The ability to adapt is the ability to survive. This is true for everything from the simplest bacteria to the most complex businesses known to humanity—anything that cannot change will be left behind.
And so, it goes with hospitality, an industry that has learned to adapt quickly. Over the last two decades, as technology changed what guests expect in hotels and as new demographics made new demands, the industry has rushed to adjust its supply. Those demands have largely been presented as opportunities for new lines of revenue rather than hurdles to overcome.
And so, it should go with Airbnb, the current bane of the industry’s existence. Hoteliers have been complaining about Airbnb for the better part of a decade, lamenting lost revenue and unfair competition. And while some of those complaints are certainly valid, the industry has also adapted to the service, creating new normals every step of the way.
Airbnb was founded in August 2008, just as the Global Financial Crisis was starting to heat up, affecting both people’s willingness to travel and hotel revenues. As travel budgets dried up, Airbnb proved to be an attractive model—less expensive, more personal and not affiliated with a large corporate brand. As the youngest millennials graduated from college into the “gig economy,” the idea of saving money while supporting independent small businesses with individual style and “authenticity” (who knew how important that word would become?!) was undeniably appealing.
Airbnb took off, and the hospitality industry responded right away. The Boutique & Lifestyle Lodging Association launched in 2009, offering support and guidance for hoteliers catering to the demands of a new market. Travelers wanted options that were small, unique and “authentic” (that buzzword!), and BLLA has helped hotels provide all of those things in a traditional hospitality setting. The response to these demands has proven effective: As HVS noted last year, the supply of lifestyle and boutique hotels has outpaced overall growth in the U.S. lodging market, growing by over 5 percent per year since 2000.
Over the last nine years, the home-sharing industry and traditional lodging industry have butted heads over many issues, but for all the regulations placed on it, Airbnb has continued to expand. At this week’s HX conference in New York City, Mark Woodworth, senior managing director and head of lodging research at CBRE Hotels, said that Airbnb’s booking model has proven to be more effective than anyone expected. In 2016, Airbnb sold more rooms than all other years of its operations since 2009—combined.
But for all of Airbnb’s success, home-sharing doesn’t seem to be hurting traditional hospitality. Earlier this year, market researcher STR said that it did not see clear effects on the country’s hotel industry performance that could be definitively attributed to Airbnb, in spite of the fact that Airbnb has nearly as many hotel-style rooms as Marriott International.
Performance data through July 2016 indicated that hotels were following their normal cyclical trajectory, hovering at or just below the peak at a time when Airbnb listings outnumbered the world’s largest hotel company by nearly three units to one. As of July 2016, meanwhile, the U.S. hotel industry recorded its 77th consecutive month of revenue-per-available-room growth, and during that same month, hoteliers sold more roomnights (117 million) than ever before.
This is important: Airbnb is certainly big, but the long-dreaded downturn in hospitality profits does not seem to be happening. In fact, by emulating elements of Airbnb’s style, hotels are appealing to new demographics and finding new revenue streams. Not only are boutique and lifestyle hotels growing exponentially, Airbnb is making it easier for hotel companies to see where travelers want to go, paving the way for traditional hospitality options to move in as well.
Hotels are still adapting: Earlier this year, Hilton President and CEO Chris Nassetta said that the company would develop a micro-sized, inexpensive “hostel on steroids” for the urban market to compete with Airbnb. “We’re not trying to be the cheap alternative,” Nassetta said. “We’re trying to be the premium alternative to Airbnb.”
“There is a lot that we’ve learned from all the alternative lodging companies in terms of going mobile for search and mapping,” Geoff Ballotti, president and CEO of Wyndham Hotel Group, said. The biggest takeaway from the growth of home-sharing, he said, is the overall experience both online and off. Wyndham is looking to boost its appeal by having its hotels offer similar experiences, he said.
Just as importantly, Airbnb is trying to play fair. At this year’s Skift Global Forum in New York, Airbnb co-founder and chief strategy officer Nathan Blecharczyk noted that his business currently has 360 agreements around the world that determine how it operates in everything from towns to entire countries. These regulations, he said, are leveling the playing field for traditional hotels and home-sharing services. “We’re prepared to pay all taxes,” he said, arguing that revenue from Airbnb guests can help support all kinds of cities.
And as we noted earlier this week, Airbnb’s global growth is already slowing, possibly due to all the city regulations and crackdowns. According to a recent survey from Morgan Stanley (disputed by Airbnb), the company’s adoption growth has slowed in both the U.S. and Europe over the last year, as the percent of travelers who used Airbnb over the last 12 months increased only 25 percent, a “notable deceleration” in the adoption curve compared to 2016. At the same time, adoption expectations of 29 percent for 2018 are roughly flat to last year’s expectations of 28 percent for 2017, so there is a chance adoption could continue to undershoot estimates. “Said another way, we’re a year behind where we’d thought we’d be…and, in effect, Airbnb’s adoption curve is flattening faster than what were our prior optimistic estimates,” the report said. A representative from Airbnb, meanwhile, noted that numbers from Asia, Africa and Latin America were not included in the Morgan Stanley report—all of which are big markets for the company.
So as the industry at large continues to fight Airbnb’s growth, we should also consider how home-sharing has helped the industry. Airbnb proved the popularity of the boutique and lifestyle segments, giving rise to a new kind of hospitality. Airbnb has paved the way into growing markets, letting hoteliers know where travelers want to be. And Airbnb is not causing significant damage to traditional hotels’ revenue. As an industry that has proven capable of rapid evolution, we may want to step back and let Airbnb keep growing, and learn from its efforts. This practice seems to be serving us well so far. Source: by Jena Tesse Fox | Nov 17, 2017/www.hotelmanagement.net