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Impact of Airbnb on Hotel Industry in Helsinki

Haki Fissha

Ashmita Shrestha

Degree Thesis

International Business

2017

DEGREE THESIS

Degree Programme: International Business

Identification number: 17315

15480

Author: Haki Fissha

Ashmita Shrestha

Title: Impact of Airbnb on Hotel Industry in Helsinki

Commissioned by:

Abstract:

The sharing economy has opened doors to many business ideas within the hospitality industry but at the same time disrupted longstanding industries. Airbnb is one of the most famous company part of the sharing economy that has created a reliable marketplace for people to advertise, find and book an interesting and unique accommodations all over the world. The fast growth of this sector and Airbnb is due to technological advancements that provide an easy access to the tourism industry all over the world. It has put many b will be a threat, and if it has affected or will affect their business in the future. The aim of this research is to find out if Airbnb has affected the performance of hotels in Helsinki. The target groups are from hostels to five star hotels. The study will attempt to if there is any competition between hotels and Airbnb. If so; has it influenced the hotel occupancy rate, price and revenue? A qualitative research method is used to conduct this research. Semi-structured interviews with 6 hotel managers were conducted in order to significant growth in Helsinki. The results indicate that hotel performance in Helsinki has continued to grow while more and more hosts were renting out their places on Airbnb. Hotels have been very successful at selling their rooms with overnight stays in hotels showing an increase along with the occupancy rates and the RevPAR. All in all, Airbnb is not considered a threat to the hotel business in Helsinki as it does not have a negative effect on the performance of hotels. It is not even considered a competitor by hoteliers.

Keywords: Sharing economy, Airbnb, Hotel industry

Number of pages: 51

Language: English

Date of acceptance: 20.12.2017

Table of Contents

1 INTRODUCTION .................................................................................................4

1.1 Research Aim and Questions ................................................................................ 5

1.2 Thesis Structure ................................................................................................... 5

2 Theoritical fremework .......................................................................................6

2.1 The Sharing Economy........................................................................................... 6

2.1.1 Future of sharing economy ...................................................................................... 8

2.1.2 Impact of Sharing Economy ................................................................................... 11

2.2 Airbnb ............................................................................................................... 13

2.2.1 How Airbnb works .................................................................................................. 14

2.2.3 Positive and Negative effects of Airbnb ................................................................. 16

2.2.4 Impact on Hotel Industry ....................................................................................... 18

2.2.5 EU Regulations about Airbnb ................................................................................. 19

2.2.6 Airbnb market in Finland and Helsinki in particular .............................................. 20

2.3 Hotel Industry in Helsinki ................................................................................... 24

2.3.1 Occupancy rates ..................................................................................................... 26

2.3.2 Pricing ..................................................................................................................... 27

2.3.3 Revenue .................................................................................................................. 29

3 RESEARCH METHODOLOGY ............................................................................. 31

3.1 Data Collection .................................................................................................. 32

3.2 Data analysis ..................................................................................................... 33

4 RESULTS .......................................................................................................... 33

4.1 Background Information and Occupancy rates.................................................... 33

4.2 Pricing ............................................................................................................... 37

4.3 Revenue ............................................................................................................ 38

5 DISCUSSION .................................................................................................... 41

5.1 Reliability and Validity ....................................................................................... 43

5.2 Limitation .......................................................................................................... 44

6 CONCLUSION................................................................................................... 45

7 REFERENCES .................................................................................................... 46

8 APPENDIX ....................................................................................................... 52

Figures

Figure 1 Willingness to Participate in sharing communities (gsma) ................................ 9

Figure 2 Airbnb listings growth (Golden, 2017) ............................................................ 15

Figure 3 Active listings of Airbnb in Helsinki (Airdna) ................................................ 20

Figure 4 Demand growth of Airbnb listings in Helsinki (Airdna) ................................. 21

Figure 5 Market Revenue of Airbnb in Helsinki (Airdna) ............................................. 22

Figure 6 Occupancy rate of Airbnb listings in Helsinki (Airdna) .................................. 23

