Deconstructing Airbnb: Pricing, Seasonality, and Optionality in the Sharing Economy

Abstract

The rapid growth of Airbnb, a virtual platform that allows users to quickly and efficiently rent and lease property, has caused significant disruption in the hospitality and real estate markets. Blurring the lines between hotel, rental, and residential properties, its short-term nature, accessibility, and versatility make it a promising resource for information-gathering and potential investment. We examine the relationship between Airbnb and broader economic factors by creating a regime-based market model through conventional economic metrics. We then use Monte Carlo simulation to evaluate pricing and listing strategies for a potential Airbnb property.