Airbnb's Competitive Disruption on Hotel Industry Performance in Kenya

Abstract

The proliferation of the sharing economy has fundamentally reshaped global tourism and hospitality. As a prominent player in this digital transformation, Airbnb has emerged as a significant force, offering peer-to-peer accommodation that challenges the traditional hotel industry across the globe. The rapid rise of Airbnb in key tourist and commercial hubs in Kenya, such as Nairobi and coastal regions, presents a unique and substantial competitive pressure on the established hotel industry. This disruption raises critical questions regarding the performance metrics of hotels as they grapple with an unregulated and rapidly expanding alternative accommodation market. The primary aim of this paper is to conduct a comprehensive literature review to analyze the specific impacts of Airbnb's competitive disruption on hotel industry performance in Kenya. This review is guided by Clayton Christensen's Disruptive Innovation Theory, which posits that a new, often simpler and more affordable, technology or business model can enter a market from the bottom-up, eventually displacing established market leaders. The methodology is based on a systematic, qualitative literature review of secondary data. It involves a critical analysis of academic journals, research reports, industry publications, and statistical data from reputable sources focusing on Kenya's tourism and hospitality sector from 2010 to 2025. Key data was extracted from selected studies and then analyzed using a narrative synthesis to identify and categorize major findings. The findings revealed a rapid expansion of the Airbnb market in Kenya, particularly in Nairobi and coastal cities, driven by both individual hosts and professional operators. This growth created significant competitive pressure, primarily on mid-market and budget hotels, by attracting price-sensitive and longer-stay guests. The analysis also highlighted a clear regulatory disparity, where hotels face stricter licensing and tax enforcement compared to many informal short-term rental hosts, creating an uneven playing field. Challenges persist around regulation, tax compliance, safety standards, and housing pressures, with professional operators increasingly dominating the market. In response, hotels have adopted defensive strategies, including price adjustments and emphasizing unique service-based amenities, with some even listing their own rooms on the Airbnb platform to remain competitive.  In conclusion, Airbnb's presence has irrevocably altered Kenya's hospitality landscape, acting as a powerful disruptive force. The traditional hotel industry is compelled to innovate, with key strategies including embracing digital transformation, enhancing personalized guest experiences, and leveraging unique strengths. Recommendations for policymakers include the urgent need for a clear, fair, and adaptive regulatory framework for short-term rentals to ensure equitable competition and protect consumer and host interests.