California’s requirement to show fee-inclusive short-term lodging prices was followed by greater price sensitivity among guests and higher average daily rates in two cities, according to a new working paper.
The researchers compared Airbnb listings in San Diego and San Francisco with matched listings in Seattle and Chicago. They estimated that average daily rates in the California cities rose by 4.8% relative to the comparison cities after the policy change.
The November 2026 National Bureau of Economic Research working paper also found changes in which properties entered and left the market. Its authors estimated that consumers gained on average after accounting for higher prices, although those gains differed across ZIP codes.
Showing the price earlier
California’s AB 537 required short-term lodging providers to advertise prices inclusive of mandatory fees from July 1, 2024. A listing with a low nightly rate and a separate cleaning charge could no longer be evaluated from the initial rate alone.
Ginger Zhe Jin, Liad Wagman and Jingyi Xing studied listings on Airbnb. They matched observations across the California and comparison cities to examine changes around the law, an approach intended to make the groups more comparable.
The study is a working paper, so its findings remain subject to further review. A comparison of four cities cannot isolate every influence on local accommodation prices, and the results should not be treated as an estimate for every booking platform or travel market.
Why the average price can rise
Clearer prices can make it easier for guests to compare the full cost of a stay. The researchers found that demand became more sensitive to price in the California cities relative to the comparison markets.
But the authors also observed more market entry and exit. Listings that relied more heavily on cleaning-fee revenue were disproportionately likely to leave. Their analysis found that higher-quality incumbent listings were more likely to remain, while entrants tended to offer lower fees and lower quality than incumbents.
Those shifts can change the mix of properties contributing to an average. A higher average rate after a rule change does not mean every host raised its price or that transparency alone dictated each listing’s outcome.
The researchers used a choice model to estimate consumer welfare, a measure intended to capture the benefit customers receive from the choices available to them. The model estimated positive average net gains after the price increase, with uneven results by ZIP code. Those welfare gains are modeled estimates, not money paid directly to each guest.
What the result means for pricing
Businesses can separate the price customers first see from the total they will pay. Moving unavoidable charges into the displayed total may change which offers look competitive, even when the amount collected for a particular booking remains unchanged.
Hosts also need to consider the economics of short stays. A fixed cleaning cost can be spread across more nights on a longer booking, while it represents a larger share of a one-night stay.
Drip pricing describes a presentation in which additional charges appear as a customer progresses through a purchase. Our coverage of product-cost disclosure examines a different kind of transparency and how shoppers evaluate a seller’s motives.
