P139 – Social Sciences – Economics
Economic theory prescribes that prices are determined through the mechanism of supply and demand. This is as true with the rental market as it is with anything else. Beyond this rather rudimentary construction, however, theorizing from a supply-side viewpoint using hedonic price techniques supports the idea that the characteristics of the house—the number of bathrooms, bedrooms, etc.—and the characteristics of the environment—the neighborhood, season of the year, distance to the beach, etc.—may well also be important in determining the rental market prices. A recent study in Spain analyzing the effects of location, seasonality, and property characteristics on a set of eight “Sun-and-Beach” tourist destinations provides interesting and promising results. Examining the role these three general categories played in rental market prices was a rather novel approach in the empirical analysis of the real estate market. Until recently, most studies focused solely on the sales and rental prices of nearby properties with these nearby sales prices being considered a relative indicator of the strength of the local market. This new approach may allow for more reliable analysis since its indicators are objective and immutable.
Alongside the development of this new research methodology has been the emergence of the collaborative economy which is revolutionizing the rental market of many tourist destinations. The generalization of rent through platforms such as Airbnb has revived interest in studies relating to the determination of rental prices and the consequences of these prices in the local economy. The analysis of sales and rental prices in different countries—namely, the United States, China, and Spain—using a set of objective variables—such as the type of tourist activity, the influx of tourists, and even the prohibition of smoking, etc.—has provided a wealth of data concerning the impact these new distribution channels have had on local market real estate prices.
One conclusion these new objective indicator studies have arrived at is that traditional real estate markets have undergone an incredible disruption due to the rise of the collaborative economy. These effects result in the displacement of traditional residents from the city centers or tourist destinations to peripheral neighborhoods with poorer facilities, environments, and work opportunities. The rising prices in the main tourist cities (whether or not they are holiday destinations) undeniably changes the ecosystems of the most popular neighborhoods and contributes to increased pressure on some areas and tourist spots that are already saturated. The proliferation of low-cost transport has accelerated the demand for tourist use, further highlighting this trend. Interestingly, these developments have led local residents to take short trips to other locations at peak travel times throughout the year so that their apartments can be rented to tourists.
The analysis of the effects of tourism and rental sales using objective indicator studies is of increasing relevance in the face of the continuous changes that the industry has undergone in recent years. The collaborative economy has called into question almost all segments of business within the tourism sector by finding direct-to-consumer alternatives to traditional business models, such as hotels, restaurants, travel, and even leisure. The use of relative indicators such as the sales prices of nearby properties fails to adequately account for the disruptive effects of the growing collaborative economy. It is essential that economists focus their attention on developing pricing models that use objective measures which allow for wide comparison. Without such wide comparisons, the negative and positive effects of these collaborative online platforms cannot be adequately assessed on the regional and national levels.
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