by Barbara Peterson | July 01, 2017


How marquee events fuel the sharing economy and wreck attendance metrics

Last February, one would-be South by Southwest attendee searching a month ahead of time for accommodations in Austin -- whose official lodging roster had long since maxed out -- spotted a deal on Airbnb for a single person at a mere $200 a night. On closer inspection, the "room" turned out to be a tent in the backyard of a private home (bathroom privileges included).

To be sure, Austin during March is an extreme case -- the Texan capital city's hotel capacity of around 40,000 rooms is more than adequate to house visitors most months of the year. And most major cities that handle large conventions would rarely if ever find themselves in a situation where meeting attendees might have to consider sleeping on a park bench.

For meeting organizers and destination marketing organizations, however, the broader implications of the ebbs and flows in demand brought on by the festivalization craze could have serious repercussions. After all, it's these very shortages in affordable temporary housing and transportation that have fueled the rise of the sharing economy. And that, in turn, has led to clashes between city governments and these new sharing entrepreneurs.

During the 2017 SXSW -- which drew more than 100,000 visitors -- local officials went on raids to sniff out illegal short-term housing rentals (STRs), which naturally included some crash pads patronized by festival attendees. And last year, Austin voters approved a move to impose strict new regulations on ride-sharing services, including fingerprinting of drivers, prompting Uber and Lyft to pull out of the market.

But while SXSW attendees this year had to rely on local taxis and scrappy start-up ride services, in late May, Texas Gov. Greg Abbott signed a law overriding the new regulations. Uber and Lyft wasted no time returning to Austin, but it wasn't all good news: A few weeks later, Fare -- one of the newcomers that had cropped up in their absence -- just as quickly shut down.  

Andreas Weissenborn, director of research and analytics for Destination Marketing Association International, notes that a growing number of meeting delegates already were going rogue and booking out of the official room block -- but the rise of mega-events has accelerated the trend. That's equally true in cities such as New York, where local officials have repeatedly tried to crack down on Airbnb. The Big Apple's dubious reputation for extortionate hotel rates during peak periods only adds fuel to the fire.

There's another crack in this fractured situation: Home sharing makes it harder to get an accurate picture of overall attendance numbers, especially during sprawling events like festivals. "After all, a visitor is a visitor, and there are these massive logistical challenges that come with the festivalization trend," Weissenborn says. "It can lead to these almost Rube Goldbergian efforts" to tackle transportation and care of feeding of the crowds -- not to mention supplying adequate bathroom facilities.

Meanwhile, Austin is stepping up to the plate. According to the Austin Business Journal, the city is one of the top 10 U.S. markets for new hotel construction and, with more than 8,600 rooms coming online, is expected to boost capacity by 25 percent. Two major new properties, the Fairmont and the J.W. Marriott, already have added around 2,000 rooms to the downtown area.

Still, most industry observers expect that services such as Airbnb will continue to play a role. According to rental provider HomeAway, which is based in Austin, short-term rentals contribute more than $200 million to the Austin economy annually. And a study from research firm Datafiniti concluded that Austin will continue to be dependent on short-term rentals to house visitors during major events.

Datafiniti CEO Shion Deysarkar comments that while Austin is clearly on a building binge, it's still a case of too little, too late. "With the data we see, I'm more convinced the STRs are absolutely needed to help Austin if they want to continue growing as they are."

In a recent analysis, Datafiniti estimated that the median price of an STR in Austin is $200 a night under normal circumstances, whereas during SXSW, it is close to $600. "If people are getting away with charging $600 a night for staying in Austin," Deysarkar says, "that clearly shows that there is unmet demand in the city."