Hotels hitting back at Airbnb
By Carmel Fisher, Director
07 July, 2017
Wellington was bursting last week as Lions supporters hit the town. My daughter and her enterprising flatmates took the opportunity to list their bedrooms on Airbnb, earning in one night enough to cover a week's rent.
In the same week, a colleague discussed his upcoming Europe trip with wife and five children, featuring an Airbnb-like service, "only more upmarket". He chose shared accommodation because few hotels cater for a large group and the variety of properties they'll be staying in adds to the holiday.
Because I like the buzz and service offered by hotels, the phenomenon of Airbnb has completely passed me by. But the growing enthusiasm for 'the sharing economy' made me wonder how hotels must be feeling.
Just as travel agents quivered at the threat of Expedia, taxi companies waged war on Uber and car manufacturers hope Tesla will be a novelty, you'd think hotels would worry how many rooms Airbnb might steal from them.
My concerns are clearly unfounded. The 12-month share price performance of the major hotel chains, Marriott and Hilton (up 48 per cent and 32 per cent respectively), suggests nobody thinks Airbnb is a real threat.
Since its formation in 2008, Airbnb has recorded more than 160 million "guest arrivals" and now has over 3m listings worldwide in some 65,000 cities. The company originally started in San Francisco when a couple of roommates couldn't afford the rent for their loft apartment. They put an air mattress in their living room and turned it into a bed and breakfast.
The idea expanded to offer short-term living quarters, breakfast and a unique networking opportunity as guest and hosts rated each other and thereby overcame the trust issues associated with staying in a stranger's home or having an unknown guest share yours.
It seems the provision of accommodation is the only common thread with traditional hotel chains. Airbnb promises experiences; connecting people to authentic travel experiences at every price point (from a single bedroom to a nine bedroom chateau). Hotels offer consistency.
Airbnb has become a popular choice for the millennial generation, more interested in making memories (and snapping Instagram photos) than paying for such things as room service and a mini-bar.
But while Airbnb is not a major threat just yet, hotel executives are certainly not complacent. Marriott CEO Arne Sorenson recently embarked on an expansion binge, buying competitor Starwood Hotels and Resorts to create the world's largest hotel company. The merger added 381,000 hotel rooms, swelling Marriott's portfolio to 1.2m rooms.
This sounds enormous but last year travellers around the world made 1.2 billion international trips; by 2030, the number is expected to reach 1.8 billion.
Acknowledging the 'community' aspects making Airbnb popular, Sorenson plans to transform his properties into lifestyle hotels, designed to cater to guests' fun-seeking, healthy or aesthetically elevated lifestyles. He realises today's travellers want more than a clean bed and a room service burger.
His new hotels will have a novel offering: four rooms clustered around a communal lounge to attract groups travelling together (guests who would otherwise rent an Airbnb) — plus a bar featuring locals enjoying karaoke nights or performances by the town's musicians.
Sorenson believes he has the advantage: "Airbnb can provide a house and a bedroom but not the beehive of activity in the lobby."
We'll see but meantime the winners, as in most instances of the sharing economy, appear to be the customers.