The Influence Of AirBnB On Hotel And Private Home Rental Industry Essay

AirBnB has disrupted hotel and private home rental industry in many ways. The impact has been most profound in smaller cities and towns and in less travelled parts of the globe. It has had a positive impact on the amenities offered as well as the customer service of hotels. In the more popular tourist areas and in areas where high end hotels exist, AirBnB has provided competitive pricing pressure to keep the hotel room rates in check as well as increase availability during holidays, festivals, and large events. The research study showed that in the top 10 US cities with largest AirBnB market share, resulted in 1.3% fewer hotel rooms booked and 1.5% reduction in hotel revenues.

Hotels have responded in multiple ways to counter the inroads that AirBnB have made across the customer spectrum. Mid-range, three-star hotels have been the hardest hit as they focused traditionally competed with hotel chains and branded properties on price. There are several ways hotel chains and independent three-star hotels can respond to the growing threat of AirBnB and other similar providers.

Lobbying

Vacation rentals are minimally regulated. Hotel lobby has been very active across the globe. The lobbying efforts had ensured that AirBnB faced similar city planning restrictions, subject to value added tax, as well as other local and federal regulations as the hotel industry. Banding together and ensuring that AirBnB plays with the same rules as the hotel industry can provide short term relief to them. This cannot be a long-term solution as there is demand by the consumers and their interest will need to be protected as well.

Location

Hotels have typically concentrated their footprint near the city centers while AirBnB has focused on surrounding residential areas. Hotels should capitalize on prime locations they hold and strive for providing easy access to attractions and transportation.

Superior and consistent amenities

Business and leisure travelers prefer lodging facilities that also provides amenities like restaurant, spa, massage parlors, curio shops, and salons within the facilities. Hotels should try and expand such facilities or partner with other close by providers to differentiate themselves from AirBnB.

Differentiated service

Providing real time service to the guests can make a significant difference to customer stickiness. Hotels especially mid-range hotels are naturally geared to providing these services – be it housekeeping, concierge, or offering rooms with better views. This can have a lasting impression with customers. AirBnB, by its very business model cannot compete in this dimension aggressively except where the hosts are staying in the same apartment.

Suite and multi-bedroom options

Many of the hotel room chains like Embassy Suites, and Candlewood Suites are targeting families and groups as they have repurposed their lodging facilities to provide more room to travelers. Three-star hotels with lower occupancy rate as well as those with required real estate, can create a hybrid multi-room and single room offerings to cater to a broader cross section of the target market. They need to market these concepts more aggressively to counter AirBnB.

Price

As Farranato’s study showed, AirBnB generated consumer surplus of $41 per room-night while the host surplus was $26 per room-night. The market is price inelastic except during special events like New Year, Boston Marathon, or Mexico Grand Prix. Thus, decreasing the price by will not have much impact on improved occupancy. Instead, as Freitag’s study in the STR report showed AirBnB’s guests stayed for seven days or more 46.5% of the time. Three-star hotels need to boost the number of days a guest stays by offering discounts, holding special promotions, or offering additional reward points.

Consolidation and Partnership

“If you cannot beat the, join them”. Independent three-star hotels have the option of joining AirBnB luxury offerings. This will help expand their reach to a larger customer base and offer incremental earnings through their services offering.

Room

Mate in Spain, took advantage this opportunity in the early 2000s to offer concierge and check-in services for luxury properties near their hotels. Industry consolidation helps improve operating efficiency and economies of scale. Marriott’s purchase of Starwood group of hotels for $13.6 billion enabled them to be become the number one hotel operator in the world with 1.3 million rooms and 110 million loyalty program members. Marriott was also able to offer higher end Starwood properties to its customers.

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