How Hotels are Benefiting from the Rise of Airbnb

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Airbnb and the traditional hospitality industry are unlikely bedfellows in a challenge to claim their piece of the $1.1 trillion American hotel industry. Though seemingly at odds — after all, travel guests that book an Airbnb are not booking a traditional hotel — there is much that one is learning and growing from the other.

Unlike traditional supply and demand economics in which a surplus of inventory drives down prices, the ever-growing supply of Airbnb rentals as well as chain and boutique hotel rooms is actually driving an increase in their share of the nation’s economy In fact, according to the 2017 industry report conducted by STR, the number of nights hotels were filled at 95% of capacity has risen hand-in-hand with the gross domestic product. As people are earning more, hotels are earning more, as is Airbnb. It is estimated that Airbnb will go public with a valuation of around $30 billion, significantly higher than Hilton’s $19 billion one and close to Marriot’s $35 billion. .

Though hotels are quick to point out that Airbnb does not compete for their high-end and luxury clientele, the availability of additional rooms in a myriad of markets has prevented the hotel industry from gouging prices during its hottest seasons and events. And, since a hotel’s biggest margins are earned on the rooms themselves, the hotel industry knows that Airbnb is a contender here to stay.

As such, the disruption caused by Airbnb’s entry into the market has compelled the hotel industry to become more competitive in service, experience and price.

Most consumers today are looking for value, for getting the most out of the dollars they spend. Given how easy the Internet allows us to compare hotels and Airbnb’s side by side, the hotel industry must offer far more to justify higher prices.

One such way they’re doing that is in their overall look and feel. While in the ’70s hotel chains could replicate their cookie-cutter hotels in any new location, “they know they can’t get away with that anymore,” says Jeff Weinstein, editor of Hotels magazine. Hotels are trendier, and their amenities and food and beverage are curated to provide an experience, from the art they display to the locally sourced food they feature.

Lobbies are no longer just a place to meet up with your dinner guests, but a place to be “together alone,” an experience attributed to the Starbucks phenomenon. Restaurants and bars are being brought out into the lobby to provide that pseudo-social experience, rather than being walled off and tucked away.

Food and beverage, an exclusive hotel amenity, must up its game to attract and retain guests, especially when rooms and rentals can be perused online for their proximity to popular local eateries.

The hotel rooms themselves have evolved as well. While roominess used to attract customers thirty years ago, guests today are willing to sacrifice extra room space for great beds and greater bathrooms. The bigger and more luxurious the showers and tubs the better. Beyond the bathroom, a comfortable and inviting bed and a desk space with good lighting devoid of the old hotel clutter are all that’s needed in the living space. Where big TVs used to require a lot of space, they have long been replaced with better, wall-mounted ones.

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Where hotels have the clear upper hand is in service and security. 24-hour service and safety personnel, as well as daily professional cleaning are offerings that cannot currently be replicated by Airbnb and with which hotels can distinguish themselves. As such, Airbnb, as well as review sites like Yelp and TripAdvisor, have catalyzed hotels to raise their level of service in such a way as to earn raving reviews rather than simply to avoid bad ones.

Though Airbnb wasn’t the first to disrupt hotel pricing — the hospitality industry has sites like Priceline and Travelocity to thank for that — by increasing the available inventory, Airbnb is slowly curtailing “compression night” pricing, the higher prices hotels often charge for major events and during high season.

There have been many efforts by the hospitality industry to curtail the growth of Airbnb, some of which have succeeded. In New York, Governor Cuomo signed a bill imposing large fines on Airbnb residences that break local housing rules. Further, U.S. Senators have urged the Federal Trade Commission to study Airbnb’s effect on housing prices.

Still, it looks like Airbnb is here to stay. In the long run, any disruption can lead to accelerated growth for both the disruptor and the disruptee. Airbnb is learning to add amenities to its offerings to better replicate the hotel experience, while at the same time benefiting from the individuality and personality of its available residences. In the meantime, hotels are learning to highlight their own individuality and uniqueness while focusing on providing extreme comfort and stellar service, often at more reasonable rates.

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