Airbnb continues to capture headlines, yet many hoteliers have rationalized its entry into the lodging space as non-competitive to their traditional hotel product. As the hotel industry learned from the dawn of vacation rentals and online travel agencies, ignoring groups that fulfill lodging demand at scale is a bad idea. Airbnb is now operating at scale, and just getting started.
Airbnb takes an asset-light strategy to anew level, operating a digital exchange that matches individuals to individual lodging units. Airbnb has A-tier investors, smart management and a sizeable valuation. Its next funding round will value the company at over US$13 billion. As of mid-December, that put the firm slightly below Starwood (US$14.2 billion) but above Wyndham, InterContinental and Hyatt.
Measuring Airbnb room supply impact gets complicated – it is highly dynamic; expanding during demand spikes. Airbnb hosted over 120,000 guests in Brazil during the 2014 FIFA World Cup. One single night, during July 2014, Airbnb housed 330,000 total guests (20,000 in Paris alone).
Lodging Advisors/STR estimated Airbnb as representing 11.1% of New York City room inventory, satisfying 5.4 % of room night demand, and capturing 2.9% of room revenue. Those figures indicate downward pressure on pricing. Long-term guests (30-plus days) represent 24% of revenue, with 21% from parties of five or more guests.
It should be noted that Airbnb offers three distinct types of product – host present/shared rooms, host-present/private rooms, and host absent/full unit stays. The third option may be most directly competitive to hotels, but as mainstream travelers become more familiar with Airbnb, traditional hotel guests, particularly Millennials, may start considering alternatives.
The biggest difference, however, is the guest experience. Airbnb’s ultimate goal is to provide a great host to guest match. When it works, visitors are no longer tourists; they live like a local and get an expert insider perspective on local experiences that can make a stay truly unique and memorable.
Airbnb disrupts the hotel industry not only by introducing supply at a lower price point, but also while enhancing the guest experience through personalization. That improved value proposition is the future battleground for traditional hoteliers.
Airbnb becomes the anti-hotel. Suddenly, hotel brands striving for a consistent guest experience start looking very turn of the century. To successfully compete with Airbnb, hoteliers must ask “why“ guests are staying and organize service delivery standards to offer unique guest experiences – just like Airbnb.
Contributed by Robert Cole, RockCheetah, Menominee Falls, Wisconsin