Airbnb casts a long-term shadow
17 AUGUST 2015 8:52 AM
Hoteliers fear the long-term impacts of shared accommodations but also realize the concept represents a growth opportunity.
NASHVILLE, Tennessee—These are happy days for the hotel industry, so why does it seem like the only thing anyone wants to talk about is the shadow cast by the black cloud of the sharing economy?
Airbnb represents a significant threat in the eyes of many hoteliers, including those who spoke at the “Alternate accommodations: The demand bandits” panel of the 2015 Hotel Data Conference.
“We definitely see Airbnb as a big threat,” said Kurien Jacob, chief revenue officer of Highgate Hotels. “We come across that in every single meeting we have.”
Jacob said the preponderance of Airbnb hosts in New York City, coupled with that market’s well-publicized supply issues, has worked to drive down rates.
“Airbnb is so well known internationally, so it’s not just a problem domestically,” Jacob said. “So we’re seeing (international travelers) coming into the city and staying with Airbnb.”
Who is dipping a toe in the shared economy?
According to BDRC market research, 19% of U.S. travelers used some shared-accommodation site in 2014, and 44% of consumers would consider using one in the future.
Usage is highest among luxury hotel brand consumers, 24% of which used shared accommodations. A total of 20% of lifestyle boutique and upper-market consumers have used shared accommodations.
BDRC research shows that millennials and Generation Xers are more likely to be repeat customers than baby boomers. A total of 66% of millennials and 62% of Gen Xers will use shared accommodations more than once, with 51% of baby boomers becoming repeat users.
The No. 1 motivator for potential shared-accommodations consumers is cost, according to BDRC, but the top deciding factor for those already using services such as Airbnb is location.
Matthew Petrie, president of BDRC Americas, said the data shows some interesting business-travel trends.
“Across generational groups, about one out of 10 business travelers used a shared-accommodation site for business travel,” Petrie said. “But also asked if they used it for work, leisure and both, and when you take work and leisure together, about a third of shared consumers are using it for that purpose.”
What parts of the industry are under threat?
There seemed to be some disagreement among the panelists about what segments of the industry will face the most pressure from Airbnb.
Matt Cox, VP of Chartres Lodging Group, said Airbnb might take some of the air out of major events in core markets.
“With (Pope Francis) coming to Philadelphia (in September), they’re emailing everyone in town saying ‘put your house on Airbnb,’” Cox said. “But it’s hard for us to measure the impact of those compression points.”
Some believe small nontraditional boutiques will end up in the most head-to-head confrontation with Airbnb because of host’s ability to offer guests uniquely curated travel experiences. But Chadi Farhat, chief revenue officer of Morgans Hotel Group, said there are still things boutique hotels offer that Airbnb can’t provide.
“The leisure customers who stays with us stays for many reasons,” Farhat said. “We’re highly focused on design. There’s access to entertainment and night life you can’t get through Airbnb. By keeping those fences, we’re protecting ourselves.”
Airbnb as an opportunity
With so much talk about how Airbnb and similar services could possibly threaten the health of the hotel industry, some are now saying integrating the best aspects of the service can actually serve to boost things instead.
“As an hotelier, imagine if you can get part of the sharing economy,” Jacob said. “There are so many potential opportunities. We’re watching the sharing economy very, very carefully.”
“We need to embrace the technology,” he said. “We can choose to work with them, which we didn’t want to do with (online travel agencies) at one point. Let’s learn from that lesson.”
Cox said there are obvious lessons that can be learned by how Airbnb does business.
“I feel from watching Airbnb that we as an industry suck at attracting reservations,” Cox said. “They’re making it easier and cleaning our clocks.”
Other alternative accommodations
While attention is usually on Airbnb, there are other alternative accommodations that can work to steal demand from hotels.
Jacob said cruise ships have the ability to quickly move into markets and drastically shift the supply-demand dynamics.
“When we had the Super Bowl in New York, it really crashed and burned because there wasn’t enough demand,” Jacob said. “They brought a cruise ship in sponsored by Bud Light. It suddenly added 4,000 rooms in the market.”
Jacob said resort markets must regularly be prepared for the added supply from cruise ships.