Host Scaling and Revenue Management: Is there a link?

Abstract

This study explores how a revenue management capability can be created by Airbnb hosts and the role played by their degree of professionalization, defined as the number of listings (apartments) the hosts manage. Considering the explorative nature of this research, a qualitative approach based on interviews has been adopted. The sample includes 55 interviews realized in the Milan destination (Italy). A protocol was created using the four theoretical blocks. These latter identify the main processes of revenue management: i) identifying the required information to establish the revenue management strategy, ii) making strategic and then tactical pricing and revenue management decisions, iii) managing communication with the guests, and iv) making available software dedicated to revenue management. Milan was selected for two reasons: first, is the second leading Italian destination after Rome in terms of overnights. Second, Milan attracts different targets, such as business, leisure, and trade fairs. Therefore, there are continuous changes in off- and on-pick revenue constituting an ideal setting for exploring the creation of a revenue management capability.
Three groups of hosts were identified: i) single hosts, ii) hosts managing three to five listings, iii) hosts managing more than 10 listings. Results show strong differences between single hosts and those managing 10 or more listings, explaining why professional hosts are able to extract more value from their listings compared to single hosts. Two theoretical contributions are proposed. First, the research adds to the knowledge about how a revenue management capability (RMC) is created in the context of short-term rentals (STR). The crucial role of professionalization is confirmed, and a complex set of relationships emerge between tangible (such as the presence/absence of a RM software and dedicated staff) and cultural (such as the orientation towards price discrimination and to revenue or price maximization, as well as the approach to guest selection) barriers to RMC. Second, findings can explain why quantitative studies have sometimes shown controversial results on factors affecting price and revenue performance. Interviews with multiple hosts highlighted how they often manage third-party listings based on agreements that include a limit price, reducing the rooms for dynamic and discrimination price, and more generally revenue maximization.