Study: Airbnb Benefits Local Economies, More So In White Neighborhoods

Jul 12, 2018

A Purdue professor has found that rooms rented on sites such as Airbnb benefit white neighborhoods, but do less good for black and Latino areas.

Using a combination of Airbnb and Yelp reviews, along with U.S. Bureau of Labor Statistics numbers for New York City, Purdue University business professor Mohammad Rahman says residential neighborhoods tend to see small bumps in the amount of money spent nearby.

“On average when Airbnb activity goes up by about 2%, the restaurant employment growth goes up 3%,” Rahman says.

But from the data Rahman collected, that spillover effect is not being seen for mostly black and Latino neighborhoods

“When there is enough economic activity, enough demand the restaurant, are they adding jobs? That’s what we’re after,” says Rahman. “And at least we’re not seeing that in the black areas.”

The research started with data from New York City, but Rahman says it appears to hold true for several other large municipalities, including Chicago, Los Angeles, San Francisco, Austin and Portland, Oregon.

“The intensity is likely to be different across cities, Indianapolis and so on and so forth,” he says. “In short, I believe the results and the insights we have generated should pretty much applicable to other places in the country.”

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Rahman hopes his study will start conversations about how to encourage Airbnb guests to consider spending money at businesses close to their rental.

“Being aware of it, the host in these place or Airbnb itself could actually probably help these guests to understand that these neighborhoods are safer and maybe proactively provide ideas about the restaurants that are nearby,” he says.

From these findings, Rahman is now planning to follow up with a study on whether visitors are actively spending less in those areas.

“In what ways race possibly matters in reaping the benefits of Airbnb or the shared economy activity,” Rahman says.

He plans to do this through looking for “racial code words” in Yelp and Airbnb reviews and the demographics of Airbnb guests.

“I don’t think we can dictate these sort of things, like how visitors or should not act in their personal spending or act in their own ways,” he says.

However, he sees this research being a part of a greater dialouge about how people view different neighborhoods they visit.

“We don’t live in a vacuum,” Rahman says. “It somewhat looks like that digital transformation, these platforms are sort of equally creating opportunities for us regardless of where we are, which areas we are living in, whether it’s a neighborhood, a city or a country. But the reality is that a lot of strategic interactions happen because of where we are, because of the local factors.”