The COVID-19 pandemic has had far-reaching and devastating effects on the hospitality industry, with a substantial increase in foreclosures and a decrease in demand worldwide. However, trying to measure the effects on the accommodation market may be tricky since, resilience-to-shock varies between firms depending on the size of the firm and the amount of capital reserves. In contrast to the traditional hospitality market, the sharing economy (comprising electronic booking platforms for accommodation e.g. Airbnb) is at the supply-side dominated by smaller firms, as well as individuals that are more directly affected by the pandemic. In the present study, we set out to examine the vulnerability of and the current market affairs in the hospitality market. We use two empirical models: multilevel logistic regression to conduct survival analysis and the price elasticity of demand model to understand new market structure of the hospitality market, on the basis of an extensive dataset that contains the dynamics of the Airbnb market between January and August, in both 2019 and 2020. We construct a price elasticity of demand model with several characteristics of lodging including price, location and also an indicator of local competition. By comparing the elasticities between the same period in 2019 and 2020 in six world cities, chosen to capture global variations in pandemic spread patterns, we are able to show how consumer behavior responds to the pandemic and the various public policies that were put forth during the past six months. The results reveal potentially devastating hardships for the Airbnb market and hosts in the major cities as a result of the immediate demand and supply shocks. The estimated price elasticities demonstrate a high volatility during the pandemic departing from their seasonal fluctuations towards a less elastic trend. Especially, the elasticities for the luxury segment point to a striking departure from the law of demand, where the inverse relationship between demand and price does not hold for an adjustment period at the beginning of the pandemic. Finally, we also address the geographical variation in response to the pandemic among the six major cities.
Tuesday, March 16, 12:30
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