Disruption has become so commonplace in business that it could even be considered a modern cliché. But no industry is safe from emerging tech companies that promise to make their services more efficient, more convenient, and more affordable than traditional alternatives.
In the hotel industry, Airbnb has been causing a stir. It has led some business owners to wonder about the stability and future of their hotel businesses.
Per US News, in terms of valuation, Airbnb has already exceeded the biggest hoteliers in the world.
Is Airbnb the future of the hotel industry? Or is it serving a market all its own? What threats does it pose?
Loss Of Revenue
Hospitality Net tells us that hotels lose roughly $450 million in direct revenues annually to Airbnb. Between September 2014 and August 2015, 2.8 million rooms were booked by Airbnb. By 2018, it is estimated that this number will reach five million.
They go on to explain that many hotel employees have lost their jobs as result of these changes. Airbnb hosts are not obligated to provide the same level or quality of service hotels do, and therefore do not have the same overheads common to the hospitality industry (thus disruption).
When guests don’t book at hotels, full service locations can also miss out on revenues generated from food and beverage, and other fees.
Additionally, Airbnb isn’t subject to the same regulatory requirements as hotels, which means hosts don’t have the same operating costs as most hotels do. Some changes in this area are anticipated, but it is unlikely that it will affect Airbnb’s market share.
Growth & Occupancy Rates
Per Skift, in Tokyo, Airbnb’s supply tripled over the 12 months ending July 2016, compared to the hotel growth rate of 3.2% in the same period. Airbnb growth rates start at a lower base than established hotels, however, which explains why the numbers are so high.
There is no question Airbnb is growing at an incredible rate, but that growth isn’t sustainable over the long haul. Still, it is expected that they will continue to grow at a steady rate for the foreseeable future.
Growth rates, however, are limited in their ability to tell the whole story. The newer the business is, the more able it is to increase its customer base. Their business model is also different. They have a larger inventory than any hotel, namely because they’re set up to partner with anyone that wants to offer short-term rentals and make a bit of money on the side on a global scale. Hotel inventory is limited by the size of properties they own.
Occupancy rates, on the other hand, are consistently higher with hotels. Airbnb has an occupancy rate of about 50%, while most hotels have roughly 80% occupancy.
Target Customer & Quality Of Service
Airbnb can help prospects and customers find places to stay for less. This doesn’t mean they can receive the same quality of service that hotels offer, where careful attention is given to cleanliness, service, amenities, convenience, and other services.
The target market discussion is ongoing. Some hotels – especially upper class ones – believe they serve a different market than those Airbnb is serving. Stats and studies, however, indicate that there is some overlap, and public sentiment of Airbnb continues to rise. It seems even mid-aged and wealthy people enjoy participating in the sharing economy.
One thing is certain. Airbnb’s value proposition is different from that of hotels. Airbnb cannot match what hotels offer.
There are different streams of thought on the impact Airbnb has had and will have on the hospitality industry.
The worst thing a hotelier can do is ignore it. Turning a blind eye and waiting for the problem to go away isn’t going to solve anything. The key thing is to understand why more people are using Airbnb. This may offer some clues as to what you can do or could be doing to compete or carve out your own market.
But for the time being, Airbnb will continue to trend upwards, as traditional hoteliers have their niche.