Airbnb Effect
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Faculty of Humanities and Social Sciences: Athabasca University
CMNS 380 - Term Project
Tutor: Holly Dougall
Airbnb Effect
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Abstract
This paper will discuss the negative impacts of Airbnb (Airbed and breakfast) on the housing crisis, hospitality industry, and local economy within communities around the world. Airbnb enables people to list, find and book (short-term or long-term) accommodations worldwide. With
almost 5 million listings in more than 190 countries, many consider Airbnb as one of the most
disruptive developments in tourism over the past decade (Pforr, 2021). Airbnb has affected local
residents by forcing them out of their neighbourhoods. The company has proven to be a strong
competitor towards hotels around the world creating issue management in the lodging industry.
Along with COVID-19, Airbnb has also made the housing market worse by taking away potential homes from residents and immigrants with hosts that rent our their spaces.
Introduction
Airbnb is a media platform where a host can offer their place or a single room in their
place for somewhere to stay for a period of time. The marketing and promotional tagline behind
Airbnb is “live like a local” (Sam & Veren, 2020). The idea is that someone can stay in a local’s
apartment and experience their accommodation from the perspective of a resident. It may be
someone’s room in a two bedroom apartment, or an entire beach house. On the other hand, listings can end up being several properties that are owned by a larger company and used exclusively as Airbnbs. The effects of Airbnb as of late have been rather negative in the economy - more
so now than ever due to the increase of the housing market. This is called the “Airbnb Effect.”
The Airbnb Effect refers to the negative impact that Airbnb has had on local communities around
the world. It has contributed in a lot of ways to over-tourism, housing shortages, rising rents, and
other issues.
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It’s a very complex problem with a lot of moving parts. So what does Airbnb really do to a
neighbourhood? The use of Airbnb negatively impacts the local economy, hospitality industry,
and housing crisis in communities. The strategy in this paper will be to cover on what the negative impacts are from the “Airbnb effect” and how they are taking a toll on both large and small
communities around the world.
Living like a Local
Before the COVID-19 pandemic (and now slowly returning back to normal), people were
able to travel around the world to experience different places, food, and culture. The most important key to travelling is finding where to stay. When Airbnb came to the rescue in 2008, it saved
people a lot of money, time, and headache when it came to travelling. It created an experience for
people to live like one of the locals in the community. Airbnb was really considered a great thing
and still is today for most travellers. What most people don’t realize though, were the negative
impacts affecting the local economy. According to a recent news article in 2020, a small city in
Barcelona, Spain had been affected by Airbnb in the last few years (Burgen, 2020). Locals say
Airbnb has been a major factor in driving up rents in the heart of the town by as much as 50 percent over the past few years, forcing residents to move to more affordable parts of the city. Local
public services were said to be potentially strained due to an increased presence of tourists in residential areas. A resident named Jessie Delgadillo was born in the Barcelona neighbourhood and
lived with his mother and sister. The house was very small and he wanted to move out to live
with his girlfriend. Even with a decently paid job, he was unable to afford rent anywhere else in
the area. He was also kept awake at night from parties nearby in an Airbnb apartment.
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The fact that Jessie had been living in his neighbourhood all his life and couldn’t move out to a
nearby town due to the Airbnb impact was discouraging. He says before Airbnb was popular, his
neighbourhood was peaceful and quiet. Critics say that short-term rentals cause serious social
issues such as privacy infringements, lack of awareness and caution with security protocols, as
well as issues with parking access and availability. Jessie, along with other locals are forced out
of their own towns. The city was also a well-known tourist attraction which provided a lot of income for the residents. Some would believe that Airbnb would actually attract more tourists
around the city because of the experience to try new foods, or go grocery shopping to cook ethnic food in their apartments. Unfortunately, a local explained that this is not the case. Guests
don’t even purchase the local foods - all they get are takeaway pizzas. In this case, it’s another
reason to eliminate the social function of housing. With short term rentals like Airbnb, possible
negative factors include noise and stress on neighbourhood infrastructure like trash pickup.
These factors are why hotels are grouped away from residential areas. Many Airbnb rental units
are in violation of local zoning regulations, and there is the strong possibility that these units are
indeed imposing large costs on a community. It is not widely known to many Airbnb travellers
and hosts that much of Airbnb activity is actually illegal. This is because most cities have regulations established that do not allow short-term rentals. Airbnb does also not require its guests to
pay any form of accommodation tax, therefore evading tax obligations other hotel chains are
forced to pay. Taxing Airbnb units is difficult, considering the only requirement hosts must follow is creating a profile on the company’s website to advertise their rental property. This way,
Airbnb rentals remain ‘under the radar’ to city governments and a tax profit cannot be acquired
(Guttentag, 2013).
