The article doesn't make it clear whether it was AirBNB itself that increased prices, or whether it was hosts. And moreover, it also doesn't even give one example of a before and after price. I'd like to see at least one example.
Host here. Almost nobody sets prices manually. You either use Airbnb's pricing algorithm, or one from a third party. Either way it's set automatically based on local occupancy rates/hotel prices/etc.
Which is an argument that this is not truly gouging - there's just a demand surge and a supply crunch and the market responds the same way as if it was a business conference in town.
Another thing worth pointing out is that the market of available Airbnbs clears out from the cheaper units first. So it may look like prices are shooting up, but really it's just that all the normal priced ones are gone.
> Which is an argument that this is not truly gouging - there's just a demand surge and a supply crunch and the market responds the same way as if it was a business conference in town.
So then real price gouging is... what, when you charge more than everyone else (and drive all your customers away to competitors)?
> then real price gouging is... what, when you charge more than everyone else
Honestly, a myth. It’s aesthetically pleasing (outside perishable personal essentials, like staples in a crisis). But if you have less housing than the population, the problem is the lack of housing. Getting uppity about pricing while builders wait months to get permits issued is performative at best.
Gouging: When I have a significant control of the supply, and set prices up in a way that significant parts of the supply get wasted because my profits are maximized anyway.
So one can argue that some cartel-like algorithms are price gouging, but it's unlikely to be what a provider of a lone AirBnb unit will do, as for them, going empty is worth zero.
Yeah, funny how property markets always seem to have that same response.
I bet most of those same people would lose their minds if their favourite restaurant tried to double prices overnight. "Yeah we sold a lot of burgers yesterday..."
popularity is irrelevant - the context is day-to-day. Prices change slowly over time of course, but that's different.
If there was less egg available for a given day, McDonald's [^1] don't charge more for a McMuffin, they sell fewer McMuffins
I'd argue AirBnb's approach here is more like Uber's surge rates. Which are clearly more extreme than anything taxi cabs did (bar the occasional bad actor)
[^1]: mcdonalds is stretching the "restaurant" analogy here, but they have a higher consistent turnover so seem like a closer comparison
I wonder how much "value" would actually be lost from the market if prices were simply fixed a month or two ahead of time to exclude those price shocks.
Is the price reflective of the market though? I just negotiated an airbnb outside of airbnb at 40% of the platform quoted price and it was not a deal either but the market price. Airbnb massively inflates prices for everyone to create an expectation of how much things cost.
> Almost nobody sets prices manually. You either use Airbnb's pricing algorithm, or one from a third party. Either way it's set automatically based on local occupancy rates/hotel prices/etc.
This seems pretty undesirable. Very easy for Airbnb/third party to increase prices even without demand just to increase their prices.
We recently saw a similar price fixing lawsuit for renters. Landlords, co-ordinating together, ended up increasing prices of Condos across major American cities (via means of a third party). The consumer ends up paying unnecessarily high prices in an inelastic market.
What definition of gouging are you using that conflicts with “there's just a demand surge and a supply crunch”?
“the market responds the same way as if it was a business conference in town.” Normal people definitely complain about that and use the word gouging when they do so.
Huh. I know a number of AirBNB hosts (the new kind that treat it like a business, not the old kind) and they all absolutely do model the market out months in advance and 100% manually set the prices.
This reminds me of the time my middle-school history teacher decided to bring in one of the student’s financial advisor parents to defend price-gouging on gas during Hurricane Katrina evacuation and subsequent exodus.
It was an unconvincing argument then, and is an unconvincing argument now.
That’s awfully hard to do well though, especially setting up a system quickly.
Sure, you can limit amount per customer per store. But then someone comes in with their husband and double dips, and then go back through in 10 minutes hitting different checkouts, or just go through self checkout, and then go to different stores…
All the toilet paper is still gone, encouraging fear in other people to do the same as the couple above.
The alternative would have been “you idiots are buying all the toilet paper? Fine. It’s 5x more expensive now.”
People then see that toilet paper is still in stores and prices can come down gradually but rapidly, and if people start being nervous again prices can quickly raise to stamp that out.
> But then someone comes in with their husband and double dips, and then go back through in 10 minutes hitting different checkouts, or just go through self checkout, and then go to different stores…
During a panic toilet paper shooping spree that would allow like 100 other customers to also get toilet paper.
if airbnb raised the prices and the market isn't there, rental income will go down and vacancy rates will go up and airbnb will lower prices again.
if airbnb raised the prices and the market stayed strong, they'd raise the prices more.
the higher the prices go, the more people with extra space to rent out will take notice and clean up their garage, or go stay at grandma's or whatever, creating more housing out of thin air (actually, on the margin) helping alleviate the housing shortage.
the same pattern would happen if hosts raise the prices themselves. also, if all the cheap places get rented, the market will appear to have higher prices even if nothing has changed.
let markets figure out prices, period. that's what markets do, it's one of mankind's stellar achievments. It's why the west is successful and communism fails.
if airbnb has monopoly power and is manipulating prices, fix that problem any day of the week, don't use a massive fire that destroys housing as evidence of anything, it means nothing, that's normal market correction.
(while I think this isn't the affordability driver) this point about prices isn't really true - compare the graphs of two markets: one with a horizontal demand curve (perfect competition) and one with a downward-sloping demand curve (monopoly) - the first will have no deadweight loss, the second will have substantial deadweight loss.
Markets tend to the second and need state intervention in order to prevent the proliferation of monopolies. Functionally this is intervention every time price coordination happens, which... is pretty clearly what AirBNB is doing!
This is all economy 101, rational preference BS. The reality is that suppliers very often collude to increase prices universally (particularly for things like housing, where there is almsot a natural monopoly - you can't bring in more land to the same city), and buyers have no way of knowing or acting on this. Airbnb is perfect for organizing such collusion, acting as a virtual cartel.
econ 101 actually explains collusion as you are describing, but you need evidence to show perfect collusion of all participants to make the point you are trying to make. the average person in LA probably knows friends who rent out spaces and would tell you that their friends are not part of a cartel
but the real estate shortage and natural monopoly you allege (it's not true as I already pointed out) would explain the post fire short term situation, so you don't need to grasp for conspiracy theories.
as i said already, airbnb's potential to manipulate RE prices is a problem to be concerned about in normal times. When a fire burns down much of the city, prices go up because there is an actual shortage, not price manipulation.
