The Pricing of European Airbnb Listings according to Demand Variations

A Difference-in-Differences Approach Employing the COVID-19 Pandemic and a Continuous Treatment

Date

2022

Authors

Francesco Milone, Ulrich Gunter (Modul University Vienna), Bozana Zekan (Modul University Vienna)

Category

Dissemination

Tags

#Airbnb #COVID-19 #Difference-in-Differences (DID) #Pricing #Two-Stage Least Squares (2SLS)

Presented at

8th IATE (International Association for Tourism Economics) Conference, 28th June – 1st July 2022, Perpignan (France)

Awards

Best Paper Award

Abstract

The COVID-19 pandemic is a major exogenous shock impacting the global tourism industry over the last two years. Given its peculiarity, this paper analyzes one of the most intriguing questions in the Airbnb literature – the pricing of Airbnb listings – while taking advantage of a difference-in-differences methodology, which largely draws on differences in country-level response policies to the pandemic. Relying on a dataset containing weekly information from 130,999 continuously active listings across 27 European countries from 2019 to 2020, this paper firstly investigates the exogenous impact of response policies (proxied by the COVID-19 Stringency Index) on demand and, secondly, accounting for the endogeneity of demand for prices, analyzes pricing responses to demand variations. Results show that: i) increases in the COVID-19 Stringency Index cause significant declines of Airbnb demand; ii) increases in demand cause, on average, increases in Airbnb prices; and iii) the pricing strategy differs between commercial and private hosts.