Jeff Green & Jerry Hoffman/Hotel Business– Since its aggressive inception into the market six years ago, more than 35 million consumers have used home-sharing startup Airbnb as an alternative to a traditional hotel during their vacation or business travel. A report from Boston University reveals a 10 percent increase in Airbnb supply results in a 0.35 percent decrease in hotel room revenue—highlighting the power of potentially transformative force facing the hotel industry. Reports from Bloomberg value Airbnb at around $24 billion, surpassing valuations of top hotel brands like Hyatt. These eye-opening numbers make it clear that Airbnb and other emerging hospitality concepts are far from a fringe element: they are an increasingly significant force on the hospitality landscape.
The question isn’t whether this will impact existing hotel brands, the question is how much. Some hotel chains have already made big changes in response to Airbnb and its contemporaries, and others are likely to follow suit. Does the home-sharing trend have staying power? If so, what does the future look like for the hotel industry, and what steps should hoteliers consider taking in order to stay relevant to the guest experience as home-rental sharing companies gain substantial market share?
For hotel owners and operators, answering these questions begins with understanding how Airbnb and other home rental companies are impacting the marketplace, and where the most prominent points of competition and differentiation exist. Larger urban markets and areas with a strong seasonal housing base (tourist areas, for example) tend to be the most competitive between traditional hotels and home-sharing companies. Not surprisingly, home-sharing concepts are popular in urban areas, as the flexibility, convenience, and broad range of nearby amenities is a natural fit for the preferences of the influential millennial generation, who are taking advantage of home-sharing alternatives on business or leisure travel. For hotels outside of urban or tourist markets, the lack of competition and force from home-rental companies doesn’t require a change—at least not in the near future.
In some ways, this competition is changing the way some larger brands view their hospitality offerings. Hyatt, for example, is not only revising their platform, but is beginning to explore some more urban locations in addition to its traditional suburban markets. In fact, Hyatt went a step further. Recognizing the growing popularity of home rentals, the iconic hotel brand recently aligned with the burgeoning home-rental industry and invested $40 million in London-based Onefinestay—a company that matches homeowners looking to rent their high-end residences in London, New York, Los Angeles and Paris. To some extent, this is a if you can’t beat them, join them situation, but this kind of partnership is much more likely to work if there is consistency between the home-sharing business and the hotel brand. Hyatt, with a well-established reputation for high quality, is a natural fit for Onefinestay, given the high quality nature of both brands.
Hoteliers should resist the temptation to see home-sharing as a “fad” or view media coverage about bad home-sharing experiences or dirty residences as anything other than isolated incidents. That said, the fact remains that the lack of consistency and regulation with home-rentals presents an opportunity for hotels to emphasize the fact that brand standards and regulations ensure that guests can consistently expect a quality experience every time—a proposition affirmed by the sheer volume of reviews through sites like Trip Advisor.
Hotels will have to hone in on price as it relates to the supply of Airbnb in any given market—remaining conscious of this new market presence. What’s challenging, however, is that the sophisticated models and metrics hoteliers use to gauge and adjust pricing may not take into account pricing information from home-rental companies. The home rental industry is so diverse and ever-changing that it will hard for these major hotels to track, then react.
Hotels have gone through some changes in the last two decades, introducing concepts like extended stay and limited service hotels. But, the rapid rise of Airbnb and its ilk has prompted renewed reflection—not only about brand identity and service offerings, but also more critical analysis about the way site selection, amenities and design decisions impact the guest experience. Extended stay hotels in major urban markets may need to consider decreasing room size and adding more communal amenities. As consumers crave a “home away from home” authentic experience, hoteliers should consider modeling their room sizes and aesthetics to match those of surrounding lofts, apartments and urban residences.
To maintain the same level of advantage as home-rentals, hotels should elevate the details and features of the rooms to include a living room space with a flat screen TV capable of streaming Netflix to add that touch of home that guests experience at home-rentals. Anything that comes with a home-rental should be free for guests, such as in-room Wi-Fi and a coffee/tea bar.
To maintain an even greater competitive advantage over Airbnb—which is key—hoteliers should consider upping their offerings when it comes to breakfast. The lack of healthy breakfast alternatives in the limited service hotel sector does turn-off the younger and more health-conscious guest. Hotels should have a small business center with a conference table complete with printers to appeal to business travelers, a feature that doesn’t always exist in home-rentals. Hotels should offer free bike rentals, charging stations, onsite laundry facilities and diverse exercise classes for extended stay guests.
Home-rentals present an opportunity for travelers to connect with the locals and receive firsthand recommendations on dining, shopping and entertainment—particularly if they’re opting to a room rental where the residents are home. To offer that authentic, local experience, hotels should create a sense of community and connection by offering a morning running club where people can connect and share experiences, or perhaps a complimentary wine and cheese reception with staff onsite to answer questions, as some hoteliers are beginning to do.
Ultimately, hotels don’t have much of a choice. The pressure from Airbnb and similar concepts is compelling hotels to adapt and evolve rapidly to demographic and social changes. These are changes that might have taken place regardless, but the home-sharing phenomenon is prompting them to make adjustments much more quickly. And while that may be disruptive in the near-term, in the long-term that might end up being a very positive thing for the hotel industry.