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Airbnb Stealing Market Share

Is Airbnb stealing market share? We’ll try and evaluate. Airbnb and the ‘sharing economy’, have been buzzwords and hot trends for a few years now. So, it leaves us wondering. How is the “sharing economy” and Airbnb affecting hotels and resorts business?

The short answer is…it’s hard to tell. Not useful information? We agree. We’ll try and explain.

First, let’s look at where we’ve recently come from. The world looked somewhat apocalyptic back in 2008-9. That wasn’t a long time ago.

Here’s a headline from 2010, that reads “Hard Times Send Hotel Industry Into ‘Survival Mode. Apparently, 400,000 hotel employees were laid off in the USA alone. That was 20% of the employees.

Bloomberg featured report conducted by Morgan Stanley states that Airbnb penetration is at about 18-19% of the accommodations industry, up from 12% last year. In 2017’s Airbnb’s penetration is forecast at 23-25% despite slowing Airbnb growth. To be clear the reference of penetration in the market refers to travellers having used Airbnb at least once over the past 12 months.

Update. AirBnb booked 137 million room nights in 2017. That’s up from 117 in 2016, and 74 million room nights booked in 2015.

air-bnb-home-page-imageIf this is the case, then why aren’t hotels crying the blues about loss of market share? The expression ‘A rising tide lifts all boats‘ fits here. Markets across the world have seen a huge rising tide in tourism and increase generally in almost all markets for hotels & resort stays. When (nearly) all hotels & resorts are seeing their businesses expand – who’s paying attention to pesky things like Airbnb.

It’s not just Airbnb that hotels need to worry about. It’s vacation rentals in general. How about Tripping.com? Never heard of them. I’m in the ‘business’ and had not heard of them until last week. Tripping.com has 8,000,000 rentals compared to Airbnb’s 2,000,000. How? They are actually a met-search site for vacation rentals. So, with Tripping.com one can search Airbnb’s inventory, and also Tripadvisor, Homeaway and more, all in one convenient & slick website.

When will the next downturn occur? Typically after a strong up-cycle. We’re experiencing that uptick now. Increased tourist demand may last longer and the wave may ride for a few more years before turning down. But we can be assured, it will turn down at some point in the future. When the economy and tourism demand turn down, what will happen in the market? Independent Hotels & Resorts will be hit especially hard. They typically lack sophisticated loyalty programs and generally don’t have a strong business traveller clientele. Independent’s are also reliant on the Online Travel Agencies (OTAs) far more than the brands are. Smith Travel Research studies indicate that brands generate about 12% of their business from OTAs and Independents average 32%. Not only that but brands pay 12-18% to OTAs for a booking and Independent’s pay 15-25%.

When the hospitality market has a dip, Independents Hotels & Resorts will have less organic business from their own marketing programs. They will need to ‘turn up the dial’ on inventory they seed to the OTAs. This means less revenue and increased costs on the revenue that they are acquiring through OTAs.

But isIs Airbnb stealing market share? Airbnb (and other vacation rentals) also offers exceptional value for the budget minded traveller. Families faced with paying $300 – $400 a night for either two hotel rooms, or a two bedroom suite, will be prime candidates for switching over to ‘renting an entire 3-4 bedroom home for $300 a night and bringing some friends along the way to share the cost. Sure Airbnb and Hotels are different products and experiences, but in tough times the value will pull guests like a magnet to Airbnb.

So what’s can Independent Hotels & Resorts do? Take the long approach. It’s a marathon, not a sprint. OTAs help hotels sprint. The long approach involves nurturing the relationship with your guests. Consistently communicating and providing past guests with compelling reasons to keep your property top-of-mind. Loyalty will be created through customized communications and consistency. But that’s not enough. You need to give your guests a compelling reason to come back – more often. That’s what good loyalty programs do. They reward the guest for staying within the network.

IndyKey’s loyalty program is unique. It enables an Independent Hotel or Resort to give a small ‘bring back’ reward, to each and every guest that checks out. Guests receive a meaningful and useful reward – after just one stay. Check out our Redeem page for more information.