Is AirBnB a Threat to the Hotel Industry?
This is a writing sample from Scripted writer Malynnda Littky
Despite stories proclaiming that Airbnb is dangerous due to lax safety guidelines, along with stories of hosts who come home to property damage from guests throwing wild parties, the company continues to grow. In 2015, bookings doubled to more than 80 million, and the company earned almost half a billion dollars. The hotel industry has signaled that they are taking the website's challenge seriously, and efforts to stop the leak of consumers include fighting at the local level to ensure that Airbnb properties charge taxes that would be applied to hotel rooms, and challenging whether zoning laws allow private owners to rent out rooms to the public. Is Airbnb truly a threat to the hoteliers, and if so, is the competition beneficial to lodgers?
With a valuation currently hovering at around $10 billion, greater than those of hotel chains such as Hyatt and Intercontinental, the business model has obviously channeled the needs of consumers to find unique and pleasant accommodations at an affordable price. In several cities with high levels of tourism, such as New York, London, and Paris, Airbnb listings make up between 10% and 20% of the overall supply of rooms, and by 2016, bookings are expected to raise by yet another 300%. However, these findings are rosier than the balance sheets might show, since Airbnb earns only a small percentage off of each booking, while hotel chains earn a large profit off of each room. Additionally, Airbnb rooms are rarely available throughout the entire year, while hotel rooms have minimal downtown for refurbishment.
A study by Boston University suggests that there is not as much overlap between Airbnb customers and hotel users as previously thought. Airbnb users were more likely to report that they would not have taken a trip at all if not for the availability of that type of booking. With three quarters of Airbnb listings located outside of downtown areas, it may be that Airbnb appeals to people who would simply not be considering a hotel experience at all.
This conclusion is supported by the finding that only 10% of Airbnb bookings are for business travel, and bookings for luxury listings do not experience much change when Airbnb enters a new market. Research by Wells Fargo posited that the greatest impact of Airbnb on the hotel industry might be in the reduction of "compression nights", those times when hotels increase room prices due to a high demand. But as those nights usually bring in enough tourists to fill 95% or more of the rooms in the target market, the impact, at most, would be 2 to 3 percent of revenue.
As the worldwide economy continues to bounce back from the recession which lasted in one format or another for the last five years, both Airbnb and the major hotel chains are continuing to thrive, largely because each is focusing on a separate sector. Although Airbnb has announced plans to attract more business travelers, for the next several years hotels don't have much to fear from this corner.
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