THE PRICE IS RIGHT - IDENTIFYING KEY PRICING SIGNALS OF AIRBNB LISTINGS

Abstract

Despite extensive research on the determinants affecting the property and rental prices, there is still virtually no evidence of the pricing of short to medium term lettings such as Airbnb. Alongside growing global interest in short-term lettings, Airbnb Asia listings crossed 1 million listings in 2019. Therefore, changing the way properties and entire neighbourhood are being used has important consequences for both the real estate and hospitality industry.

This thesis aims to investigate the key pricing determinants of Airbnb in Australia, exploring the various price effects of different categories of variables (i.e. geographical location, physical characteristics, host status and operational functionality), both across geographic segments and across time. The distinguishing feature of this work is to use keywords such as “walking” and “wheelchair accessibility” to identify key amenities. Indeed, the results suggest that such physical characteristics and amenities are the most significant contributor to pricing variation, bringing about significant positive price premia on listings.

As expected, the second most important set of determinants of value concerns the geographical location, with properties that are located at the heart of the city enjoying substantial price premia relative to listings in the suburbs. Nevertheless, the fact that location characteristics are not dominating, illustrates a distinct difference from long-term lettings where location is the most important contributor rather than physical amenities. Furthermore, segmentation of operational days for a listing, as well host status and background such as the presence of Superhost status, number and rating of reviews are found to have economically relevant but overall negligible contributions to the prices of Airbnb listings.