Can hotels and the sharing economy coexist?
 
Can hotels and the sharing economy coexist?
16 DECEMBER 2015 6:56 AM

The growing roster of peer-to-peer booking platforms is not going away. If hoteliers can’t beat them, will they join them? 

By  
GLOBAL REPORT—While many CEOs at public hotel companies downplay the threat of Airbnb and the broader sharing economy on traditional hotel demand, this new source of competition in the accommodations space begs the question: Can hotels and the sharing economy coexist? 
 
Many within both sectors seem to think so. 
 
During Hilton Worldwide Holdings’ third-quarter earnings call with analysts, CEO Chris Nassetta was asked specifically about Airbnb. He described the platform’s demand as “incremental” and without a “material impact on the bulk of our markets.” It carves a separate niche, he said. 
 
“I do believe that strongly as I said that there is every ability for us to coexist,” Nassetta added. 
Some on the sharing-economy side seem to agree. 
 
“While vacation rentals may compete with hotels in some cases, a majority of rentals exist in markets underserved by hotels,” said Jon Gray, chief revenue officer at HomeAway. 
Gail Mandel, CEO of Wyndham Vacation Rentals, shared that perspective.  
 
“We’re a complement” to hotel demand, she said of the Wyndham Worldwide Corporation subsidiary, which she described as a member of the sharing economy. The company manages more than 105,000 vacation rental properties in more than 550 destinations worldwide.
 
“An educated traveler is going to use the different options depending upon their needs for that specific trip. ... There’s absolutely a distinction,” Mandel added.  
 
Whereas a platform such as Airbnb is an online marketplace with a focus on owners’ primary residences, Wyndham Vacation Rentals manages the distribution and upkeep of owners’ secondary residences, she explained. And that’s different from traditional hotels, which offer different room types, amenities and services. 
 
“Each one of them provides a different value proposition,” Mandel said. 
 
Competition, not a complement
Not everyone shared this utopian view. MMGY’s Steve Cohen is one of the dissenters. 
 
“You have to take what you hear from industry leaders with a grain of salt, because they do have a stake in the game,” he said, acknowledging their place in the public markets and the shareholder scrutiny that can bring. 
 
David Kong, president and CEO of privately held Best Western Hotels & Resorts, shared a similar perspective. 
 
“Some executives at public companies really have to be careful about what they say because that can affect their stock prices. Whether or not they are direct competition is common sense,” he said. 
 
Well, are they? 
 
“I would look at them as competition,” Kong said. 
 
Cohen was more succinct when asked the same question. 
 
“Absolutely,” he said. 
 
Cohen pointed to data from MMGY’s “2015 MMGY Global portrait of American travelers” study that found more than two in 10 travelers (23%) stayed in a vacation home rental as an alternative to a traditional hotel/resort during the past two years. Nearly four in 10 (39%) expressed interest in staying in a vacation home rental as an alternative to a traditional hotel/resort during the next two years.
 
Hoteliers dipping into distribution
Kong said the sharing economy is here to stay. Instead of putting his head in the sand, he envisions a day in which Best Western’s members might distribute their rooms on the likes of Airbnb or HomeAway. 
 
“It’s not like they haven’t approached us or different hotel companies,” he said, adding some hotels are already listed on those two platforms and others. 
 
A scrape of Airbnb listings in the U.S. from October 2015 by InsideAirbnb.com, which is not affiliated with Airbnb, found 410 unique “hotel” listings. That’s up 18% from the 346 listings in July. These are primarily timeshares, “condotels” and smaller independent properties, but also include some branded hotels. 
 
Kong said such a shift likely would be started by the largest chains before Best Western and others would follow suit. 
 
“I don’t really see, especially with today’s thriving hotel industry, the need to do that,” he added. 

When asked during the earnings call whether Hilton might one day leverage Airbnb in particular, Nassetta was noncommittal.  
 
“I don’t think it becomes connected to hotel brands. I could be wrong. I don’t see that. But it’s possible,” he said. “I mean, if you believe what I just said a few minutes ago that it’s sort of developing into its own segment, one of the big hotel companies could say that’s a segment we want to serve and we don’t serve, and we don’t think it cannibalizes any of the rest of our business, which I’d happen to believe is true and we want to have that segment.” 
 
Cohen said the MMGY team thinks a merging of the hotel industry and sharing economy is inevitable. 
 
“We believe that at some point we’re going to see a hotel company that gets into this business, whether it’s branding it or being on the back end, buying units in condos and selling them through Airbnb,” he said. “They’d be foolish not to. If this is the direction that the lodging industry is taking, and if we can see a trend with those people who will soon make up the majority of travelers interested in this type of lodging, it would be silly for them not to become involved, particularly given their capitalization.”
 
The lines already are blurring between the different players within the sharing economy. 
 
Wyndham Vacation Rentals, for instance, earlier this year signed a global distribution agreement with HomeAway, which itself will be acquired by Expedia, Inc., in a $3.9-billion deal expected to close in the first quarter of 2016.  
 
If nothing else, hoteliers must improve to keep offerings distinctive and relevant, Kong said. 
 
Sharing-economy accommodation providers are “not going away, whether they are regulated or not, whether they have to pay taxes or not, they’re going to grow tremendously,” he said. 
 
“With Expedia buying HomeAway, both companies are going to be ramping up their game. They’re going to be even stiffer competition for us, so we have to improve our game as well,” Kong said.
 

3 Comments

  • Joel Ross December 16, 2015 5:43 AM

    the top three apartment owner managers are in negotiation with Airbnb to make a deal to rent unoccupied apartments as part of Airbnb. That is a real game changer. Other apartment owners are already using Airbnb to fill unoccupied units and if they cut a deal with the three big players, Airbnb not only gets thousands more rooms, it gets huge political clout in many cities. As I read comments by Nasetta and others who are trying to make believe Airbnb and Home Away do not compete and do not matter, it is just another example of how the hotel industry lives in its own bubble and why it missed the crash in 2008, and is missing what is coming over then next two years. Airbnb is bigger and financially stronger than any company in the hotel space, so making believe they don't matter is either simply trying to con the analysts or fooling yourself. The sharing economy is here, and the sooner the hotel industry wakes up and figures out how to compete effectively, instead of just creating more me too brands which canabalize itself and its franchisees, the better the industry will be.

  • Janisa July 24, 2016 5:44 AM

    Hi Greg, A truly great & inspiring post We sometimes get lost and forget that we don’t have to be ridiculously rich to be happy, right? ChssCe,rchrie_moneyandi recently posted..

  • Janisa July 24, 2016 5:44 AM

    Hi Greg, A truly great & inspiring post We sometimes get lost and forget that we don’t have to be ridiculously rich to be happy, right? ChssCe,rchrie_moneyandi recently posted..

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