How much impact does Airbnb have on the lodging industry?
Tuesday, April 05, 2016
Airbnb does not seem to be a real threat to the lodging industry, as I suggested in my previous discussion. Rather, listings on Airbnb and traditional lodging products could possibly co-exist in the market and serve different needs of travelers.
That does not mean, however, Airbnb has no impact on the lodging industry. After all, those 60 million-plus travelers who rented a place on Airbnb could have otherwise stayed in traditional hotels.
Now, the question arises: How much impact does Airbnb have on the lodging industry?
A recent study by professors at Boston University provides some empirical evidence to answer that question. According to their analysis of the Austin, Texas, market:
- When the supply of Airbnb properties increases 10 percent in the market, the hotels' monthly room revenue will decrease 0.37 percent.
- When the supply of traditional hotel rooms increases 10 percent in the market, the hotels' monthly room revenue will decrease 1.5 percent.
- Such negative impact to those most vulnerable hotels in Austin could reach 8-10 percent.
- The impact of Airbnb becomes gradually magnified when the subjects under observation move downward from luxury, upscale, mid-price, economy to budget hotel segment.
- Airbnb has a greater impact on independents compared to chain hotels.
- The impact of Airbnb is more salient on average daily rate (ADR) than on occupancy rate, indicating hotels tend to respond to the "threat" of Airbnb by lowering the price.
- Airbnb has less impact on hotels that cater to business travelers than those cater to leisure travelers.
Another investigation that replicated BU's study in the Nordic market found no significant impact from Airbnb on hotels' revenue per available room (RevPAR). The results also indicate travelers to the Nordic countries feel more attracted to Airbnb's "cultural experience."
Therefore, it may seem the current impact of Airbnb on the lodging industry could be trivial, but it varies across different hotel segments. In the foreseeable future, however, I suggest hoteliers to pay close attention to these two trends:
1. The growth of multiunit and full-time operators on Airbnb
According to a report by Penn State University and the American Hotel & Lodging Association, those operators who listed two or more units accounted for nearly 40 percent of the revenue in the 12 largest U.S. Airbnb markets being observed. Additionally, those mega-operators who ran three or more units had experienced an 87.3 percent increase in number (from 1,171 to 2,193) and 81.4 percent growth in revenue (from $16.1 million to $29.2 million) between September 2014 and September 2015.
As the hosts on home-sharing websites can gain many unfair advantages over those operators of traditional lodging products in the market, mega- and full-time operators on Airbnb can become a real threat to the traditional lodging industry.
2. Airbnb wants to attract business travelers
While current analysis suggests that listings on Airbnb tend to be more successful in attracting leisure travelers over business travelers, the company is making a big effort in developing new products that tailor to business travelers' needs. Such revolution can create another threat to the lodging industry.
As a concluding remark, because the hosts on home-sharing websites have the advantages of running their business with low costs, competing with Airbnb in price will never be a solution for the traditional lodging products. In order to face the future threat of Airbnb, hotels should focus on differentiation strategies.
Do you agree? What suggestions would you make for hotels?
- 13 ways to screw up your RV
- 6 All-American Roads that you simply can’t miss
- 7 critical trade show mistakes you’re making and don’t know it
- Full-time RV living: Should you buy a 5th wheel or a motorized RV?
- 7 key trends emerging in the hospitality industry
- Oops! Learn a lesson from these awkward RV mistakes
- The best of America’s Shakespeare festivals
- Motorhome living: The simple life
- Confronting religious bias with education
- Why you should make more Instagram stories — and how to improve them
- Get long-term employees engaged in open enrollment
- Boost patient safety at your hospital by reducing little-known risks
- Hello? Is anyone listening? The perils of not paying attention
See your work in future editions
Your content, Your Expertise,
Your Industry Needs YOUR Expert Voice & We've got the platform you needFind Out How