Airbnb and Hotel Pricing Dynamics under Compression Period: Madrid 2019 Champions League Final

Athos Valsecchi

Student thesis: Master thesis

Abstract

By studying the case of the Madrid 2019 Champions League Finale, this work aims at providing some empirical evidence about how hoteliers set their prices in an intertemporal setting with heterogeneous costumers. Furthermore, this thesis represents the first study shedding empirical light on the intertemporal pricing behavior of hotels and Airbnbs. The empirical analysis was carried out by scraping daily from the 1st of May until the 31th of May the webpages of Booking.com and Airbnb. Additionally, semi structured interviews have been conducted with hotels from the Madrid market in order to gain better insight about their pricing decisions and to assess to what degree Airbnb’s offer might threat hotels during a compression night. The evidence suggests that both Airbnb and Hotels make an intense use of dynamic pricing during the Champions League Final. Even though hotel prices were remarkably higher compared to Airbnb rates, the prices were highly correlated showing a correlation coefficient of 0,93 during the entire sample period. However, the day before the Champions League Final, when it came to address to last minute travelers, the average price for hotels slightly increased whereas the Airbnb one kept on decreasing. When it comes to decide their prices, hoteliers in the Madrid market didn’t take into consideration Airbnb rates, as they believe that Airbnb does represents a direct competitor. In conclusion, we show that even though Airbnb offered unquestionably lower price for an accommodation during the Champions League final, customers weren’t substituting hotels for Airbnb suggesting that Airbnb’s inventory of hosts and private homes can help hotels and cities contend with the challenge of having an adequate supply of rooms for tourists and business travelers to stay in during major events.

EducationsMSc in Management of Innovation and Business Development, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages86
SupervisorsPankaj Kumar