Are Vacation Rentals such as Airbnb a Threat to the Hotel Industry?

The Airbnb/Vacation Rentals vs. Hotel battle is quite a controversial conversation people are having at the moment, it could even be compared to the Taxi vs. Uber one, which as we all know, is kind of a big deal. 

If there’s a cheaper, easier option available, then more people are going to begin to start using that option (Uber and Airbnb) and the original services (Taxis and Hotels) could begin to suffer.

Uber has caused significant damage to the taxi industry in many large cities around the world, so much so that it has been banned from many places such as China, Italy and just last week, London. But what impact has Airbnb as well as other holiday rental sites such as HomeAway, had on the hotel market? Could they potentially cause as much damage to Hotels as Uber has on Taxis?

airbnb_mini

Airbnb, HomeAway, VRBO and other holiday rental services, have many benefits that steer people to book them, rather than hotels. Erica Silverstein, for example, talks about why she prefers Airbnb to hotels on the SmarterTravel website based on her travel experience with her family. 3 of her top 5 reasons are the location; Airbnb properties can be anywhere so you’re not limited to where you can stay, space; rather than the standard hotel room size, which can be difficult for a family of 4, you have a wider range of sizes of places you can stay and flexibility; there are no strict check-in and check-out times, you can work out arrangements that suit both you and your host.

Furthermore, the simplicity of the booking process of vacation rentals is another driving factor as to why people are beginning to lean towards vacation rentals; you can book a place to stay in someone’s home, whether that be a bed, a room, a guesthouse or the entire home, in just a few clicks, being able to choose and compare hundreds of different locations and types of room in one place, and for a cheaper price than hotels (most of the time).

Airbnb and other vacation rentals are sometimes accused of being an unfair competition to the hotel industry because they do not have to comply with the same legislation as hotels. Therefore, vacation rentals are able to offer accommodation at a significantly lower price, which is the another of the key reasons why travelers are likely to opt for them and not a standard hotel room. 

A report released by Sharebetter in 2016 (interestingly an anti-Airbnb lobbying group) obtained by Alison Griswold, a reporter of Quartz, shows that renting an entire home (be that an apartment, studio, house or other) on Airbnb still costs slightly less than a room in a hotel, even in the biggest of US markets. On average, the daily rate for a single hotel room was $163.90 whereas an Airbnb rental for an entire home was $160.47. For two similar prices, you can get two significantly different sized accommodation, so there’s no surprise that the popularity of Airbnb and similar markets are rising so rapidly.

airbnb-introvert-GUIDE0316

In 2016, the number of adults using Airbnb in the United States alone was 44.8 million. This figure is forecasted to reach 86.5 million by 2021, according to StatistaSurely, with the increase in the number of people using Airbnb and other vacation rental services around the world, there will be a decrease in hotel demand, right? 

Well yes… to an extent.

Airbnb is just nine years old and has already caused massive changes in the way people travel. According to a new survey from Goldman Sachs obtained by Bloomberg, once travelers switch to vacation rentals, they don’t go back to hotels. This is potentially the most significant threat to hotels as Airbnb, as well as other vacation rentals, could be permanently steering more and more customers away from hotels.

In addition, according to CBRE3, Airbnb accommodations now account for 9% of the total lodging units in the 10 largest U.S. markets and appear to be adding units at a substantially faster clip than the U.S. hotel industry. For example, the average number of Airbnb units is said to be doubling year upon year, whereas hotel supply increased by only 1.1%.

With more units comes more customers, and therefore Airbnb is seeing explosive growth with only modest slowdowns in the frigid winter months. New Airbnb listings peaked at 38,232 in September 2015 vs 26,486 in July of 2014. (AirDNA, 2016)

listing-growth

(Chart: http://blog.airdna.co/2015-in-review-airbnb-data-for-the-usa/)

And remember, while Airbnb does dominate the market for smaller, hotel comparable rentals, it does not account for all vacation rental properties. In fact, up until about a year ago, Airbnb hadn’t really entered the vacation rental market at all yet. (VRMB, 2016)

So… if the number of Airbnb and other vacation rental units are rising, and more people are choosing them over hotels, then surely that must impact the hotel industry in a negative way?

It does, but so far this change has not had the biggest impact on hotels, here’s why:

Using Amsterdam as an example, the following chart shows that Airbnb is by no means replacing the hotel industry. Even though Airbnb in Amsterdam is growing incredibly fast (from 48 to 16,000 properties listed in the course of just seven years), the number of hotel rooms also increased by nearly 9,000 in the same period.

chartoftheday_8696_airbnb_an_unfair_competitor_for_hotel_industry_n

(Chart: https://www.statista.com/chart/8696/airbnb-an-unfair-competitor-for-hotel-industry/)

For the most part, Airbnb and other vacation rentals cater to a different market, the CEO of Hilton, Christopher Nassetta, said in his interview with CNN that travelers who stay in vacation rentals tend to stay for longer and are largely focused on leisure and value. That includes “staycations where customers are willing to accept inconsistent product with very limited services”.

On the other hand, travelers who stay in hotels expect quality service, from the arrival to the hotel to their departure. Nassetta says, “I think it’s extremely hard for them to replicate what we’re doing” and believes it is”relatively impossible” for vacation rentals to pose a major threat.

top-room-service

So, are Vacation Rentals such as Airbnb a Threat to the Hotel Industry?

Yes, vacation rentals are causing a threat to hotel companies, but not to a severe extent at the moment. Perhaps in the future, if the hotel industry does not begin to diversify their investment, they’ll cede further ground to the fast-growing, ambitious and capable young companies.

As Airbnb and Hotels continue to wage their battles, TheBesty is a tool that can be used across all hospitality industries – hotels, vacations rentals, and even timeshares.  TheBesty provides a simple and classy mobile concierge app full of custom and unique content that supercharges properties existing concierge service and providing a mobile concierge to accommodations that don’t have a concierge at all.

If you are a hotel, apart hotel, vacation rental, or timeshare interested in improving guest satisfaction and increasing your revenue, please visit TheBestyConcierge.

Download TheBesty app in the App Store (iOS) or Google Play (Android).