Airbnb Plus Boosts Bookings and Earnings, Study Finds

It may be easy to claim a product or service is high quality, but it is much harder to convince online consumers the claim is true. Shoppers are increasingly skeptical, going to great lengths to read reviews and research a product or service before purchasing. But even those reviews and performance reports are proving unreliable as it becomes easier to create fake ones or pay an influencer for an endorsement.

Sanjeev Dewan and Tingting Nian, both of the UCI Paul Merage School of Business, along with Jooho Kim of the Zicklin School of Business, Baruch College, City University of New York, decided to explore these issues by studying Airbnb after it launched its Plus certification in an effort to communicate quality to would-be guests.

“Sharing-economy platforms like Airbnb, Uber, and others have a problem with review inflation,” Dewan explained. “That is, people are reluctant to post negative reviews for various reasons. As consumers are figuring this out, they are becoming uncertain of how to gauge quality.”

The Airbnb Plus program started in 2018 and offers quality certification to rental properties that meet certain standards. Certification is meant to signal the quality of the property and the reliability of the host. But does it actually do so? That’s what the research team aimed to find out.

“We wanted to understand whether the certification had real value for the host, the guest, and for Airbnb itself,” Dewan said. “Is it a gimmick? Or does it yield tangible results?”

Both Dewan and Nian have previously researched similar topics within the world of sharing economies. In one study, Dewan and his research partners found there is considerable quality uncertainty on eBay, which impacts how much buyers are willing to pay.

Nian and her colleagues studied Uber to find out how its entry into a new region impacted the local economy and the workers who signed up as drivers. This research found that new Uber drivers are less likely to default on debt payments because they found a reliable source of supplemental income.

“Sharing-economy jobs can be a lifeline for people who need flexible work schedules that accommodate their other responsibilities,” Nian said. “The bar for entry is fairly low, so these jobs are good for a variety of workers who would struggle to make ends meet otherwise.”

Building on these findings, Dewan, Nian, and Kim dug deeper into the intricacies of Airbnb Plus to determine whether the certification leads to more revenue for the platform, the hosts, or both. The short answer is yes; the certification increases the weekly booking rate of Plus listings by about 6.8% on average.

“An increase in the booking rate is good for both Airbnb and the hosts,” Dewan explained. “They are both making more money on those properties than they did before the certification.”

In fact, this study found that the net impact of the Airbnb Plus certification for the platform itself is an increase in revenue of about $37,500 per year for the average two-kilometer zone in a U.S. city that includes one or more Plus listings. This revenue is compared to matched zones without any Plus listings.

But what does this mean for the guests booking these properties? Are they actually receiving a quality rental experience? It’s a question the research team considered.

“...The Plus badge signals the quality of the product (i.e., short-term rental property) in addition to the reliability of the provider (i.e., host). However, [with] the relatively low one-time inspection fee and lack of capacity for ongoing monitoring of quality, one may wonder if the Airbnb Plus certification is a credible signal of quality—or just ‘cheap talk,’” the research article explained.

Dewan and Nian admitted this is still an open question. After all, the platform itself serves as both inspector and certifier, creating a potential conflict of interest. However, they pointed to several factors that might offset the concern.

“The properties and the hosts still receive reviews from guests, so if there is too much misalignment between what the Plus program claims as quality and what the guests actually experience, that will start to show up in the reviews,” Nian said. “And to meet the standards and pass inspection in the first place, the properties do have to be designed well and furnished with nice amenities, which not every property will be able to achieve. There is at least some exclusivity to the certification.”

Dewan added, “Airbnb is putting its brand name and reputation at stake if they hand out certifications willynilly. They have one of the most respected brands in the short-term rental industry, and I imagine they want to protect that.”

The researchers were not surprised that the results showed an increase in bookings and revenue due to the Plus program, but they were not expecting those results to be quite so clear and strong. For instance, the positive effects for hosts do not vanish right away. Even several months after certification, the Plus properties are still seeing favorable impacts.

Furthermore, the increase of 6.8% in booking rate translates to over $3,100 in additional revenue for the average certified property. Considering the inspection fee is only $149, for properties that already meet all or most of the quality standards, pursuing certification is pretty much a no-brainer.

The relevance of this study for property owners and sharing-economy platforms is fairly obvious: Quality certification will likely lead to increased demand and revenue.

“We believe this study has relevance for other companies in the sharing-economy space,” Dewan said. “Many platforms are rolling out similar certifications, so they might benefit from understanding the specific and detailed financial impact of doing so.”

Both Dewan and Nian are currently exploring other topics related to sharing economies. Nian is again studying Airbnb, this time addressing the problem of guests and hosts taking their business off the platform where they can make their own arrangements. Her research uses consumer location data and Airbnb’s new instant booking feature to determine whether the platform can successfully combat this issue.

Dewan’s research is using machine learning to identify counterfeit products on Amazon. With this, he hopes to uncover what consumers and platforms can do to avoid purchasing and selling counterfeits and whether current efforts to eliminate counterfeits are effective.

Sanjeev Dewan is a professor and the faculty director of the Master of Science in Business Analytics program at the UCI Paul Merage School of Business. He has served as senior editor of Information Systems Research, associate editor of Management Science, and on the program committee for several academic conferences. His research and teaching interests include the economics of digital platforms and customer and social analytics.

Tingting Nian is an assistant professor of Information Systems and a Hellman fellow at the UCI Paul Merage School of Business. She has received several grants and awards from institutions including Think Forward Initiative, Hellman Foundation, Wharton Customer Analytics Initiative, and INFORMS. Her current research interests include sharing economy, platform economics, gender bias, and social media marketing.