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How Is The Sharing Economy Impacting The Los Angeles Hotel Market?

| Oct 17, 2016 | Commercial Leases

It is no secret that the sharing economy has put a burden on housing markets across the country, most notably through Airbnb and other short-term rental exchanges like it. As small-time investors snatch up spaces for the sole purpose of using them as short-term rental properties, housing markets have suffered.

The Los Angeles-area housing market has felt the impact of the sharing economy through severe shortages and rapidly rising rental rates, as noted by the Los Angeles Times last year. But how has the sharing economy affected the hotel industry?

Still Strong, But Vulnerable To Disruption

Although some companies are reporting little to no effect, recent research shows that traditional space providers across the country are vulnerable to disruption by the sharing economy. As real estate demands shift, hotels seem to be among the sectors most threatened.

For now, however, the hotel industry in Southern California continues to do well. As of July, hotels in Los Angeles had nearly double the occupancy rates of Airbnb rentals in the area. Showing further resilience, hotels in LA experienced positive growth of more than 8 percent, while Airbnb saw negative growth.

An Evolving Industry

The emergence of the sharing economy has certainly made waves in national and local commercial real estate markets. Hotels continue to prosper for the moment. Clearly, however, Airbnb and similar services are offering up some competition that is difficult to ignore.

Recent partnerships between major travel management companies and Airbnb – as well as Airbnb’s recently increased lobbying presence in Washington, D.C. – may be indicative of a further-changing market that could challenge hotels to adapt sooner than later.

Another factor is the fact that local government regulation short-term rentals in response to the rise of Airbnb and other sharing sites remains a highly contentious subject. As we noted in our July 28 post, these local rules are – well, to use the obvious pun – up in the air, not only in Los Angeles but across the country.