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This isn’t real tourism - this is destroying the possibility of being a community. The potential
benefit of increased tourism supporting city economies is much smaller than commonly advertised. There is little evidence that cities with an increasing supply of short-term Airbnb rental accommodations are seeing a large increase in travellers. It seems that Airbnb cares more about a
certain location that brings in more money than about the local residents within that community therefore the push is there for residents to rent out their houses rather than to actually live in
them.
Hospitality
It has been described that issue management involves mainly looking into the future to
identify potential trends and events which may influence the organization (Jaques, 2007). This
applies to the hotel industry competing against Airbnb. Airbnb, founded in 2008, has listed more
rooms for rent than any hotel chain in the world. Since Airbnbs aren’t regulated like the hotel
industry, anyone can list a room on this service. Hotels must pay taxes for existing in the first
place, and these taxes are reflected in room rates. They also must adhere to safety protocols such
as smoke detectors, fire escapes and exits, etc. These are things that cost more money. There
have been stories of people being injured or even losing their lives because of certain unsafe
conditions at an Airbnb. This is the minority of people staying at an Airbnb, of course. This is not
to say that if a person rents out a room at an Airbnb is at risk of death - this could happen in a
hotel as well. Although, the regulations that hotels must abide by are very strict to ensure that
this doesn’t happen. Airbnb’s regulations are not regulated. There is very little that can take place
if something happens to a person in an Airbnb because there were not the right proper safety precautions in place.
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Several stakeholders discerned that residential property insurance does not cover claims against
commercial establishments, putting both host and guest at risk in the case of accidents, with a
perceived lack of support from Airbnb to assist operators and tenants in grave cases when compliance was not in place (Pforr, 2021). It has been proven that Airbnb is a disruptive innovation
since it is competing with hotels for the same customers. The hotel industry used to make a lot of
money during peak periods like New Year’s Eve, graduations, Christmas, etc. With Airbnb as a
competitor, the capacity is not scarce and the hotels cannot increase their prices as much as they
want. Since customers are choosing Airbnb rather than hotels for better prices, locations, or other
reasons, the hotel industry has started to fight back. The American Hotel and Lodging Association started an investigation to prove that Airbnb actually serves as hotels illegally since they do
not pay hotel taxes and do not have to adhere to hotel security regulations. A paper from the National Bureau of Economic Research explains the competition between Airbnb and established
hotels. The authors analyze the data on average prices and rooms by city, particular day, and accommodation type from 2011 to 2014. They limit their analysis to the 50 U.S. cities with the
largest hotel room inventory. Findings from the paper display that in 2014, Airbnb reduced hotel
profits by up to 3.7 percent. That year, Airbnb generated $41 of consumer surplus per room per
night and 26 dollars of host surplus. The result, a total welfare gain of $137 million dollars (Farronato & Fradkin, 2018). This effect was concentrated in locations and on dates where hotel capacity was most constrained, for example, New York City on New Year’s Eve. Hotel revenues
would be 1.5 percent higher without the presence of Airbnb, although between 42 and 63 percent
of these would not have resulted in hotel bookings if Airbnb was not available.
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Tax avoidance in the short-term rental industry has negative economic impacts on the hotel industry due to the low-cost short-term rentals. The authors (Consigli et al., 2012) conducted a U.S
study that showed that Airbnb activity in Austin, Texas has negatively impacted hotel revenue by
about 10-13 percent. Airbnb offers accommodations that are different from the traditional hotel
room, which is valued by customers who are looking for an atmosphere that resembles a home
aesthetic, or living like one of the residents. Airbnb has increased room availability, resulting in
reduced prices for consumers, especially during high peak times. These effects are more prominent in larger cities. High demand during peak times coupled with limited capacity results in
higher prices for the consumer. Airbnb can extend supply during these peak times to accommodate the higher demand for available lodging. It has also been proven that short-term rentals typically do not provide the same level of service and expertise that is provided by hospitality professionals. Therefore, Airbnb is slowly disrupting the hospitality industry.
