What do you get when the best-in-class in music, film, technology, and interactive media converge on Austin, Texas for a 10-day conference? Say hello to the most profitable event for the City of Austin’s hospitality industry, SXSW. Starting in 1987 with just over 700 attendees, it has grown to over 500,000 in 2016. Over the years, the festival has made a name for itself as an industry institution. The festival has welcomed guests such as President Obama, Lady Gaga, and Mark Cuban.
With an increase in the number of people flocking to the festival in March, the cost of travel and a badge alone can cost you a pretty penny. The real challenges, however, are settling on a home base and place to stay. Hotels booked months in advance or with a high price tag open the door for alternative housing options; these options include short-term rentals such as Airbnb and HomeAway. Unfortunately, travelers may notice that Austin, typically a very affordable city, is seeing a surge in short-term rental prices; these prices are due to an increase in demand.
How much do festivals like SXSW inflate short-term rental prices in Austin?
Datafiniti’s rental data includes hundreds of thousands of short-term listings from across the country, so we thought we should do an update on last year’s coverage. We can analyze prices from multiple services simultaneously and a wide range of time; this information provides a complete view of the market. In this case, we’ve zoomed in on Austin and a few other cities for comparison.
We found that during the month of March, SXSW 2016, the median price per night for a short-term rental in Austin, was three times the yearly median. It appears that similar effects also take place in other small to mid-sized cities with comparable major annual events; these cities include New Orleans, San Jose, Park City, and Omaha. However, an increase in rental prices is not reserved only for SXSW, but also around the time of another one of the city’s most popular events the Austin City Limits Music Festival.
On an average weekend, you can expect lower prices in smaller cities (e.g., Austin, New Orleans). These prices are relative to larger cities (e.g., New York City, Chicago). However, during major events, you’ll pay a lot more.
For our analysis, we wanted to understand Austin in detail. Starting with our database of over 3 million STR listings, we isolated those for Austin and calculated the median price across all rentals, which was $200. For comparison, we grouped the listings by the month the data was captured to understand the variation. Our data spans a full year, from October 2015 through September 2016.
Most notably, we see spikes in October, March, and May. The largest is March, which lines up with SXSW. October plays host to Austin City Limits; in April and May, there are a series of smaller festivals and concerts. These events likely attract enough attention to impact rentals as well.
If we break the information down further, we see how price changes with rental features like the number of bedrooms. Viewing the information over time, we can determine if changes correlate with the timing of SXSW.
Changes in price are not unique to SXSW and Austin. Sharp increases in rental prices also correspond to large events in cities across the U.S. We explored hundreds of these events to discover which ones affect prices. Below we’ve noted several examples, which we’ll explore further.
There are a few additional factors that drive costs. First, events that attract attendees from near and far. The Super Bowl is a great example; while hosted in California, most people attending were from Colorado or North Carolina (each team’s home state). Second, the starting price and location of a rental. For example, Park City is a ski area, and rentals are more expensive. While the surge price was the highest here ($1229 per night), it was only about 200% more than the normal rental cost.
Could Austin meet the demand of lodging needs during peak tourist season without short-term rentals?
Short-term rentals play an indispensable role in events in small to mid-sized cities such as SXSW in Austin. City-wide, Austin’s hotels only have room for about 40,000 people per night, which only serves half the demand during SXSW, according to our previous analysis. What would the absence of short-term rentals look like? Especially in a city that desperately leans on them in peak tourist times? Say goodbye to accessibility (as it relates to accommodations) due to limited hotel capacity.
As the demand for alternative travel accommodations grows, the current and available supply may place a bit more strain on your wallet. But just like Batman needs Robin, Austin’s hospitality industry needs short-term rentals. In the case of local tourism, the proof is in the numbers. Short-term rentals come to the rescue and make up for what Austin is “short” of during its most jam-packed weeks of the year – room.