Benefits of Airbnb to Local Economies: Restaurant Industry Trends

Over the last decade, the so-called sharing economy has made a major splash in the global market — and its ripple effects are set to grow wider. In 2022, the global sharing economy market size was valued at almost $150 billion, and it is expected to expand at a compound annual growth rate of 32.01% over the next five years, according to Absolute Reports. That means, by 2028, the sharing economy market size could reach an astounding $793.68 billion. 

The sharing economy market size growth doesn’t come without controversy though. Risks include regulatory uncertainty, privacy and safety concerns, and unfair management practices. One major sharing economy player, Uber, has faced massive lawsuits for numerous types of wrongdoing, including Americans with Disabilities Act violations, employee misclassification and negligent hiring practices. 

However, many aspects of the sharing economy have proven beneficial to consumers and to other businesses. The Airbnb sharing economy, for example, has been shown to have positive effects on local businesses, according to new research co-authored by Yongseok Kim, PhD, an assistant professor of marketing at the University of San Diego Knauss School of Business.

Benefits of the Airbnb Sharing Economy on Restaurants in Texas

Kim and his fellow researchers became interested in studying the impacts of the Airbnb sharing economy as demand for the platform grew exponentially between 2008 and 2018. To explore the relationship between Airbnb rentals and local economies empirically, he focused specifically on restaurants in Texas, using a difference in difference strategy to compare Texas state government revenue data to Airbnb review data by manually scraping consumer-facing information from the company’s website. The final data set included about 900,000 reviews of 99,805 properties listed by 61,210 distinct hosts.

“There was so much talk about the negative impacts of Airbnb, I wanted to explore if there were positives,” explains Kim. “When we look at the geographical distribution of Airbnb compared to hotels, they’re everywhere. And that style of accommodation attracts tourism demand to areas that were historically isolated from tourism, which creates interesting results.”

Kim’s research found that, in the state of Texas, a 1% increase in the number of Airbnb reviews in a zip code is associated with a 0.011% increase in restaurant revenue in the same zip code. According to the paper, “this result implies that Airbnb can explain about 12% of the median annual restaurant revenue growth.”

Put simply, the data reveals that, for every $100 worth of restaurant revenue growth, $12 can be attributed to a rise in the number of Airbnb stays in the local area.

This information is especially pertinent in less commercialized areas that have been traditionally cut off from tourism. Hotels aren’t built in these areas because they can’t fill enough rooms, but, with Airbnb rentals, just one housing unit needs to be filled at a time. And that leads to tourists visiting areas that were previously inaccessible.

For local restaurants, this uptick in tourism can lead to revenue growth. It can also create unique opportunities to maximize the benefits of Airbnb rentals in their area.

Comarketing: Restaurants and Airbnb Owners

Comarketing is a strategy in which two or more companies collaborate on promotional efforts to mutually boost their brands’ visibility, reach larger audiences and share their resources. In the unique context of the Airbnb sharing economy, this can be done by restaurant owners and Airbnb owners.

Comarketing for Airbnb units and restaurants can take many forms. It could mean listing local restaurants in the online Airbnb description, providing an in-home neighborhood guide that includes restaurants or even partnering to offer a discount to Airbnb guests at restaurants. These strategies are mutually beneficial because restaurant owners stand to gain more business while Airbnb owners are able to showcase the character of the local area, which could lead to increased bookings.

“What’s interesting is that we see a greater impact on local restaurants, not chains,” says Kim. “So, in more residential areas, Airbnb could be a good thing for small businesses.”

According to the research paper, “home-sharing platforms can increase economic activity for businesses and in neighborhoods that are more likely to need it the most.” The paper demonstrates the benefits of Airbnb rentals to the local economy — but Kim warns that this isn’t the only factor that should be considered.

Objections to Airbnbs

In residential and rural environments, the Airbnb sharing economy is associated with positive economic impacts. However, increased tourism isn’t always welcome. For example, unruly large groups can disrupt the peace in an otherwise quiet neighborhood.

Additionally, analysis conducted by the Economic Policy Institute suggests that an expansion in the number of available Airbnb units in an area is similar to gentrification in that it can slowly increase the property values in the area to the detriment of long-term residents, who can be pushed out due to financial constraints. But this is typically relegated to major cities — not residential areas.

Kim suggests that local officials weigh the benefits of Airbnb rentals, such as local business revenue growth, against potential drawbacks. “It’s not a one-size-fits-all,” he says. “There are lots of important factors to consider, and economic growth is one of them.”

Ongoing Research: The Influence of the Airbnb Sharing Economy Is Felt Beyond Restaurants

While Kim’s research demonstrates a positive association between Airbnb reviews and local restaurant revenue, ongoing research suggests that the economic impact likely goes beyond the food and beverage industry.

Other local businesses such as clothing stores, entertainment venues, grocery stores and gift shops are likely to reap similarly positive benefits from Airbnb units becoming available in their communities. Tourists usually spend money in the places where they stay, whether that’s on eating out, going to a show or buying a souvenir. For local businesses that would ordinarily not have access to tourism revenue, this could mean a welcome bump in business.

Study What Excites You at the University of San Diego

The University of San Diego Knauss School of Business is closely studying previously unknown ways for local economies and businesses to take advantage of new opportunities. Professor Yongseok Kim and his fellow faculty members are uncovering innovative ways to help small businesses thrive, and they’re committed to passing those insights on to their students.

Visit the Knauss School of Business to explore degree offerings, get acquainted with the University of San Diego student experience and see how you can study what excites you. 

Recommended Readings

Auditor-Client Communications: Industry Implications for Engagements 

Finding Opportunity in Crisis: Developing Strategies for Managing Climate Risk 

How Underlying Consumer Values Can Support New Strategies for Nonprofit Organizations

Sources:

Forbes, “The Airbnb Effect on Housing and Rent”

Yahoo Finance, “Sharing Economy Market Size 2023, Share │ Growing Report [2028]”

Yongseok Kim is an assistant professor of marketing at the University of San Diego's Knauss School of Business. In his research, Dr. Kim focuses on the empirical analysis of a variety of societal, economic, and technological changes and measures their impact on business.