Airbnb and hotels : friends, enemies or frenemies?

Abstract

Purpose – The purpose of this paper is to explore the intricate relationship between the flagship of the sharing economy, Airbnb and hotel revenue per available room(RevPAR) in South Africa. Design/methodology/approach – To identify the impact of Airbnb on hotel RevPAR, the paper used a triple difference-in-differences framework that compares changes in cities in South Africa where Airbnb started operating relative to areas without Airbnb. A total of 569 hotels were analysed. Findings – While the study finds no evidence of adverse impacts of Airbnb on hotel RevPAR, the findings show that the entry of Airbnb led to a decrease in RevPAR of budget hotels. However, its impact is more pronounced during periods of peak demand, consequently, disrupting the pricing power of hotels. Research limitations/implications – The research was based on the impact of Airbnb on hotel RevPAR in hotels situated in specific cities in South Africa. Caution is therefore required when generalising the findings of this study to other hotels in other geographic areas. Moreover, if a longer time series data set of hotels in the post-Airbnb time period could become available, it would be interesting to further investigate the time-varying dynamic effects of Airbnb on hotel RevPAR. However, the findings underscore the notion that innovations are not intrinsically disruptive but only relative to another product. In so doing, the study adds to the limited body of work in the field on disruptive innovation and to the academic discourse on innovation in tourism more broadly. Practical implications – First, the findings suggest the impact on hotels tends towards Airbnb generally playing a largely complementary role rather than a diversionary one. However, to increase RevPAR, hotels should systematically change their pricingmodels to account for flexible capacity by rethinking the wisdom of seasonal pricing and reduce prices during peak seasons to avoid inviting more competition from Airbnb. Originality/value – To the best of the author’s knowledge, this paper is the first to explore the relationship between Airbnb and hotel markets using a triple difference methodology.