How has Airbnb changed the hotel industry? Airbnb and other home-sharing platforms have revolutionized the short-term rental market, resulting in massive inventory supply growth in almost every market. For the hotel industry, which has traditionally benefited from the constrained supply of accommodation, the creation of thousands of competitors around their hotels was bound to increase competitive pressures and reduce the amount of revenue hotel assets could generate.
It now seems inevitable that short-term rentals will play a major part in the lodging industry for the foreseeable future. Younger demographics have been increasingly opting for short-term rentals over hotels when booking leisure travel, and Airbnb even started to make inroads into bastions of hotel profitability such as business travel.
The number of short-term rental nights booked in the United States has been on an uptrend for the last few years, and short-term rental bookings as a percentage of total accommodation bookings has also been rising steadily.
The arrival of COVID-19 in early 2020 accelerated this structural shift. Short-term rentals offered an accommodation option that was compliant with social distancing guidelines and there were lots of short-term rental listings in the rural locations that guests preferred. Guests could book a stay at an Airbnb, check-in, and enjoy their stay without ever coming into contact with anyone outside of their party.
In contrast, hotels were perfectly positioned to under perform during COVID-19. Staying at a hotel involved face-to-face contact with a large number of people during check-in and when using communal amenities and spaces. A large amount of hotels were situated in unfavorable locations like urban areas and near airports and convention centers.
To make things worse for hotels, COVID-19 also resulted in a massive drop in business travel, a market segment that hotels typically dominated, and also put a temporary halt on the event-based travel market. For hotels, which relied heavily on compression nights – nights where hotels could raise their rates substantially due to high demand in their market caused by a popular event – for a large proportion of their annual revenues.
Another reason hotels were so exposed to the impacts of COVID-19 was demographics. Younger demographics increasingly preferred short-term rentals, while the older age groups who have a higher propensity to prefer hotels were the most likely to avoid travel due to the higher risk the virus posed to older people.
Hotels have faced a combination of structural headwinds, as short-term rentals ate into their market share, and the exogenous shock of COVID-19, which decimated a number of important revenue channels. So how are hotels responding? How can the hotel industry try and compete with Airbnb? We’ve spoken to a number of our hotel clients and collected the most common strategies hotels have been employing.
Largely in response to COVID-19, many hotels are now switching to a contactless check-in process. This trend has widened to aiming for less contact in general, with hotels offering room service instead of restaurants, advance booking of amenities, and restrictions being placed on the use of communal hotel areas. Short-term rental hosts have increasingly been similarly offering contactless entry to their properties using vacation rental host apps like KeyCafe, and it’s time hotels caught up.
One of the more obvious ways hotels have been responding to the competitive threat of Airbnb has been via their pricing strategies. While it’s not ideal, it’s still preferable for a hotel to have some minimal level of occupancy rates at discounted prices compared to managing an empty hotel.
Hotel pricing during events and compression nights has also been a key strategy. Instead of a hotel charging 4 times or 8 times the typical room rate when a big event is in town and demand is high (compression nights), now hotels are benchmarking their rates more closely against short-term rental rates to ensure they still offer value for event attendees.
Hotels offering rewards programs to guests is nothing new, but it’s one of the few areas where short-term rentals still lag behind the hotel industry. While it’s true that Airbnb has started to explore it’s own rewards program, the scale and scope still leaves a lot to be desired for frequent users of the platform.
Rewards programs therefore represent a potential source of competitive advantage for hotels which they have been doubling down on. A number of hotel clients we spoke to have been expanding their partnerships and increasing the rewards their programs offer – making the rewards more valuable and usable at more locations.
There’s a certain level of service, comfort, security, and ease-of-use provided by hotels that short-term vacation rentals simply can’t match. Room service, 24-hour security, sparkling cleanliness — hotels have thrived for centuries by clinging to these pillars of hospitality and now is no time to stray from those tactics. Locke Hotels are excellent examples of how hotels can leverage these amenities to compete with Airbnb.
