In just 11 years, Airbnb has rocketed to the top to take its place as a leading international provider of accommodation, with more rooms booked every night than the largest global hotel chains. Ralph Nader, CEO of Amber Consulting, looks at the consequences of this global phenomenon
A report by Morgan Stanley found that 42 percent of Airbnb users have replaced a traditional hotel stay with one in an Airbnb property. And the stats tell us more…
• Airbnb offers listings in 191 countries, with its total number – 4 million – higher than the top five major hotel brands combined.
• Airbnb has raised more than USD 4.4 billion in funding to date and is currently valued at more than USD 30 billion.
• In 2019, the company expected 4.5 million guests to stay at an Airbnb on New Year’s Eve, up from just 540,000 five years earlier.
• Average rates for an entire home on Airbnb are the same or lower than the cost of a single hotel room.
• By 2020, Airbnb’s revenue is projected to be as much as USD 8.5 billion.
The secret recipe
The main factor contributing to Airbnb’s success has been its ability to capitalize on travelers’ appetite for distinctive experiences on a low budget and offer them the opportunity to live like a local. Whether staying in a castle in Switzerland or a Treehouse in Sri Lanka, Airbnb customers are given the flexibility to create their own leisure pilgrimage. In addition, customers have the chance to pick the price that suits their budget.
Hotels’ Biggest nightmare
HVS Global Hospitality Services estimated that hotels lose approximately USD 450 million in direct revenues per year to Airbnb. The numbers are expected to rise as competition increases, especially as Airbnb’s new expansion strategy gathers momentum. Today, Airbnb has expanded its offering to include hotels, luxury properties, a loyalty program and an experiences portal for guests, shifting toward a holistic booking company.
• The Airbnb Plus will be inspected in person by Airbnb for cleanliness, comfort and design and come with a dedicated support team
• Beyond by Airbnb is a standalone site based on the company’s acquisition of Luxury Retreats. It will offer high-end properties, including optional concierge services.
• The Superguest loyalty program will reward regular and highly rated customers. Superguests will receive benefits, such as discounts, airport pickups, flight upgrades and lounge access.
In addition, Airbnb is moving into the hotel business, partnering with a New York developer to turn commercial properties in the city into a ‘new category of urban lodging’. The first venture involves converting 10 floors of the Rockefeller Plaza in Manhattan into ‘high-end, apartment-style suites’. The company is also partnering with Newgard Development Group to open a 48-story tower in downtown Miami called Natiivo that will offer 412 condos and 192 hotel rooms.
Natiivo will also open in other locations, including Austin, Nashville and Orlando.
Taking on Airbnb
Eager to challenge Airbnb’s dominance and compete, traditional hotel brands have been expanding and innovating their business models and services. Marriott International is the first global hotel chain to launch a home-rental business. The company has added a new product – ‘Homes and Villas’ – to complement the core offerings of Marriott’s hotel portfolio of 30 hotel brands, spanning 7,000 properties across 130 countries. Comprising 2,000 premium and luxury homes in more than 100 destinations across the US, Europe, the Caribbean and Latin America, they are expected to cost between USD 200 and USD 1,000 a night.
In a separate development, Hilton has built a slight digital advantage for itself over Airbnb. “We are innovating more than we ever have,” Hilton Hotel CEO Nassetta said, promising new tech offerings in the near future. The multinational partnered with Foursquare to create a new feature on Hilton’s application. ‘Explore’ will combine the best of the ‘local’ and ‘expert’ world, allowing guests to receive recommendations on food, nightlife, shopping and activities. The new feature is growing at a much faster rate than that registered by Airbnb Homes initially, with 1.5 million bookings made yearly and about 1,200 host applications coming in per week.
Hotel, Airbnb or nothing
Half-apartment, half-hotel and 100 percent ‘Instagrammable’ describes the new concept boutique apart-hotel. These boutique apart-hotels offer a stylish stay, complete with a large space, functional kitchenette and comfortable living area at an affordable price. Axel Hefer, the new CEO of Trivago, claims that these concepts will be the future of travel, since they combine the best aspects of Airbnbs and hotels, offering “the coziness and personality of a private home with the predictability and standards of a hotel.”
Ones to watch:
• Locke Hotels’ pipeline features 22 projects planned for the coming years, in locations that include Dublin, Paris and Berlin. “The intention is to cover every major European city and get the company to $2 or $2.5 billion [in valuation]- then we’ll look at the US and Australasia markets,” said Eric Jafari, chief development officer.
• AKA, meanwhile, intends to expand its portfolio from 12 properties to 36 in the next five years, covering Paris, Rome, Austin, Miami, Chicago, Prague and San Sebastian.
• Sonder now has 8,500 rentable spaces in 20 cities, up from 2,200 in August 2018 in 12 cities, alongside $400 million in projected revenue for 2019, a four-fold rise on its 2018 total.
• Lyric is another company that specializes in short-term apartment rentals and is already operating across 14 US cities.
• Amsterdam is the location for the first Zoku hotel, which offers guests a choice of 133 loft-like rooms with modular furnishings.
• Wilde, a design-focused offshoot from the UK’s largest apart-hotel operator, launched its first property in March, which is located in London, and has another planned soon for Edinburgh.
• Purchased by Starwood Capital in 2015, Native now has 15 apart-hotels located throughout London, with projects in the pipeline for Glasgow and Manchester.