A new study by the UC San Diego's Rady School of Management found Airbnb hosts in college towns increase their listing prices when there are home football games against rival teams, reducing bookings and causing a 78% reduction in rental income, it was announced Monday.
The paper, to be published in Real Estate Economics, investigates whether households set listing prices to maximize rental income.
"Airbnb hosts in college towns are individuals, not corporations and are more susceptible to biases that lead to sub-optimal pricing," said co- author Joseph Engelberg, professor of finance and accounting at the Rady School. "In this case, we found that strong emotions involved in college football rivalries confounded listing prices set by households."
For hosts in college towns, home game weekends are a big source of revenue during football season, the report contends. The six weekends equate to 60% of total rental income between August and December.
When the authors of the report compared price hikes of more than 20% during rival weekends to price hikes of more than 20% during top-ranked, non- rival weekends, they found the increase during rival games reduced the likelihood of booking by 36%. This caused a reduction in rental income by 78%.
The inability to obtain a booking on just one Saturday night of a home game against a rival team results in an average rental loss of $325, or nearly 40% of the unit's monthly mortgage payment.
Engelberg and co-authors, Barbara A. Bliss of the University of San Diego and Mitch Warachka of Claremont McKenna College, analyzed data on 1,320 Airbnb units in 26 college towns encompassing 236 games during the 2014 and 2015 football seasons.
The researchers found that hosts increase listing prices more during games with well-known rivals, compared to games with top-ranked, non-rivals.
For example, Florida State had home games in Tallahassee against Notre Dame and the University of Florida during the 2014 college football season. For the home game against the fifth ranked-team Notre Dame, Airbnb units in Tallahassee were listed for an average price of $201. However, five weeks later, on the home game against the unranked, rival Florida team, the average listing price in Tallahassee increased to $267.
With fans allowed in stadiums again for the 2021 season, the authors expect the same trend to continue.
The researchers also sought to answer if financial constraints influenced hosts' listing prices. They divided the ZIP codes within each college town into areas where residents are either "financially unconstrained or financially constrained" based on their utilization of available credit.
On average, those with and without financial constraints earn similar rental incomes on most days. However, on games against rivals, the average rental income of financially unconstrained households declines by more than 20%, compared to hosts with more limited budgets.
The units in the study resemble hotel rooms and provide accommodations that physically separate guests from hosts. Thus, rental transactions typically do not involve any interaction between hosts and guests.
Yet, that does not deter Airbnb hosts from increasing their rates and unlike hotels, they are not subject to regulatory oversight constraints.
The authors conclude their findings highlight an important issue in the sharing economy.
"The prices set by households may differ substantially from those set by corporations since the former are susceptible to the personal preferences of individuals," they write. "In this case, animosity toward rival affiliations is a preference capable of reducing household income."
