Airbnb has gained exponential traction since its debut in 2008. The user-friendly online housing marketplace seemed to have left its competitors in the dust. Besides creating a lucrative shared economy business approach, Airbnb has made waves in the Chicago real estate industry while also causing their competitors to re-evaluate their approach.
Owners of Chicago real estate can use the Airbnb platform to connect with travelers and rent a spare room or entire home as a short-term stay. All booking details occur online. The automated process has become so optimized that even the key exchange often won’t even require the host to be there. This give guests and at-home feel when they arrive at their Chicago destination.
Airbnb’s Impact on the Hotel Industry
As it happens, the larger hotel and hospitality industry isn’t exactly thrilled about the local and global success of Airbnb. A report from Morgan Stanley found that 42% of Airbnb customers had replaced traditional hotel visits by booking using the Airbnb online platform. What’s more, Airbnb hasn’t been subject to regulations and fees common among hotels until recently.
But hotels aren’t just sitting back and accepting Airbnb’s dominance. Old school brands have been expanding their business models and services to try and compete, but with very modest success. This pushback has prompted a notable shift in hotel operations that will be felt in the industry for years to come.
Though some competitors may have more listings, platform functionality, pricing, and location variety can’t seem to compete. Naturally, Airbnb receives some backlash, but not all of it is from competitors.
How Does Airbnb Effect Chicago Real Estate
A new analysis from the Economic Policy Institute attempts to more comprehensively catalog these local impacts–and measure what, if anything, cities including Chicago, get out of the deal.
Research shows that the added exposure due to Airbnbs in Chicago continues to drive the hosting business and generate revenue to local businesses creating another huge win for the sharing economy. In 2018, Chicago Airbnb hosts earned over $77 million in income, up from $67 million earned in 2017. Airbnb operations in Chicago generated a total economic impact of $345 million in 2017, up from $331 million the previous year and increasing steadily.
However, since the Airbnb business models help homeowners take existing housing stock and turn some of it into short-term units, it, along with other economic factors, have impacted Chicago Real Estate prices by repurposing units that might otherwise be long-term housing, Airbnb is blamed for straining an already supply-short market. Rent rises in the process.
How the Good Outweighs Concerns
Airbnb’s impact in Chicago is a top of debate among property owners, city government leaders, and community members. The news at the beginning of 2018 says that Airbnb raised $2.9 million for homeless services.
Still, some argue that Airbnb rentals hurt the market. It’s said that short-term rentals take away the option for longer-term renters to claim space, leaving fewer rental options and driving up prices. Some speculate that encouraging visitors may take away from the united sense of community. For these reasons, Chicago has put in regulations with the goal of keeping the sense of community and prevent a price influx.
Proponents for Airbnb in Chicago know that the guests bring money into the Chicago communities where they are located. A visitor who might normally choose a hotel in the heart of Downtown Chicago instead chooses a unique rental in a lesser-known neighborhood. The restaurants, boutiques and other businesses in that area earn increased revenue as more guests stay in the area.
For Chicago property owners and investors, the home-sharing market offers a major benefit. In 2017, according to data from Zillow and Airdna, Short-term rentals on average made 40.1% more money than longer-term rentals. Airbnb investment properties give owners a major source of income to offset the cost of the mortgage. For homeowners who rent a room or the whole unit, home sharing is a way to supplement income or help pay for the home. For business owners with investment properties, it maximizes profits.
There are always pros and cons as there are with most things that significantly alter the way people live, spend, and travel. Airbnb was founded on the principles of shared resources and will continue to strive for a balanced economy amongst Chicago’s visitors, homeowners, and locals.