AirBNB Shakes Up the Hotel Industry

Share Button

AirBNB has gained traction in the hotel industry for the last couple of years. In June of 2015, the popular alternative lodging platform has closed a $1.5 billion funding round with a valuation of $25.5 billion. It was one of the largest private capital funding rounds ever and galvanized its place as a “unicorn” in the startup world. What makes AirBNB unique in the hospitality industry is that it helps people rent out their homes or spare rooms for short stays. This year alone, the company is expected to earn at least $900 million in revenue. By the year 2020, the amount is estimated to increase to more than $10 billion.

At those amounts, hotels are trying to look for ways on how to deal with the lodging paradigm shift. AirBNB already supplies more inventory than all of the worlds largest hotel brands. InterContinental, Marriott, and Hilton maintain under 700,000 rooms each.

While AirBNB does have a lot of rooms to offer, the company doesn’t own them, and most of the listings are not available all throughout the year. And when it comes to actual bookings, AirBNB still has a lot of ground to cover. At present, their bookings are at 37 million room-nights a year, which is only 20 percent of IHG’s numbers. However, experts agree that AirBNB’s booking rates are expected to grow in the next couple of years. They are on track to outpace hotels in the near future.

While it is unlikely that AirBNB will manage to take over the hotel industry completely, the hotels should take the shift seriously. The company is going to offer more additional lodging rooms each year, and as the supply increases demand is likely to shift more slowly and room rates are likely to go down. Hotel general managers must use proper hotel revenue management to ensure that their bottom line is not affected by the influx of available rooms.

Another way hotels are coping with the growth of AirBNB is to keep their standards of cleanliness and service high. Most hotels were developed based on a price point, and they work hard to maintain that price point over time with the use of a comprehensive hotel rate strategy. Hoteliers agree that it is important to create a great value proposition in order to maintain the status quo.

With the right hotel yield management and hotel rate analysis, hotels will remain competitive even if AirBNB manages to attract more homeowners to offer their spare rooms for short stays. One advantage that hotels have over room rentals is that the former provide a holistic guest experience that is topped with great amenities and service. While AirBNB has attracted people looking for authentic local experience, there are still travelers who look for the services and comfort provided by hotels.

Share Button

Leave a Reply

Your email address will not be published. Required fields are marked *