Calls for legislation are premature
When legacy businesses are threatened by new competitors, too often they respond by lobbying for regulation to quash them. It’s notable, then, that Marriott recently announced it is starting a new home-rental business, putting the world’s biggest hotel operator in direct competition with Airbnb, the world’s largest home-rental business.
Many in the hotel industry have dismissed Airbnb or attributed its success to stealing business by running unregulated and untaxed illegal hotels. There has been little hard research on exactly how Airbnb affects the hotel market. But now three professors in hotel management and marketing — Tarik Dogru from Florida State, Makarand Mody from Boston University, and Courtney Suess from Texas A&M — have analyzed Airbnb’s “disruptive impact” in 10 key markets. Their findings make a case for old-fashioned competition.
The sample cities are Boston, Chicago, Denver, Houston, Los Angeles, Miami, Nashville, New York, San Francisco and Seattle. These are the top-performing cities in supply of hotel and Airbnb rooms. The time frame covers the decade after Airbnb was founded in 2008.
Over this period the available accommodations in these cities dramatically increased, in good part thanks to the entry of Airbnb. The researchers weren’t surprised to find a resulting loss in hotel revenue. For each 1 percent increase in Airbnb supply in a city, hotel revenue declined by 0.02 percent.
As with any disruptive new competitor, companies such as Airbnb bring out the regulators. And here the authors have a warning. “The application of excessive legislation driven by the interests of incumbent industries,” they note, “has the potential to stifle innovation that ultimately benefits the consumer” and harms economic growth. Let the competition continue.
— The Wall Street Journal