The Economic Footprint of Short-Term Rentals on Local Businesses: Evidence from Portugal

Ronize Cruz (), Francisco Nobre () and João Pereira dos Santos ()
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Ronize Cruz: University of Coimbra
Francisco Nobre: Kingston University London
João Pereira dos Santos: ISEG

No 18295, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyze how the proliferation of short-term rentals (STRs) affects firm survival, performance, and entry in two European cities with high STR density. Using administrative firm-level accounting data, a shift-share instrument, and an event-study design, we find that STR growth increases exit rates among underperforming firms, while surviving firms experience relative gains in sales and profits, with minimal effects on employment or investment. Operational costs, particularly rents and liabilities, also rise. STR expansion stimulates entrepreneurship, though new entrants face higher costs and lower initial profitability. These findings underscore the nuanced impacts of tourism-driven demand shocks on urban economic ecosystems.

Keywords: tourism; local businesses; short-term rentals; Portugal (search for similar items in EconPapers)
JEL-codes: L25 L83 R12 (search for similar items in EconPapers)
Date: 2025-11
New Economics Papers: this item is included in nep-ent, nep-lab and nep-sbm
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