Housing Crisis
Airbnb’s poorly regulated private short-term rentals contribute to broader negative social
issues, such as decreased employment, divestment from local suppliers inevitably impacting local economies, and increased renting rates and reduction in housing availability ultimately contributing to ghost towns devoid of active and engaged communities. When a whole property is
listed as short-term rental, this impacts the housing market and its protection. New York City implemented a legislation in 2010 where short-term rentals of an entire home for up to 30 days was
deemed illegal. The host could rent a single room or couch, but not an entire home. In 2016, this
legislation was extended. This made over 20,000 listings on Airbnb illegal (Jamasi, 2017).
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A Los Angeles study indicated that, in 2014, almost half of Airbnb listings were clustered in seven neighbourhoods, where rents increased a third more quickly than the city average (Guttentag,
2018). A wider U.S study suggested a 10% increase in Airbnb listings led to a 0.42% increase in
rents and a 0.76% increase in house prices. The Los Angeles report also suggested the growth of
Airbnb could be as much a result as a cause of wider affordability problems. It suggested that
Airbnb profits from illegal rentals that cause rent increases, reduce the housing supply, and exacerbate segregation. Airbnb market density coincides with neighbourhoods that have rents well
above the citywide average. These neighbourhoods boast an average rent of 20 percent higher
than the citywide average (Samaan, 2015). Since the beginning of 2013, rents in Airbnb’s top
neighbourhoods have climbed 16 percent, as compared to a 12 percent growth in the citywide
median rent over the same time period. An article by (Shabrina et al., 2021) explore’s Airbnb and
measure’s its possible impact on the housing market in London, England. London was already
facing an extreme problem of not being able to afford housing, especially for younger adults.
London is an unequal city with rapidly rising rents already, thus Airbnb is not exactly doing the
city any favours. The presence of Airbnb in the last decade has stimulated concern that its growing usage is feared to have exacerbated the uncontrollable growth of rental prices by constraining
the housing supply even further. The rapid growth of short-term holiday rentals like Airbnb is
feared to have worsened the housing crisis and affordability in many large cities, if not in most
cities where there is a significant presence. Research has examined Airbnb from the important
perspective of exploring the effects of short-term rentals on the housing market, touching upon
the possible impact of Airbnb with respect to the gentrification of neighbourhoods (Horn & Merante, 2017). Airbnb appears to be forcing a new kind of rent gap.
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It allows the new revenue flow from short-term rentals through the platform, mainly in areas that
are currently gentrifying or that are post-gentrified neighbourhoods. The renting population is at
the highest risk of being stuck in the precarious rental market. The assured short-hold tenancy
makes them less protected in this tenure as it gives the right to landlords to evict tenants with just
two months notice and increase rents (Judge & Tomlinson, 2018). With the growth of Airbnb,
landlords now have the choice to advertise their properties for permanent residence or to convert
their properties to short-term holiday rentals. Airbnb is very popular in cities where the cost of
living is relatively high, mainly because it provides a channel for extra earnings.
Conclusion
Tourism destinations have had to deal with the impact of Airbnb in several areas. Firstly,
there are the legal considerations which raise a question of, given the double nature of the usage
of homes, is Airbnb illegal? How can other legal issues such as zoning, subletting, security and
fraud as well as overcrowding be addressed? Airbnb has just has become just a way to make
money. If a traveller were interested in trying to get away from creating a negative impact on a
community by using Airbnb or short-term rentals, there are some other options available. House
sitting is an example of actual accommodation sharing. A traveller can be a full-time house sitter
and is an exchange. Someone would leave their house for a trip and the other person would take
care of their belongings/pets. Couch-surfing is another example of accommodation sharing and
another way to interact with locals in a meaningful way. No money is involved, so the person
wasn’t trying to rent that place out anyway. Apart from participating in the sharing economy,
there are always the basics: stay in a hotel, hostel, or B&B, the original bed and breakfast.
Airbnb has a goal of having a billion guests by 2028.
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That’s right around the corner, and the company is not thinking about how it’s impacting communities at all. Airbnb has been nothing but dismissive about these issues. While city governments are stepping in and creating regulations, individual action can go a long way towards more
sustainable and responsible options being available. With Airbnb currently dominating the millennial market now and positioned to continue having a hold of this generation as well as the upcoming one, this could mean a dramatic shift to what we now refer to as the hotel industry (Sam
& Veren, 2020). How will traditional hotels realign themselves to compete against the business?
