Getting Into Each Other’s Business: Airbnb, OTAs & Hotels

Hotels and OTAs are offering short-term rentals and Airbnb is listing hotel rooms. Why? This spring, Airbnb’s managing director for Europe, Middle East and Africa, Jeroen Merchiers, told a Skift Forum Europe audience,  “The concept of home sharing and staying in a flat instead of hotel room is something that people want. It’s not just millennials anymore—it’s pretty much everybody.”

Phocuswright shared research early last year that found “the private accommodation segment has grown much faster than travel overall.” Douglas Quinby, vice president of research, said, “The segment’s shift online, the expansion of the concept to include private homes in urban markets, the entrance of OTAs, and numerous innovative startups have all contributed to powering a period of tremendous growth,”

Airbnb attracting new customers

It may have begun as a “quirky sharing economy startup,” but Airbnb is now a $30 billion company. Announcing its new Airbnb Plus and Beyond by Airbnb tiers at the start of the year, Airbnb proved it’s looking to gain customers who likely haven’t considered staying in private accommodations before.

Airbnb Plus homes are inspected in person by Airbnb staff and they come with a support team. Olivia Solon explains, “Beyond by Airbnb is a standalone site based on the company’s acquisition of Luxury Retreats in 2017. It will offer high-end properties, including optional concierge services.”

These new tiers come on the heels of Airbnb Experiences, launched in late 2016, for tours and activities as well as Airbnb’s entry into restaurant reservations. Another way Airbnb is competing with OTAs and hotels is with its new Superguest loyalty program, which offers discounts, flight upgrades, lounge access and airport pickups.

OTAs gaining ground

Earlier this year, Susan O’Driscoll, writing for Netaffinity.com, said “Airbnb has roughly 15 percent share of the global home-sharing market, compared with 12 percent for Expedia and 9 percent for Priceline (Booking.com).”

OTAs, such as Expedia and Booking Holdings, are taking advantage of the growing demand for short-term rentals by working hard to increase their inventory. This is great news for individual owners or managers who don’t have the budget to attract as many potential renters as an OTA does. Also, when properties are listed with an OTA, travelers can trust that the transactions are secure.

In 2015, Expedia gained 2 million rental units in 190 countries when it acquired HomeAway Inc. Two years later that investment brought in $224 million in revenue, a 31% increase over 2016. At the end of 2017, Booking.com’s foray into the short-term rental market saw a 53% year-over-year increase.  The company recently “announced that it had 5 million ‘alternative accommodation’ listings on its platform—a number which currently outnumbers Airbnb’s amount of apartments and homes available for rent.”

Hotels take on home sharing

How can hotels differentiate themselves from Airbnb, HomeAway, VRBO and others? Hospitality.net lists three areas that “the hotel industry as a whole should be playing up” – location, amenities and service. They explain that hotels “have an advantage with central locations and easy access to transportation.” Perhaps the biggest advantage for hotels is service. As Kyle Killion writes, “The staff that sometimes is seen as a cost center is really one of the most valuable distinguishing factors in favor of hotels.”

Even so, Marriott, Accor Hotels and Hyatt have jumped into the home sharing/short-term rental arena. Accor Hotels bought three companies, now all under the OneFineStay brand, and Hyatt’s Unbound Collection includes Oasis, which it invested in in 2017.

Marriott’s pilot with Hostmaker is a little different. They’re offering 200 London homes that have been “chosen specifically by Marriott and Hostmaker.” The accommodations offer “one or more bedrooms, full kitchens, and laundry facilities, and adhere to Marriott’s exacting standards regarding safety, design, security, and service.” Guests can also enjoy other services, “such as 24/7 dedicated phone support and an in-person check-in/welcome experience. “

Booking options make a difference

Hotel rooms and short-term rentals do have their differences. Guests don’t walk into the front door of a home sharing location and book it that night. But, since short-term rentals are predominantly booked online through an OTA or a company like HomeAway, VRBO or Airbnb, this accommodation “category is miles ahead of the hotel industry.”

Making it easy for travelers to book is critical. Lodgify.com reports, “almost half of Airbnb’s inventory is instantly bookable, along with over 60% of rentals listed on Tripping.com.” And HomeAway notes that travelers often make last-minute plans and don’t have time for back-and-forth communications with hosts, adding “as marketplaces begin to consolidate inventory, travelers will view instantly bookable hotels alongside private accommodations. Removing the barriers for a traveler to book is mandatory if vacation rentals are going to compete.”

There are other considerations that travelers will need to take into account when considering the many options in accommodations. For instance, what role do home sharing hosts play? Do they add to a more authentic experience? If the guest never meets them is that the same as “a hotel without a front desk?”

As the competition between hotels, OTAs and home sharing companies grow, it’s expected the lines between them will blur further and aspects of each will appeal to one traveler versus another. And those differences are likely to get plenty of attention. Will home sharing service fees play a role or will they offer discounts? Will the support teams put in place by hotels be as much a part of the experience as private accommodation hosts?  Will guests who book hotel rooms via Airbnb be able to pay at the hotel?

An opinion piece for hospitality.net nicely sums up the current state of accommodation: “As an industry we need to remember that travel is about the people. Airbnb succeeded by bringing the human element back into travel, not from just ‘staying like a local’ but by providing a space for people to stay together. Today’s travelers want to reconnect with their friends and families. The traditional hotel mindset of one-size fits all one king, two queen hotel room needs to change” And it certainly is.