Figure 7 Monthly RevPAR of entire home Airbnb listings in Helsinki (Airdna) .......... 23 Figure 8 Average Daily Rate of Entire home listing in Airbnbin Helsinki (Airdna) ..... 24

Figure 9 Night spent in hotels in Helsinki (Statistics Finland)....................................... 25

Figure 10 Occupancy rate of rooms of hotels in Helsinki (Statistics Finland) ............... 27

Figure 11 Prices of rooms in Helsinki (Statistics Finland) ............................................. 29

Figure 12 RevPAR of hotels in Helsinki. (Statistics Finland) ........................................ 30

Figure 13 Average rate for a standard room ................................................................... 38

Tables

Table 1 Background Information of Hotels Interviewed ................................................ 33

Table 2 Additional services provided by the hotels interviewed .................................... 38

4

1 INTRODUCTION

The sharing economy currently has opened doors to many business ideas within the hospitality industry. Individuals are proposing to share their private apartments and houses, cars and other personal materials temporarily for travellers from all over the world; and, travellers are willing to use other individual spare materials cars or even apartment rooms. Airbnb was found in 2008 as a platform that helps travellers seeking accommodations to connect with individuals who have extra rooms in their house. It allows hosts to utilize their spare rooms and help them generate income without putting much effort. The fast growth of this sector is due to high-speed internet connection and provided an easy access to the tourism industry all over the world. It has put many questions in many hotel owners mind if it will be a threat or if it has or will affect their business in the future. This paper will be based on collected information to finding out if the growth of Airbnb has any impact on the performance of traditional accommodation providers within Helsinki. Airbnb has created the belongingness feeling to travellers by making them part of the local society at their any preferred destination. The fact that travellers can be in touch with their hosts had made them to choose Airbnb; We all enjoy travelling even though it is for so many reasons and finding a good accommodation with perfect price and good hospitality is one of the important part of planning a trip. Many people want to experience the local life while traveling. They want to feel part of the local society to have a good understanding about the city that they are staying in which was not easily possible in the older days but now credits to the founders of Airbnb it is possible to find a good place with a host that has a better knowledge about certain destinations. Currently Airbnb works in a lot of countries attracting many customers since the price is fair and help them build new friendships with locals. The interaction with the local society and the fact that they are making friends has helped Airbnb to grow faster in the past years. Not only travellers but hosts are enjoying the whole Airbnb process. They try to bring out the best in order to get a rating; they put some extra services in order to challenge their competitors. 5

1.1 Research Aim and Questions

The aim of this research is to find out if Airbnb has affected the performance of hotels in Helsinki. The target groups are from hostels to five star hotels. The study will attempt to find out if Airbnb presence has caused any impact on hotels in Helsinki region. If there is any competition between hotels and Airbnb. If so; has it influenced on the hotel occupancy rate, price and revenue. To reach this aim, this research will try to answer the following questions;

1. Has the presence of Airbnb affected the performance of hotels in Helsinki?

2. Does it have an effect on the occupancy rate, pricing and revenue of hotels?

1.2 Thesis Structure

The first chapter is Introduction, where the researcher demonstrates the reasoning behind the choice of the research topic, the overall purpose and aim of the study is indicated as well as structure of the paper is outlined. In the second chapter, the literature review is presented where readers are provided an insight into the topic of sharing economy reviewing general definitions and driving forces supporting this phenomenon. Also, the future of the sharing economy is discussed and its impact on tourism. Further Airbnb is introduced; this section focuses on the fast pace of Airbnb development and its impacts on hotel industry. This part also mentions about the current growth of Airbnb in Finnish market in particularly in Helsinki area. Also, the performance indicators used in the hotel industry are explained. The concept of occupancy rates, pricing and revenue is introduced and key figures of performance indicators of hotels in Helsinki is also included. The third chapter of the thesis is the discussion about research methodology, merged with the explanatory section about data collection and data analysis. The fourth chapter contains the major findings collected during the research conducted along with relevant information needed for accomplishing the research aim. 6 The fifth chapter of the thesis is assigned to the discussion derived from the comparison of the research and theoretical observations. Also, the reliability and validity andquotesdbs_dbs3.pdfusesText_6