The general belief that hoteliers lie awake at night worrying about black swan incidents is far off the mark, judging by a panel discussion at the recent Hotel Operating Agreements conference, where Airbnb was identified as a principal cause of concern.
LONDON—During a panel titled “Macro-influences: Here now and possibly coming” at the Hotel Operating Agreements conference last week the main topic of conversation was the continued threat to the hotel industry posed by peer-to-peer accommodations provider Airbnb.
Moderator Richard Bursby, partner and head of the international hotels group at law firm Taylor Wessing LLP, said that in London more than 25% of Airbnb listings are rented out for more than the 90 legally allowed days per year, despite Airbnb assurances that it would ban this practice in any case where it breached regulations.
Airbnb reiterates the legal framework on its United Kingdom website.
“So,” Bursby asked tongue-in-cheek, “has Airbnb peaked?”
“No,” answered James Bland, director, hotels and hospitality, at research company BDRC Continental, who pointed out the same conversation is being had in Amsterdam, where rentals are capped at 60 days per year.
“There is the same Airbnb self-regulation” in both cities, he said. “Ultimately, Airbnb is demand-led.”
Bursby added the hotel industry “ain’t seen nothing yet,” citing Airbnb plans to add trips to their offerings. “They’re growing, growing, growing.”
Fighting back, again
The response from hotels has to be targeted, said Saar Sharon, managing director at West Ridge Asset Management and former CEO of Leonardo Hotels’ U.K. division.
“Brands need to stay relevant and offer something different,” he said, adding that recent legislation in the U.K. has added to traditional hotel woes.
“Business rates have skyrocketed, but not for Airbnb,” he said. “The government needs to look into this, and anyone who wants to discuss affordable housing in the run-up to the (U.K. general) election (on 8 June) should go head to head with Airbnb. The regulators need to get involved.”
Sharon added a further political spin on Airbnb success, saying that increased demand for the service might be part of the general, global anti-establishment trend, which has resulted in Brexit, the Donald Trump presidency and Marine Le Pen’s run to the second round of France’s presidential election.
“It is about not necessarily wanting to eat at the time the restaurant is open,” Sharon said, making a general analogy.
Bursby said there’s hope in the fact that the hotel industry is quick to respond to individual threats with differentiation and fresh offerings.
“Brand awareness does grow quickly, but it can erode just as quickly,” he added.
“There are new brands adding to the gene pool, although there are many that are obviously similar to one another,” Sharon said. “Hoteliers need to concentrate on what customers are willing to pay premiums for.”
He said what hoteliers cannot say to guests is that if we pay more for online travel agencies and other disruptors then we have to spend less on you.
Bland said hoteliers have to pick their battles.
“Understand what you’re good at, and then do it well,” he said.
In terms of pricing product, hotel management must be in control in both directions of distribution channels, Sharon said.
“Choose a channel that brings in the right (average daily rate), and then look at the commissions involved,” Bland said.
Sharon added that net revenue per available room—a metric generally understood to take into account costs associated with distribution and commissions—is harder to gauge in terms of increases or decreases. But with the right revenue management, he said, understanding it can lead to higher net yields.