Airbnb is a poster child for the new sharing economy– the idea that socially driven startups can disrupt entrenched industries like the hotel business, the taxi industry and the education market, with better pricing and availability. So far, Airbnb is off to a fast start. It has rooms listed in 35,000 cities and is forecasting $1 billion in bookings this year.
According to Priceonomics, its rooms and apartments are often significantly cheaper than what hotels charge. In a study compiling the median rental price points of hotel rooms and Airbnb options (both entire apartment rentals and private rooms in occupied apartments), Airbnb consistently beat hotels in cities across the country. On average, Airbnb apartment rentals are 21.2% less expensive than hotel rooms, and a private room in an apartment is on average 49.5% cheaper. Airbnb can undercut hotel rooms in large part because of the lack of overhead.
One interesting note is that in places where there are a lot of Airbnb listings — like San Francisco or Washington, D.C. — there are wider price differentials between apartments and hotels. That makes sense, just like a cluster of hotels in a resort town would likely lead to greater competition and presumably better pricing options for consumers. Also, not surprisingly, the price of an apartment on Airbnb varies greatly by neighborhood.
The pricing trends don’t hold for every city, though. In some places — like Las Vegas and Houston — the median price of the hotel is actually below that of the Airbnb apartments. And in Tucson, Ariz., the hotel is only $9 more than a room in an already-occupied apartment, according to the study. These exceptions are largely a function of the real estate patterns in those markets.
Another important note: Priceonomics is addressing the median prices, not necessarily the lowest in any particular region. Also, regulators in cities like New York are starting to crack down on Airbnb for alleged violations of the so-called illegal hotels law, so it’s unclear whether the market for room and apartment sharing will remain as vibrant in the coming months in some of those cities.
Here’s Airbnb co-founder and Chief Product Officer Joe Gebba speaking at our RoadMap conference last year.