Airbnb Versus Hotels – What Lies Ahead
Airbnb has always been a fascinating story to me. Starting by the fact that it was born right in the midst of the largest global financial crisis back in 2008, and consequently, at the same time most major hotel chains and independent hotels were struggling to survive in an environment where few people could afford to travel.
Today, Airbnb is the second-highest valued startup in the US after it raised a massive $1 billion funding round in March 2017 that pushed its valuation to a whopping $31 billion.
How much is that? Well, for comparison, Marriott’s valuation is around $39 billion, Hilton’s is $21 billion and IHG is ‘just’ $9.3 billion.
However, when it comes to total listings, Airbnb with around 4 million total listings has more rooms for rent than the above top 3 hotel chains combined!
Guest arrivals have grown from a mere 2,000 in 2008 to over 100 million in 2017, totaling around 260 guest arrivals over the past 10 years. And this number continues to grow.
Geographically, Airbnb is now available in more than 191 countries and 65,000 cities around the world for a combined average of about 500,000 stays per night. Of those, 88% of the reservations are for groups of two to four guests with almost two thirds of them opting to rent an entire home or apartment.
In sum, on any given night, around 2 million people are staying at some form of Airbnb rental location.
If you already use Airbnb, you’re not alone. In fact, Airbnb has about 150 million users out of which 54% are female and 46% of Airbnb guests are male. Yes, more females than males staying at strangers’ homes. How’s that for proof of concept.
And here’s another interesting fact. The fastest-growing Airbnb host demographic is seniors, with over 200,000 senior hosts and over 120,000 senior women hosts. Senior women are also consistently rated as the best hosts on Airbnb. I wonder if home made cookies make a difference 😊
Who’s the typical Airbnb guest? According to Airbnb, they usually attract travelers looking for a spacious and comfortable place to stay that is also affordable and functional. Target guests vary from host to host and space to space.
The countries with the most Airbnb listings are: United States — 660,000 listings; France — 485,000 listings; Italy — 340,000 listings; Spain — 245,000 listings; United Kingdom — 175,000 listings.
Pricing? The average nightly reservation rate is around $80. Typically, an Airbnb guest or guests can rent an entire apartment or home for around 6% to 15% less than they would pay for a single hotel room in the same city.
In other words, hotels are no longer just competing with other hotels in their comp set or OTAs underselling their rooms or even meta-search engines as a less damaging option. Over the past few years and into the future, they will also be competing with Airbnb, and other home-sharing services, in their neighborhood. Hotel’s overall occupancy is expected to fall to just over 66% in 2018.
According to a study by HVS Global Hospitality Services, hotels lose approximately $450 million in direct revenues per year to Airbnb. Between September 2014 and August 2015, 480,000 hotel room nights were reserved while over 2.8 million room nights were booked on Airbnb. Add to that all other traditional hotel revenues like hotel restaurants, bars, spas, amenities, parking, valet, or any other hotel fees, and you can see how each guest that decides to stay at an Airbnb location really eats into the traditional hotel revenues.
It is now more important than ever for all hotels and especially independent hotels to look directly at Airbnb’s success elements and figure out ways to fight back to claim the guests that they are losing or could be losing in the future. Every business, no matter how successful it is, has its own weak points, but just as important, traditional hotels still have a number of advantages over peer-to-peer rentals like Airbnb.
On its part, Airbnb is making people that would normally not consider traveling due to lodging costs or any other reasons, start planning trips to their favorite destinations. Those same travelers would eventually consider staying in similarly priced hotel room in exchange for the full service and amenities that a hotel has to offer. People are much more mobile today than they have ever been. There’s space for both hotels and Airbnb to co-exist. Each has to find its own way to market their own competitive advantage over the other. Doing nothing, is not an option.
Thank you for reading. Until next time, this is Manuel Gil del Real (MGR).