Real Data Validates Home Sharing Segment Impact on Hotels
Much has been said about the impact of the sharing economy and the proliferation of alternate lodgings on the hotel industry, but there hasn't been much concrete evidence to directly and undeniably support this claim. This evidence has mostly been tangential and more based on consumer behavior theory than on showing an immutable link between the growth of one and losses for the other. Recent data, however, is sobering.
Bank of America Consumer Spending Snapshot tracks the utilization of 40 million credit cards users, sorted by industry (SIC code). By examining longer term data – in this case seven continuous quarters – we can start to visualize trends that properly illustrate the causality we hoteliers have long purported. Below are four charts revealing slightly different perspectives on the same comparison.
This first chart looks at the change in expenditures for the home sharing and hotel segments. As you can see, hotel category spending has been relatively flat compared to strong year-over-year growth for the home sharing segment.
This second chart looks at number of transactions. Here, you can see that the total number of transactions for the hotel segment is flat or in a slight decline. On the other hand, the growth of home sharing transactions is remarkably strong.
This third chart looks at the ratio of the hotel to home sharing categories for both expenditures and transactions, revealing that the gap between the two segments is narrowing.
Finally, if we consider home sharing plus hotels combined into a single 'accommodations market', the data translates to the following market shares for the home sharing subcategory. As you can see, the share of spending has moved up to non-negligible amounts.
As Jason Gaughan, Credit Card Executive at Bank of America, notes regarding these four charts along with other data at his disposal, "Like other sharing economy services, home sharing continues to consistently experience high growth. As more consumers try out this new lodging option, we would expect this trend to continue."
We cannot yet distinguish between the impact that home sharing businesses are having on leisure versus business or group segments based on these statistics alone, but the general trendlines are clear. Alternate lodging providers are taking business from regular hotels, and even though they may only currently represent upwards of 10% of the total accommodations expenditures, this alone may be enough to erode a property's margins and force drastic cost savings measures.
Moreover, these charts debunk the often-cited argument against the deleterious effects on hotels whereby home sharing opens travel to totally new customers who wouldn't be inclined to do so otherwise. By showing that, at the very least, a portion of the revenue for alternate lodgings is coming at the expense of hotels, it is now abundantly clear that this 'new traveler' hypothesis doesn't hold water.
In essence, though, these charts are only putting numbers behind what many hoteliers already know. The next step is figuring out a solution. Without getting into specifics, the answer is innovation. If these home sharing numbers continue to trend upward and chew away at hotels' foothold on the hospitality marketplace, we are going to need to be leaner and meaner, with better guest service, improved amenities, greater technological integration and more efficient operations if we are to stay afloat.
