Airbnb has experienced surging growth since it was launched in 2008, but it was not until the last couple of years that the world’s leading apartment rental platform became a source of concern for hoteliers. Indeed, today the web-based behemoth has about 1.1 million property listings in some 35,000 cities located in over 190 countries and, based on the group’s latest round of private financing in early March, is now worth an estimated US$20 billion, or about two times the market cap of IHG (InterContinental Hotel Group), the world’s biggest hotel company by the number of branded rooms. Consistency not standardisation The firm’s head of global hospitality, Chip Conley, the iconic Californian boutique hotelier, was on the podium last Monday (2 March) at the International Hotel Investment Forum (IHIF) in Berlin defending the young company’s record as a leading driver of the ‘sharing economy’. He cited the tens of millions of spare rooms that are now being put to use by being listed Airbnb’s website, evoking particularly the case of ‘empty nesters’ (couples whose children have grown up and left the home), who now have extra bedrooms to offer and often enjoy the company and contact with travellers who could come from the other side of the planet. In fact, in the US, 40% of Airbnb guests stay with their hosts in the same house or apartment. While Conley was clearly hired in his present role to improve the firm’s lodging product, he emphasised that his goal is not to standardise the group’s lodging offering, but rather to achieve more consistent service delivery. In fact, the differentiated ‘local character’ of many Airbnb listed properties is a major source of attraction for guests, who want to get a taste of ‘living local’. A level playing field? However, in some major destinations like New York a handful of the big time ‘hosts’ have little to do with the sharing economy, since they control as many as 200, or more, apartment units. The fact that Airbnb hosts are not subjected to the same regulatory constraints and mostly don’t pay bed night taxes has been a sore point with hoteliers, who note that they are no longer operating on a level playing field. Conley, however, was quick to point out that Airbnb is in the process of regularising the situation of hosts who now are obliged to pay bed night taxes in a number of important urban destinations, such as San Francisco, New York, Amsterdam, Hamburg, etc. Airbnb a threat to hoteliers? At the same time, Conley sought to allay the fears of hoteliers about losing business to Airbnb. First of all, he noted that there has been no visible effect on hotel occupancy and RevPAR (revenue per available room) in key markets, where Airbnb is firmly entrenched, like London, Paris or New York. Also he was quick to point out the difference in customers’ length of stay. While the big hotel chains have an average length of stay usually not exceeding two days, the equivalent figure for Airbnb is about the double. Also, contrary to popular belief, Airbnb does not particularly target young ‘Millennial’ travellers, but rather is making a pitch for families, who, in many cases, could not afford to stay in two or three hotel rooms, but are able to travel because they can rent a whole apartment for a reasonable price. In this context he evoked the case of Southwest Airlines, the highly successful US LCC which created a new market serving travellers who before would not have been able to afford to fly. Consequently, the airline was dubbed the ‘Greyhound (America’s intercity bus company) of the skies’. The direct threat of Airbnb to the hotel sector will come when the company figures out how to seriously attack the chains’ core business traveller segment which accounts for 60% to 70% of the client base of the major hotel groups. While about 10% of Airbnb guests currently are business travellers, according to Conley, the site still has significant drawbacks in terms of booking confirmation, which can take over 24 hours, and the risk of cancellation by hosts. Starwood’s CEO has resigned Interestingly, Frits van Paasschen, the hotelier who was originally scheduled to appear in tandem with Conley, lost his job on 17 February, and is no longer the CEO of Starwood Hotels and Resorts. Apparently he was eased out because he did not succeed in growing the chain’s room count fast enough, especially as compared to competing groups like Hilton and Marriott. In recent years, a former Accor CEO, Denis Hennequin, who stepped down in April 2013, and Kathleen Taylor, the former head of Four Seasons, who was the first woman CEO of a major hotel chain, both met a similar fate. Instead, the hotel sector was represented by Vivek Badrinath, Deputy CEO for Marketing, Digital Distribution & IT at Accor, the largest hotel group in Europe. You might also be interested in: No related posts.