By Francisco Nobre - PhD - Applied Microeconomist & Postdoctoral Research Associate at Aston Business School and Teaching assistant at Royal Holloway University of London.
Portugal news - Over the last decade, short-term rentals (Airbnb-type accommodation) have become a highly debated topic and understanding the full economic ramifications of such peer-to-peer accommodation platforms has turned into an interesting and fruitful research question for academics.
Exploring the impact of Airbnb in Portugal is of vital importance: Not only have such types of accommodation experienced a drastic surge since 2014, as depicted in the figure below, but they have also raised concerns among residents, due to their effect in increasing house prices and reducing housing supply. In fact, last month Lisbon’s municipal assembly approved a local referendum on banning short-term rentals.
Previous research has shown that indeed Airbnb leads to increases in house prices, in cities such as Lisbon and Barcelona. Studies have also identified its role in driving leisure amenities. For example, it was found that in Madrid, 10 Airbnb rooms in a neighborhood led to an opening of one more restaurant.
However, the impact of short-term rentals on the performance of local businesses remained largely unexplored. Hence, together with João Pereira dos Santos and Ronize Cruz, we have analyzed how Airbnb shaped local businesses, in Lisbon and Porto, the two largest urban centers in the country.
To accomplish that, we started by identifying the level of exposure to Airbnb, at the civil parish level, given by the ratio of new short-term rentals to dwelling stock. Then, we estimated the effect of such exposure on business performance indicators between 2016-19.
We show that higher exposure to short-term rentals leads to an increase of firm closures, especially for low-productivity enterprises. We argue that plausibly this is due to an increase in the rents of commercial properties. Evidence also suggests that more exposure to Airbnb leads to increases in sales for both resident-oriented (grocery stores, retailers) and tourist-oriented firms (restaurants, bars, cafes), with the latter also experiencing significant rises in the number of employees, wages and liquidity.
Neighborhoods with a higher share of Airbnb accommodation are more likely to see entry firms being oriented towards catering tourist needs, potentially leading to a clear separation between touristic and residential areas. Moreover, entry firms have higher turnover but are not necessarily more productive or profitable.
In our research, we show that short-term rentals can drive the expansion of surviving firms, especially tourist-oriented enterprises, while reshaping the urban business landscape, creating a division between touristic and residential areas, thereby demonstrating the broader social and economic implications of these accommodation services.
Link for the full paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4982275
Author: Francisco Nobre - PhD - Applied Microeconomist & Postdoctoral Research Associate at Aston Business School and Teaching assistant at Royal Holloway University of London - Website Francisco Nobre
Other Authors: João Pereira dos Santos and Ronize Cruz
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