For business travelers in a rush or vacationers looking to taste local cuisines, cooking isn’t always in the cards. Thus, hotels with an on-site restaurant or bar are immediately at an advantage. Showcase food and beverage menus that highlight local dishes and give guests a hometown feel.
Pools, steam rooms, gyms, parking garages, complimentary valet — some hotels have been putting the amenities that traditional Airbnbs lack at the forefront of their marketing strategies.
Tastes are changing. More and more, travelers are opting to stay in accommodations that offer authentic experiences and unique opportunities. In effect, they’re looking to stay like a local, which often runs contrary to the corporate, cookie-cutter branding that traditional hotels are unfortunately bound to.
Hotels should focus on marketing their properties as local, historic, distinct, or somehow emblematic of their location. As the best Airbnb hosts do, hotels could offer helpful tips and insights on things to do in the near vicinity — not in an elegant brochure, but rather in a simple, friendly, bullet-pointed email that feels more like personalized advice.
In that same regard, hosts could benefit from personalizing their concierge service. When a client books an Airbnb, they have a profile of the host and a number of the reviews. As the industry currently stands, when someone books a hotel, they have no such information on the hotel staff. Consider assigning guests to ‘hosts’ who send automated welcome emails and serve as the guest’s trusted point of contact.
One of the principal differences between Airbnb and many hotel chains is the capacity to track the entire guest journey under one cohesive platform.
Whereas Airbnb’s customers conduct everything from searches to communication, payments, and reviews under one central hub, hotels still often run outdated protocols that span across the mediums of telephone, email, chat, and websites.
If the hotel industry is looking to truly compete with the sharing economy, they should consider consolidating the spaces of customer interaction and leverage the data acquired. Data can be used in a number of ways, including building robust customer profiles which can be used to create customized promotions and unique marketing messages.
While Airbnb prides itself on being part of a sharing economy, the company’s evolution has shifted its hosting strategies away from one-off spare bedrooms and towards the market of entire self-service homes and apartments. With Instant Book and access codes for entry and exit, it’s very likely guests never have any interaction with the host (much less other travelers).
Pre-COVID, one of the hospitality industry’s strengths was the common spaces they maintained. As the virus recedes, hotels can get back to curating spaces where guests — and even locals — can socialize, do laundry, use a shared workspace, and drink a coffee. The trend of adding co-working spaces to hotels is likely to get back on track as life returns to normal.
If you can’t beat them, join them.
A number of hotels we’ve spoken to have started to convert hotel rooms to operate as short-term rentals. This conversion may require that the room is altered – for example, adding kitchen facilities. A number of hotels have even been designating entire sections of their physical footprints to handle short-term rental bookings.
Some of the bigger hotel industry players have taken things a step further and have created short-term rental subsidiaries with purpose-built properties.
Should hotels list on Airbnb and other short-term rental sites? As monthly traffic to sites like Airbnb continues to rise, advertising hotel rooms on these platforms makes more and more sense for hotels, as they offer an opportunity to increase exposure and booking volumes, and also get hotel inventory in front of demographics that might not have seen it otherwise.
Hospitality property management software run the gamut from free, no-frills services to all-out solutions that take the reigns on the entire process. Features include channel management between third-party providers, payment processing systems, guest communication platforms, and more. Arguably the most important, however, is the capacity to publish your listing on hundreds of the most important sites. While direct bookings should be the priority, exposure is a key to staying relevant, so using hospitality software that allows you to distribute rooms on short-term rental sites is probably a good idea.
While an outright ban on short-term rentals seems to be off the table, hotels have been trying to claw back some competitiveness by ensuring that Airbnb and other short-term rental platforms are enforcing short-term rental regulations and collecting occupancy taxes from their hosts. With hosts and guests abiding by these laws, hotels can at least be sure they are operating on a more level playing field.