Will millennials shift away from Airbnb? It is clear that Airbnb contributes positively to the
livelihood of its users, however, this appeal is negatively affecting this housing market and there
seems to be no middle ground. It is either a thriving Airbnb market or a severely overpriced
housing market. While it is obvious that Airbnb can be considered as a powerful community
building tool, there are other unintended social consequences that is negatively affecting the
Airbnb community such as discrimination. The key points to take away from this paper as a traveller who will think twice about using this company are that part of the income created by Airbnb
goes back to a corporation instead of the local communities (ex. Bed and breakfast, locally
owned motels), there is a huge housing crisis for rentals and house purchases and satellite hosts
may live elsewhere and take up this community housing for their income, and finally, the hospitality industry is better equipped and is more reliable to stay at regarding cancellation policies,
cleanliness, environmental policies. Positioning the short-term rental phenomenon within a housing perspective is of primary importance, as “housing is a basic human need”, which leisure
travel is not – as a logical inference (Croce, 2021).
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Although Airbnb has good intentions about its product, along with looking good from the outside
(to consumers/travellers), it seems that no one has really looked at what is happening on the inside and how it’s negatively affecting many countries and people around the world. According to
the course readings, corporate social responsibility means that an organization is committed to
influencing the people and places it affects in positive and constructive ways in alignment with
the three pillars of financial, environmental, and social sustainability. Members of a corporation
must be committed to the fundamental values of the organization, both at work and as members
of society. It seemed that Airbnb appeared to be good corporate citizens on paper with strong
corporate social responsibility (CSR) rankings, but had subsequent actions resulting in significant harm to stakeholders (Mazutis & Slawinksi, 2014). The communications strategy used in
this paper was the RACE formula by John E. Marston from one of the course readings. There
was research done in order to identify the issues of Airbnb and was analyzed on the potential impact it had on the public (hotel industry, housing market, and local communities). The concerns
were communicated to the public using articles, case studies, and journals to inform them on
these negative impacts. The evaluation and outcome of these efforts will be up to travellers and
Airbnb on whether they believe that these negative impacts are worth changing in the future.
References
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Burgen, S. (2020, February 26). Soaring rents and noisy parties: how Airbnb is forcing out Barcelona locals. The Guardian. Retrieved December 1st, 2021, from https://www.theguardian.com/technology/2020/feb/20/soaring-rents-and-noisy-parties-how-airbnb-isforcing-out-barcelona-locals
Consigli, M., Gallagher, M., Kumar, M., Mehta, N., Purnell, J., Templeton, R. (2012): EIS
Final Project: Airbnb. Hanover: Dartmouth College.
Croce, V. (2021). Airbnb, Short-Term Rental and the Future of Housing – book review. Journal
of Tourism Futures, Vol. 7 No. 2, pp. 273-275. https://doi.org/10.1108/JTF-06-2021-214
Farronato, C., & Fradkin, A. (2018). The Welfare Effects of Peer Entry in the Accommodation
Market: The Case of Airbnb. National Bureau of Economic Research. Published.
https://doi.org/10.3386/w24361
Guttentag, D. (2018, August 30). What Airbnb really does to a neighbourhood. BBC News.
https://www.bbc.com/news/business-45083954
Guttentag, D. (2013). Airbnb: Disruptive Innovation and the Rise of an Informal Tourism
Accommodation Sector. Current Issues in Tourism 18 (12): 1192-1217.
Horn, K., & Merante, M. (2017). Is home sharing driving up rents? Evidence from Airbnb in
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j.jhe.2017.08.002
Jacques, T. (2007). Issue management and crisis management: An integrated, non-linear,
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Jamasi, Z. (2017). Regulating Airbnb and the Short-Term Rental Market [E-book]. Canadian
Centre for Policy Alternatives’ Ontario Office.
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Mazutis, D., & Slawinski, N. (2015). Reconnecting business and society: Perceptions of
authenticity in corporate social responsibility. Journal of Business Ethics, 131(1), 137–
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Pforr, C., Volgger, M., Cavalcanti Marques, S., & Nusantara, A. (2021). Understanding and
Managing the Impact of Airbnb. SpringerLink. Retrieved December 3, 2021, from
https://link.springer.com/book/10.1007/978-981-16-2952-5?error=cookies_not_supported&code=1011c79e-efe0-4740-af77-d3843b7c3db6
Samaan, R. (2015). Airbnb, Rising Rent, and the Housing Crisis in Los Angeles. Laane. Published. https://www.laane.org/wp-content/uploads/2015/03/AirBnB-Final.pdf
Shabrina, Z., Arcaute, E., & Batty, M. (2021). Airbnb and its potential impact on the London
housing market. Urban Studies, 59(1), 197–221. https://doi.org/
10.1177/0042098020970865
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