Trust in peers or in the institution? A decomposition analysis of Airbnb listings’ pricing

ABSTRACT

The present paper examines whether Airbnb listing prices differ significantly between ‘casual’ hosts and hosts with multiple listings, regarded as professionals. To this effect the Airbnb apartment market in Athens (Greece) is used as a case study. Drawing on a sample of about 3.500 Airbnb apartments listed in May 2017, the study employs, first, typical hedonic price modelling to assess the determinants of listings’ price of both groups, and then it uses the Blinder–Oaxaca decomposition methodology to examine whether there is a price gap between casual and professional hosts, the characteristics that cause this price gap and their relative contribution to it. The research finds a statistically significant difference in the Airbnb pricing between casual and professional hosts, where about a half of the price gap is attributed to the ‘better’ listings that professionals manage (in terms of size, availability of amenities and locational attributes), and a half to the different reaction hosts have towards specific Airbnb characteristics. In particular, professionals value higher (i.e. place more trust on) the Superhost badge issued by Airbnb as an institution, whereas casual hosts place trust on (and price accordingly) the evaluations provided by the guests.

KEYWORDS:

• Airbnb
• price
• decomposition analysis
• professionals
• interpersonal trust
• institutional trust

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Since 2018, the criteria that must be met in order to gain Superhost status are: (1) complete at least 10 stays in the past year or 100 nights over at least 3 completed stays, (2) have a 4.8 or higher average overall rating, (3) maintain a 90% response rate or higher, and (4) cancel less than 1% of the time, which means one cancellation per 100 reservations in a year.

2 Studies has employed different criteria to define professionalism, and so to differentiate between professionals and non-professionals, on the basis of existing regulations, local circumstances and observed practices in the market under examination. The vast majority of scholars regard as professionals those hosts who hold two or more listings, using either a threshold point and treating professionalism with a dummy variable (inter alia: Deboosere et al., 2019; Gibbs et al., 2018; Li et al., 2019; Tong & Gunter, 2020; Xie & Mao, 2017), or using a continuous variable (the number of listings) (inter alia: Chica-Olmo et al., 2020; Moreno-Izquierdo et al., 2019; Wang & Nicolau, 2017). Yet others employ more complicated criteria. Ayouba et al. (2020), for instance, draws on the French regulator’s definition to identify professionals as those who own either several listings (regardless of the number of days made available to Airbnb) or even one listing available for more than 120 days per year. Our study follows the former group of scholars, to define as professionals those hosts with more than two listings.

3 According to the Euromonitor International 2019 report, Athens is ranked 43 among the top 100 city destinations worldwide (with 6,301,300 tourist arrivals) having climbed up 18 places since 2013, whereas it has been voted second best European destination for 2020 by travelers in the online competition of the European Best Destinations took place in January 2020 (Rodriguez, 2020).

4 Airbnb, and P2P accommodation in general, emerged rather recently in Athens in the context of the reent deep economic recession the country has experienced following the 2009 sovereign-debt crisis (Balampanidis et al., 2019). In particular, homeowners and property investors alike welcomed the introduction of Airbnb as an opportunity to cover the high property costs (including tax costs) and to improve their income flows at a time where the Greek property market was in a deep and prolonged recession (Amore et al., 2020).

5 For brevity reasons, these robustness models are not presented here but they are available upon request.