Hotels benefit from stricter regulations on short-term rentals in European cities

Abstract

The aim of this study is to examine whether the introduction of stricter rules on short-term rentals (STRs) in some European cities will have an impact on hotel overnight stays. The treatment group consists of cities with the strictest regulations in Europe (Amsterdam, Barcelona, Berlin, Paris and London). The coarsened exact matching method is used to select an appropriate control group consisting of cities where there are no similar regulations but which are of a similar size in relation to population and relevant tourist space. Weighted fixed-effect models are used to estimate the average treatment effect on the treated. The specification also includes variables controlling for accommodation prices, value-added tax (VAT) rate on accommodation, terrorist attacks, real income of the destination country and time. Results show that stricter regulations for STRs in the five cities lead to an average increase in overnight stays of around 9%. This suggests that STRs such as Airbnb are substitutes for hotel accommodations and thus strong competitors. In addition, terrorist attacks lead to a decline in overnight stays, while an increase in VAT on accommodation reduces hotel overnight stays.