As Airbnb grows, this is exactly how much its bringing down hotel prices and occupancy

As Airbnb grows, this is exactly how much its bringing down bettenburg prices and occupancyAs Airbnb grows, this is exactly how much its bringing down hotel prices and occupancyAirbnb has grown exponentially since its founding in 2008 and is expected to soon go public in an initial public offering that would rank it among the worlds most valuable hotel companies.Follow Ladders on FlipboardFollow Ladders magazines on Flipboard covering Happiness, Productivity, Job Satisfaction, Neuroscience, and moraIn fact, U.S. consumers spent mora money on Airbnb last year than they did on Hilton and its subsidiaries, the second-biggest hotel chain in the world, which was founded a century ago.As an expert in hospitality management, I was curious to know precisely how all this growth has affected the hotel industry and just how scared hotels should be.Exponential growthResearch I recently conducted with colleagues Makarand Mody and Courtney C. Suess studied Airbnbs impact on hotels performance in 10 major U.S. cities to determine how the fast-growing company has influenced three key metrics room prices, hotel revenues and occupancy rates. Our research included data from 2008 to 2017 in Boston, Chicago, Denver, Houston, Los Angeles, Miami, Nashville, New York, San Francisco and Seattle.In those cities, the number of properties on Airbnb from room shares to entire houses surged from just 51 in its first year of operation to more to 50,000 five years later and to over half a million in 2017.Some of this growth can be attributed to consumers increasing demand for authentic lodging experiences in peoples real homes at affordable prices.But another important factor is the lack of regulation Airbnb faced during its first decades, which gave it more flexibility and made it easier to add new properties to its inventory.While this is now changing as cities clamp down, this provided Airbnb with a significant competitive advantage against the hotel industry. Indeed, the typical regu latory framework in cities across America means it can take several years to add a new hotel to the market and requires permits, adherence to safety codes and more tax collection.A significant impactAnd our study showed that these advantages translated into a significant impact on the hotel industry in terms of revenues, prices and occupancy rates.Specifically, we found that every 1% increase in the number of Airbnb properties decreased the average revenue per room by 0.02%. Although this impact seems small, consider Airbnbs phenomenal year-over-year growth rate when measuring the companys impact on hotel room revenues. Accordingly, every time Airbnbs supply doubles which is its average yearly pace since inception hotel revenues fall 2%.While its hard to convert this into dollar amounts given the statistical nature of our analysis, we crunched the data on New York City and found that total potential hotel revenue lost to Airbnb may have totaled US$365 million in 2016 alone.The imp act on average room prices and occupancy rates was similar but smaller. Room prices fell 0.003% to 0.03% for every 1% increase in Airbnb supply, while hotel occupancy declined by 0.008% to 0.1%.Bearing down on luxuryAlthough Airbnb was initially perceived to be a potential threat to economy hotels defined as the bottom 20% in terms of average price we found that Airbnb also had a significant impact on the luxury segment or the top 15%.That suggests the company has successfully pushed to provide more unique experiences across the spectrum, and now theres a large inventory of more luxury experiences on the platform where one can rent designer homes and unique accommodations like cabins, boats and even treehouses all of which tend to be in the higher price range.Our findings also showed that midscale and independent hotels were the least hurt by Airbnbs increasing supply, probably because both have very similar price points. Another possible reason is that people who chose independ ent hotels perceived those properties to be more authentic compared to chain hotels, and so those consumers were less motivated to switch from independent hotels to Airbnb.Airbnbs continuing threatThese results collectively suggest that Airbnb appears to have taken a slice of the pie from the hotel industry.The question now is will that phenomenal growth continue?Airbnb continues to grow its supply of properties around the world, and it is clear to me that the company represents a permanent challenge to hotel chains.While there are efforts to regulate the home rentals that makes up the Airbnb properties and other sharing platforms which could curb its growth decisions on how to regulate these platforms have not been straightforward.In other words, hoteliers should continue to fear Airbnb.Tarik Dogru, Assistant Professor of Hospitality Management, Florida State UniversityThis article is republished from The Conversation under a Creative Commons license. 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