Airbnb guests spend less money in black and Hispanic neighborhoods

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Last year, Airbnb partnered with the NAACP to help encourage more people of color to list their properties on the short-term rental site. The hope was that this would benefit not only African-American and Hispanic property owners, but also nearby businesses given that 50% of guest spending occurs in the neighborhoods where guests stay, according to Airbnb.

However, the spillover spending effect is much greater in predominantly white neighborhoods compared to black or Hispanic neighborhoods, according to a study published this week by Purdue University Krannert School of Management professor Mohammad Saifur Rahman and Ph.D. student Mohammed Alyakoob.

Users of the home-sharing platform generally eat at local restaurants near where they are staying. In fact, the study authors found that the presence of Airbnb guests in a neighborhood increased restaurant employment rates in response to increased demand, driven in part by Yelp reviews. Ultimately, the researchers estimate that this translated into $1 million of additional tourism activity in contrast to ten years prior when Airbnb did not exist in New York City.

That economic effect is not realized, however, in neighborhoods where 50% or more residents are of black or Hispanic origin.

Initially, Rahman said that his team was mainly interested in seeing if Airbnb produces an economic spillover effect on local restaurants. To measure the economic impact the researchers analyzed employment data from the Bureau of Labor Statistics, Airbnb, as well as 3.5 million Yelp reviews corresponding to more than 34,000 restaurants in New York City. Analyzing the Yelp reviews helped them understand how guests are selecting restaurants.

“When we focus on the predominantly white areas, the estimates suggest that there is a 4% employment increase in the service industry in response to a 2% increase in Airbnb activity,” said Rahman. “In contrast, our estimates suggest that in predominantly black or Hispanic areas, despite Airbnb activity, guests aren’t going to restaurants at the significant level that would cause them to hire more employees.”

Nick Papas, an Airbnb spokesman, disputed the findings of the Purdue research, which he said was “deeply flawed.” He said, “Any rigorous analysis should compare the traditional hospitality industry to new accommodation choices.” He also pointed out that Airbnb has surged in the predominantly black neighborhoods of Washington, D.C.

However, it is not clear why guests are not spending as much money in minority neighborhoods. Rahman recommends that Airbnb partner with more hosts to actively promote local restaurants to their guests.

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