Is Airbnb Hotelier’s Friend or Foe?
After the recent acquisition of HotelTonight, If there were any doubt as to Airbnb's true intentions of entering the OTA space and start aggressively competing with online travel agency giants such as Booking Holdings and Expedia, they need to be laid to rest immediately.
The industry has conflicting views of the role Airbnb plays and will play in hotel distribution. Some hoteliers believe that Airbnb is not an ordinary OTA since it "hijacks" travel demand and diverts traditional hotel guest to private accommodations. Airbnb has already "hijacked" 10%-15% of the travel demand in many major metropolitan areas and leisure destinations such as New York City, Paris, and London. This affects negatively overall occupancy and hotel room pricing and hoteliers are unable to raise ADRs in periods of traditional peak demand. According to Morgan Stanley Research, 50% of survey respondents in the US, UK, France, and Germany reported that they booked an Airbnb in place of a traditional hotel. In other words, Airbnb is diverting traditional hotel guests to private accommodations.
Other hoteliers welcome the entry of Airbnb in the hotel distribution mix, since they believe Airbnb adds another option to the existing duopoly of Booking Holdings and Expedia.
What is your take on the subject?
Associate Professor at The Collins College of Hospitality Management
Airbnb adds a tremendous amount of room inventory to the market, mainly in the top tourist destinations. Regardless the fact that hosts on Airbnb gain some advantages over hoteliers as there are fewer compliances a host must follow, there occurs a loss of revenue for the hotel industry every time when a traveler stays in an Airbnb or any room-sharing facility instead of a hotel room. In a nutshell, hosts on Airbnb not only gain advantages over hoteliers in operations, but they also take away real business from hotels.
Yes, Airbnb and hotels are competing against each other in the same market. The question is: Can hotels gain something from the competition with Airbnb?
There is a possibility that Airbnb can help hotels increase revenue, depending on the relative pricing strategies the Airbnb listings have as compared to the hotels. More importantly, hotels are learning from Airbnb for product improvement and development. Inspired by the unique features of Airbnb, many hotel chains have introduced new brands to combat Airbnb. Moreover, some hotels chains were able to identify new business opportunities as they noticed there was no way hotels can stop the growth of Airbnb, not now and probably not in the future either. So, hotels themselves also enter the short-term residential rental market.
While both hotels and Airbnb want to win more market share, they are developing new products and inventing new services to stay competitive. Such competition can add more excitement to the market, especially if we can find ways to ensure a fair “game.” Travelers are probably liking such competition too. Having more options in the market to choose from is not a bad thing. Would you agree?