airbnb effect on hotels

Are Hotels Marching into their World War 1?


The Airbnb Data Show They Could Annihilate Hotels

In July 1914, Europe basked in a glorious summer with a backdrop of the most prosperous, wealthiest time the continent had ever seen. A crown prince had been assassinated in Sarajevo, but all but the diplomatic services of Europe paid it little heed.

As everyone knows, out of this cloudless sky came, what Arthur Conan Doyle called, “the most terrible August in the history of the world”.

Is it July 1914 for the Hotel Industry?

Every metric out there pronounces the hotel industry in rude health. RevPAR, ADR and Occupancy, according to hotel statisticians PKF, are all at record levels. With such abundance in the air, hotel executives have been merrily swatting away the idea that Airbnb is going to disrupt their business. Last year Marriott CEO Arne Sorenson viewed Airbnb as a “fun experiment”.

But some cracks are appearing in the dismissals. Pebblebrook Hotel Trust CEO Joe Bortz recently qualified weaker than expected results by saying hotels could no longer gouge prices at times of high demand like they used to.

What Does the Data Say?

We at Airdna have been housing and analysing all the data on reservations taken from Airbnb’s website, so are in a unique position to really see into the level of business that is already being taken away from hotels.

We looked in detail at Santa Monica in our recent blog post, and anyone who places the following chart under a microscope can be in no doubt that this fun experiment is beginning to reach into the liver of the lodging industry.

Our data shows that picture is writ large across many cities in America, and we examine some of this diversity in different cities here.

What Would August 1914 Look Like?

The lodging industry always suffers more in a downturn, but Airbnb could make the next downturn apocalyptic. Not only will travellers be looking to cut costs, there could be an explosion in supply as middle class families look to augment their income at every opportunity. This could sweep away entire hotels in markets that are currently awash with guests.

On top of this, Airbnb’s huge push into attracting business travellers could threaten the core market that businesses depend on. Those Millennials who have been insisting that they are permitted to stay in apartments rather than hotels (1 in 5 Millennials are using Airbnb for business trips) are going to be travelling more and more as they age. Moreover, once Airbnb gets inside companies’ travel policies, the bean-counters may start to think about insisting on this economy for all their staff.

What Can Hotels Do?

Dare we say, the first thing they should do is call up Airdna right now and get their hands on the most accurate information available about what Airbnb is doing in America and internationally, to see the true nature of Airbnb, with our repository of every detail of every booking in the last 15 months.

The second thing they should do is make broad strokes to combat this existential threat. This is more than allowing iPhone room entry. This is getting into this space. BeMate is doing a great job of this, using their parent hotel chain as hubs to serve the spokes of different apartments they are managing specifically as apartments for guests.

Failing to move fast will see tremendous upheaval. Just as the map of Europe was completely re-drawn after 1918, with most of the crowned heads of Europe in the gutter, so could the lodging landscape be uprooted if hoteliers fail to respond to Airbnb.

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