How Marriott will differentiate home-sharing platform
 
How Marriott will differentiate home-sharing platform
06 MAY 2019 8:51 AM

Marriott International launched its Homes & Villas home-sharing platform, counting on loyalty members and taking a different approach than other companies experimenting in this space.

REPORT FROM THE U.S.—With the recent announcement of its expanded home-sharing initiative, Marriott International is further wading into waters most hotel brand companies have yet to dip their toes into.

Marriott isn’t the first hotel company to explore the home-sharing space. Hyatt Hotels Corporation initially invested $40 million in Onefinestay in June 2015, but in April 2016 Accor purchased Onefinestay for €148 million ($165.5 million). A year later, Accor folded home-sharing platforms Travel Keys and Squarebreak into its Onefinestay brand.

Marriott’s Homes & Villas platform takes a different approach from other hotel brand companies, said Jennifer Hsieh, VP of Homes & Villas. While Hyatt and Accor made equity investments into home-sharing platforms, Marriott’s model is to essentially create a marketplace for consumers to find homes by partnering with property-management companies, she said.

Homes & Villas by Marriott International offers travelers 2,000 different “premium and luxury homes” in 100 destinations around the United States, Europe, the Caribbean and Latin America, a news release states. Forty of those leisure destinations are new markets for Marriott. The newly launched program is an expansion of the company’s 2018 Tribute Portfolio Homes pilot program, which started in London before including homes in Paris, Rome and Lisbon.

With the pilot program, Marriott looked to test consumer acceptance of the company offering a home-sharing platform, Hsieh said. Marriott needed to see if it was filling a need and whether it could position itself as a company that offers home rentals. It was also important to learn what consumers would expect from the Marriott brand in a home, she said.

Along with learning more about guest expectations, the company also needed to test the operational and business model of a home-sharing platform, she said. Instead of having an open platform where people can list homes on their own, Marriott is working with professional property managers who work with individual homeowners to identify potential homes for the platform.

“The beauty is the home managers understand the space,” she said. “They do home rentals in multiple locations. They understand how to operate the service, how to clean. They understand the regulations.”

According to feedback Marriott received about the trial platform, guests had higher expectations for design, cleanliness and service, Hsieh said. Guests also loved the ability of the platform to meet a unique trip purpose. Those who stayed in a home on a leisure trip cited a need for more space for larger groups; they stayed an average of five nights, and 80% of the time they were loyalty program members, she said.

Measuring the success of this program is different than measuring the success of a hotel, Hsieh said. With hotels, companies can measure occupancy, but as some home rentals aren’t always available, this metric is less meaningful. These might be primary residences or a vacation home for the owners, she said. The other issue is while a majority of the homes on the platform are exclusively part of Homes & Villas, some are listed on other platforms.

The key metric is the growth of the home-sharing industry, she said. In a 2018 study, 25% of Marriott Bonvoy members said they had stayed in the past 12 months in a home-rental unit—a percentage which has grown from previous years, she said.

Marriott looks at whether consumers are happy with the product, whether it’s compelling and if it fills a need, Hsieh said. All of those indicators have come back strong, and the numbers are showing the platform is filling a gap in the market, she said. Some guests said they were unsure about home sharing before, but having Marriott’s name attached made them feel more confident in it, she said.

Marriott will look to grow the number of offerings in locations where consumer demand is high, Hsieh said. The company will also consider regulatory conditions, as well as robust operators and the hotel presence in the markets, she said.

Analyst’s thoughts
Marriott isn’t shifting away from hotels, but this move makes it less a hotel company and more of a top-to-bottom travel booking platform, said Michael Bellisario, VP and equity research senior analyst at Baird. This is an adjacency that over the years will include other partnerships and other businesses complementing its hotel service, he said.

Bellisario pointed at how Marriott has transformed its business over the years. It spun off a timeshare, skilled nursing operations and restaurant business. Marriott also sold off real estate and is now a little more agnostic on managing hotels as there are more, better third-party managers, he said.

“They’re in the franchising business,” he said. “They just happen to be franchising hotels. The reservation system, marketing, the loyalty program—anything to feed into and from there is a potential business they could pursue. Home sharing is definitely one of them.”

The homes listed on the platform are aspirational, Bellisario said. This will help keep people within the Marriott ecosystem, because if they want to stay at one of these homes, they’ll go to Marriott to book a hotel room to earn the points they can use to book the homes, he said.

“It’s more reason to give Marriott a greater share of your travel wallet,” he said.

But in terms of growing this platform, Marriott has to be careful, Bellisario said. The company can’t add 500 new units in an apartment building in Chicago because Marriott owners there would be upset over the new supply, he said. Because of its existing management and franchising agreements, Marriott will have to take a more targeted approach than the explosive growth Airbnb has seen with its listings.

The platform is scalable to a certain extent, and scale is important, Bellisario said. Airbnb was not the first home-rental platform, but it’s had more success than VRBO or similar early platforms, he said. The reason is Airbnb scaled the platform and made it more user-friendly, which makes the scale component vital for the future of Marriott’s platform.

“Marriott has been building this loyal base for decades,” he said. “This is what they’re trying to leverage. Airbnb, do they have that? Maybe for certain guests, but it’s not the same deep-rooted loyalty, with the credit card and loyalty program like Marriott has, and that’s the differentiator.”

Industry perspectives
Hyatt President and CEO Mark Hoplamazian told analysts on the company’s latest earnings call that the company learned from its experiences through its brief investments in Onefinestay and Oasis that the delivery model necessary for high-end properties is expensive, and it’s difficult to achieve a financial return through a sustainable model.

The home-sharing platform will also become more difficult because of regulatory issues, he said. Publicly reported data has shown the negative effect tougher regulations have had on rental listings in different markets, he said.

“So that’s why I think you see some evolution of the model, where the practice is to really focus on more controlled inventory and the like,” Hoplamazian said.

The company will continue to evaluate whether there’s a way to participate in what he described as a more B2B, corporate-focused, urban-residential play, Hoplamazian said.

“But it’s unlikely to involve anything that looks like a sharing platform,” he said.

Home sharing is not something that Hilton is pursuing, Hilton President and CEO Chris Nassetta said during his company’s first-quarter earnings call.

“The longer answer, which is consistent with my prior commentary, is we fundamentally think that home sharing is a different business,” he said. “What we think we’re in the business of is providing high-quality, consistent, branded experiences.”

Hilton has received feedback from guests, who have said they don’t need home sharing from Hilton, he said. The company’s view could change if guest attitudes change, he added, but for now, Hilton won’t be entering the home-sharing space.

From the perspective of a company that owns many higher-end, Marriott-branded properties, Host Hotels & Resorts views Homes & Villas by Marriott International as complementary to Host’s business, President and CEO James Risoleo said during the company’s recent earnings call.

“We actually view it positively, because it’s going to give our existing guests another place to go and to earn points or redeem points as part of the loyalty program,” he said. “It will take some pressure off some of our hotels from that perspective. And it should also, over time, reduce the charge or cost associated with loyalty.”

Host spent a fair amount of time looking over the new platform and talking to Marriott about it, Risoleo said. Through Marriott’s pilot program, the Tribute Homes Portfolio generated 7,000 roomnights from guests who went on the Marriott website to look at the homes listed but ended up booking a standard hotel room.

“So we think more traffic through the system is good,” he said. “The properties that they are contemplating putting into this program are not going to be competitive with us. There is going to be a minimum of a three-night stay, whereas our average stay is two nights and is geared toward the leisure customer.”

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