Will More Hotels Get Into the Home-Sharing Business?
By Linchi Kwok, Associate Professor at The Collins College of Hospitality Management
There is no doubt that COVID-19 has had an unprecedented impact on the travel and tourism industry. With massive layoffs and closures, many hospitality professionals have noted that they had never seen such a detrimental event to the industry in their careers. Nobody knows when the recovery will take place.
Airbnb booking is up and ready for an IPO
When the pandemic hit, Airbnb reported a 90% drop in booking, or a $400 million adjusted loss in the second quarter. Then, Airbnb laid off 7,500 employees, or 25% of its workforce, and cut its marketing budget by 14% from the last year.
Now, when hotels are still struggling and running at a below 50% occupancy, Airbnb booking has already bounced back. For example,
- During the weekend of June 5-7, Airbnb's gross booking value recorded positive year-to-year growth for the first time since February.
- Over 100,000 new guests in the U.S. used the platform for short-term residential rentals.
- In July, Airbnb reported a 22% year-to-year increase in bookings.
- People are booking long-term stays at Airbnb, for weeks or even for months.
- Airbnb finally filed a widely anticipated initial public offering (IPO) in August.
Marriott's home-sharing arm is doing well
- The site offers premium and luxury private home rentals only.
- All properties are managed by trusted partners, who provide professional cleaning service, 24/7 assistance, high-speed Wi-Fi, and premium linens/amenities.
- Guests can earn and redeem Marriott Bonvoy points.
Like Airbnb, Marriott Homes & Villas are doing very well, especially in the summer months. For instance,
- The number of listing properties grew from 2,000 when it started to over 10,000 in 250 markets.
- The booking was up 700% over last summer.
- The revenue increased by more than 800%.
Nevertheless, the number of 10,000 properties is still too small compared to the 7 million-plus Airbnb listings in over 220 countries and regions. Likewise, Booking.com has more than 28 million listings, or more than 6.2 million homes, apartments, and other unique places, in 226 countries and territories.
Marriott International itself manages 1.38 million hotel rooms of more than 7,300 properties in 134 countries and territories. That means, Marriott's home-sharing inventory accounted for less than 1% of its portfolio. The gain of Marriott Homes & Villas is unlikely to offset the lost revenues from Marriott hotels during COVID-19.
Will more hotels show interest in the home-sharing business?
The hotel industry had a record-high performance in 2019, running a 66.1% occupancy at $131.21 average daily rate. At that time, not every hotel showed interest in the home-sharing business.
Hilton CEO Chris Nassetta, for example, did not worry about the competition from Airbnb. Last year, when Marriott launched Homes & Villas, Nassetta wanted to remain focus on Hilton's core business. He was not interested in the home-sharing sector.
Now, when hotels are still struggling, and Airbnb is doing just fine, will more hotels become interested in the home-sharing business? What will be hotels' advantages and challenges as they get into the home-sharing business?