

      You changed the data slightly and that gives it a different meaning. 390,270 room/days per month are AVAILABLE which is not equivalent to being used. They say later in the exact same sentence that the occupancy rate is 27.6%. This means only 107,415 are being USED.

      Yes people are renting entire properties or apartment units out on the Airbnb, but that does not mean a home owner does not live there and rents the entire place when they are out of town. I’ve read numerous times that the majority of entire homes/apartments for rent on the Airbnb platform are from homeowners renting a place when they are gone. I’m not saying that there isn’t rental housing being used for the sole purpose of re-renting them short term on platforms such as Airbnb, but to assume a statistically significant impact without the data is wrong. The news is going to make assumptions about data in order to invoke an unjust emotional response from people (that’s why they interview a handful of people to get the side of the story they want to portray), so be careful and make sure there is real data to support the claims.

      Here is a quote from the research paper (“Comparing apples and oranges? Examining the impacts of Airbnb on hotel performance in Boston”) that this article summarizes: “Homeowners might simply turn their properties into Airbnbs if they believe they can make more money, which may exacerbate preexisting housing problems in metropolitan cities (Lee, 2016). There is little empirical evidence on the economic or social impacts of Airbnb to support either the proponents or the critics of Airbnb. Thus, the course and the magnitude of these impacts do not go beyond speculation for the time being.”

  • Aldon on 06.21.2017 at 4:07 pm

    I should clarify: this is a really good article summarizing the facts of research. Academic research provide great info. Other news based sites make assumptions using the data they collect. When reading articles from news companies be careful and make sure the data they cite (if even cite the data) actually does completely and fully support the claims they make.

  • Jerry Dimaso on 06.21.2017 at 4:09 pm

    Um, the data here comes from Airdna, which gets it from … Airbnb. Why would you believe it and run with this story?

  • Patricia Adams on 06.23.2017 at 9:53 am

    VRBO/Homeaway, also a very large world-wide home-sharing service, offers much the same kind of service as Airbnb, although I get the impression there is perhaps less of the room-sharing aspect. With VRBO I think it’s a lot more often a whole house, apartment, or condo. Nonetheless, it would make a lot more sense to do a study which includes VRBO, as well as Airbnb; in this study the studiers made no mention of VRBO whatsoever. To me this means that the data does not show a true comparison of how home-sharing affects the hotel market. An entire major segment of the home-sharing market is left out and that I consider to be a major weakness of the study. If someone wants to focus only on Airbnb one ought to mention VRBO and explain that solely an Airbnb study does not tell us about the entire comparison between home-sharing and hotel stays and that this is a limitation of the study.

Post Your Comment

(never shown)