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Barcelona introduces greater regulation on Airbnb

Jonny Clark

7th June 2018

If you use the Edexcel exam board you will probably have seen the classic question on this year's Paper 1 about consumer interest and market share (relating to mobile phones).

On a similar note, the city of Barcelona has just introduced greater regulation on the operations of accommodation-hosting app, Airbnb. If you have ever used Airbnb you will be aware that the app offers a huge selection of accommodations in a flexible per night format at a price that is highly competitive compared to nearby hotels and hostelries. The app uses its technology to cut out the cost of information transfer, allowing the individual renting our their accommodation to communicate directly with potential customers. An increase in choice and reduced prices is clearly a positive thing with regards to consumer interest.

Barcelona are arguing, however, that there are other external costs.  They are not alone - Tokyo and San Francisco have regulated in a similar way.  All 3 cities now insist that all individuals who rent out their accommodation must register with city authorities and meet various criteria.  This process will vastly reduce the number of places that will be made available through Airbnb (and by restricting supply, increase the prices to customers).  Their argument is that by having a process that encourages landlords to rent out to tourists rather than long term lets it is reducing options for people who wish to live in these cities and, in Barcelona's case, turning certain parts of the city into tourist 'ghettos' with more souvenir shops and cafes.  The cities also argue that the existence of Airbnb leads to higher house and apartment prices, squeezing an already difficult housing market.

Here's an interesting activity.  How much would you be willing to pay for a single night's accommodation in London?  In this 'Dial Up' activity you will be offered 5 different locations in London offered through the Airbnb app and asked to guess the price for that accommodation.  The scoring for this activity is explained at the start.  Have a go!  Is Airbnb as cheap as your thought?

Note:  Costs used in this activity are true for June 2018

Jonny Clark

Jon Clark has been teaching economics and business studies for over 25 years primarily in the Further Education sector. Before joining tutor2u, he was a senior manager at South Cheshire College in Crewe.

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