Thesis
The profitability of Airbnbs relative to long-term rentals in Los Angeles
Washington State University
Master of Science (MS), Washington State University
08/2020
DOI:
https://doi.org/10.7273/000004138
Handle:
https://hdl.handle.net/2376/125112
Abstract
With the introduction of Airbnb, the short term rental market has been greatly expanding. It is assumed that profit-maximizing property owners would only choose to use a short-term platform if expected net revenues from doing so exceeded the expected net revenues of renting to a long-term tenant. Information asymmetries in occupancy rates, net nightly rental fees, and other short-term rental factors, however, might lead property owners to overestimate the profitability of short-term rentals. This study estimates the yearly revenues earned from 19,970 short term rentals in metro Los Angeles from March 2018 to February 2020 using data scraped from the Airbnb website and compares it to yearly revenues over the same time period for 4,443 comparable properties in the long-term (annual lease) rental market. It was found that a property listed on Airbnb is expected to generate $17,027 less per year than a comparable long-term rentals, on average. This result is sensitive to assumptions about Airbnb occupancy rates, but the gap remains even under the most optimistic occupancy assumptions. This difference in revenues indicates that property owners may be over-estimating the profitability of Airbnb rentals or that the annual costs of operating an Airbnb is lower than a long-term rental.
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Details
- Title
- The profitability of Airbnbs relative to long-term rentals in Los Angeles
- Creators
- Richard Burdette Houghton III
- Contributors
- Joseph H. Cook (Advisor) - Washington State University, Economic Sciences, School of
- Awarding Institution
- Washington State University
- Academic Unit
- Economic Sciences, School of
- Theses and Dissertations
- Master of Science (MS), Washington State University
- Publisher
- Washington State University
- Identifiers
- 99900890781001842
- Language
- English
- Resource Type
- Thesis