The April launch of Homes & Villas by Marriott International provided the latest confirmation that homesharing has reached the mainstream. The lodging behemoth opened up access to 2,000 premium and luxury homes in more than 100 destinations in the U.S., Europe, the Caribbean and Latin America.
Marriott didn’t blindly dive into the business; last year it ran a pilot test in Europe. “Can we work in a model with management companies to execute against standards successfully, do guests think they had a Marriott experience, and how does this sit against our core business?” were among the concerns, said Jennifer Hsieh, vice president of the Homes & Villas initiative.
The pilot demonstrated the logistics of working with property managers and how to ensure certain standards. Guests liked the product, and the data suggested that bookings weren’t stealing roomnights from the core lodging business. Guests booking during the pilot test wanted longer stays, larger shared spaces, multiple bedrooms, kitchens and other amenities associated with leisure travel.
Marriott had good reason for caution: Some rivals have struggled to make a go of it. Hyatt Hotels took stakes in two homeshare firms, Onefinestay and Oasis; on an investor conference call last spring, CEO Mark Hoplamazian pointed to struggles with consistent quality, an expensive delivery model and challenging local regulations. Ultimately, he said, it was “hard to get to a point where you are receiving, from a financial return perspective, a sustainable model.” Accor, which eventually bought Onefinestay, has found profitability a challenge.
Niche that can’t be ignored
The obvious factor driving hotel companies into homesharing is demand, fueled by the rise of Airbnb and smaller players like Home Away and VRBO. Lodging firms largely have stood by while the shared economy model carved out its own space, rising from nothing to more than 8% of the U.S. hotel market in 10 years, according to hotelappraisers.com. Globally, according to iproperty.com, Airbnb has more than 6 million listings in 191 countries, 150 million total users, and more than 2 million guests each night; By 2020, projected revenue could be as high as US$8.5 billion.
Now, Airbnb is shedding its budget heritage with the addition of a new tier, Airbnb Luxe, which consists of 2,000 upscale homes, villas, castles, islands and other rentals aimed at high-net-worth travelers.
New York-based Researcher and lodging consultant Bjorn Hanson said anyone involved in the conventional hotel business is now compelled to at least test homesharing because of shifts in demand. “If the potential is that large, they need to learn this new business,” he said. For companies like Marriott and Choice Hotels that have a large loyalty member base, he added, offering longer-stay vacation rental inventory is essential, both for earning and redeeming points.
The other big motivator: attracting younger customers. “We see the trend especially for younger travelers to stay in alternative accommodations,” said Michael Bellisario, vice president and equity research analyst for Robert W. Baird & Co., Chicago. “Those people will travel for the next 30 to 40 years, and if Marriott can gain a little of that travel wallet early on, they will see benefits down the road.”
Approaches vary
Marriott’s foray into homesharing relies on a network of trusted property management companies been vetted and instructed in Marriott’s standards. The homes are professionally cleaned and equipped with high-speed Wi-Fi, premium linens and amenities and family-friendly conveniences as requested. The idea is to allay some of the anxiety associated with staking the success of a family vacation or a milestone anniversary trip on an unknown quantity.
“We recognize that level of anxiety, and we want to provide the home that really delivers against a family vacation — one that will look better than or just like the pictures, someone you can call 24/7, and service levels that you would expect from Marriott,” Hsieh said.
Properties in the Homes & Villas network are not exclusive to Marriott; Marriott acts as a distribution platform. Bonvoy members are expected to drive bookings: Survey data showed 27% of Bonvoy members had rented a home in the previous 12 months. “One of our advantages is members’ ability to lean into the program to earn and redeem points,” Hsieh said.
Choice, which debuted Vacation Rentals by Choice Hotels in 2016, offers about 30,000 rentals in 50 of the top U.S. vacation destinations; all are run by local property management firms. The company, which expects to double its portfolio this year, was motivated by data that showed that “many guests were looking for longer stays and ways to use their Choice Rewards points,” said Sara Searls, vice president of digital commerce. Travelers book the properties on a separate site.
Accor took a different approach, buying the upscale Onefinestay homeshare brand in 2016 for US$166 million and integrating it with its lodging brands and loyalty program. After the purchase, the company sustained a US$288 million writeoff partly attributed to the brand in the second quarter of 2018. But Accor remains committed to the potential of homestay. The portfolio, which has doubled to 5,000 since the acquisition, is divided between an urban collection, with properties in major U.S. and European cities exclusive to the brand, and a villa collection specializing in resort locations and managed by local professionals.
Accor’s strategy for Onefinestay is to scale “strategically and sustainably so that we maintain brand integrity and consistency along the way,” said its CEO, Thomas Girard. Short-term, it will focus on signing more exclusive management agreements in markets where it already has a presence, such as New York, Rome, Paris and London. “Our core business has always appealed to single families and leisure travelers looking for private rentals, but today we’re also seeing a growing trend in the number of multigenerational vacations,” Girard said. Business travelers with families in tow, a growing segment, are driving expansion into more urban sites.
Room Mate Group, Madrid, created a division in 2014 to manage rental homes and buildings under the Be Mate flag. The homes can be booked on Room Mate’s reservation site. Its latest push is to get exclusive rights to manage whole buildings. Over the next year and a half it expects to open 13 Be Mate sites in Mexico City, Milan, Venice, Barcelona, the Canary Islands and other destinations. Room Mates Hotels President Kike Sarasola said other sites in North and South America are targeted for expansion.
“We were the first hotel chain that, instead of fighting Airbnb, embraced it and said we can do it better,” Sarasola said. “Now everybody is doing it.” He thinks hotel companies have an edge in the homeshare space because of their expertise in catering to guests’ needs, the infrastructure and contacts that an individual owner can’t match.
Hyatt, which backed away from its disappointing investments in Onefinestay and Oasis, retains a foothold in vacation rentals. It picked up 10 condo properties as part of its acquisition of Two Roads Hospitality last year, and “the vacation rental business model gives us more control regarding both the product — quality, service and amenities — and the booking experience, since most units are exclusively bookable through our platform,” said James Francque, Hyatt’s global head of transactions. He said the experience with Oasis and the online marketplace “continues to inform our approach to how we might offer residential options for the benefit of our guests, owners and shareholders.”