Airbnb is helping South Korea battle price-gouging hotels ahead of the Winter Olympics

Demand is off the charts.
Demand is off the charts.
Image: Reuters/Fabrizio Bensch
We may earn a commission from links on this page.

Since late December, South Korea has been battling price-gouging hospitality providers.

One motel reportedly raised prices as high as 900,000 won a night (about $840) ahead of next month’s Winter Olympics in Pyeongchang. Others were advertising nightly rates of 300,000 won (about $280) before government officials promised to take action.

Choi Myeong-hee, mayor of the city of Gangneung, announced a campaign against hotels and motels charging excessively high fees. Choi Moon Soon, governor of the Gangwon province, said he’d crack down on those that overcharge or refuse individual reservations. Son Jung-ho, head of the Gangneung branch of the Korea Accommodations Industry, pushed the businesses to lower prices and refund the difference to guests who had already booked rooms at exorbitant rates.

“Through this campaign I hope Gangneung can leave behind its disgraced reputation for ripping visitors off,” Son reportedly said. “And I think accommodation charges will be stabilized with more people participating in the campaign.”

Another weapon the government has in its arsenal against price-gouging hotels? Airbnb.

The home-sharing startup is looking to do brisk business during the Olympics. It became an “official supporter” of the games last November, saying it would work with locals in the Gangwon province on offering short-term rentals. Airbnb also partnered with Gangwon earlier in 2017 to help the province scale up its 1,000 home-sharing listings.

The average price of an Airbnb listing in Gangwon province during the Olympics period is $100 per person, per night, the company said in an email, significantly cheaper than the rates that enterprising hotels and motels were charging in recent months.

Airbnb makes it harder for traditional lodging companies to price gouge because it expands the supply of rooms. The hotel industry describes nights when more than 95% of rooms are occupied as “compression nights,” enabling them to raise prices. In August 2016, a report from financial services firm UBS found that hotels in two of Airbnb’s biggest markets—New York and San Francisco—had noticed a decline in compression nights during 2015. The analysts theorized that was happening because rooms on Airbnb had given customers more options.

In July 2015, Pebblebrook Hotel Trust CEO Jon Bortz told investors that Airbnb had limited what the company could charge during events like marathons. “We used to have really intense compression and an ability to price maybe what the customer would describe as sort of gouging rates,” he said. “I’d say we’ve lost a lot of that ability at this point.”

A few weeks ahead of the opening ceremonies in Pyeongchang, Airbnb says it’s expecting 6,000 guests in Gangwon, with more bookings to come. Jake Wilczynski, Airbnb’s spokesman for the Asia Pacific region, said listings in Gangwon have tripled from the previous year thanks to the company’s regional partnerships, and that based on current bookings, local hosts are set to earn around $2 million. Airbnb says 1.9 million travelers stayed in an Airbnb in South Korea in 2017.

During the 2016 Olympics in Rio, Brazil, Airbnb hosted more than 85,000 guests. According to a survey sponsored by the Brazilian Ministry of Tourism, 21% of Brazilians and 25% of foreigners opted for home-sharing.