Airbnb launched just over 10 years ago and quickly disrupted the hospitality industry. The fact that it needs little introduction is a testament to its brand, while its online marketplace, cheap rates, and unique venues acquire increasing volumes of customers. Who wouldn’t be happy about that kind of success?
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As it happens, the larger hotel and hospitality industry aren’t thrilled. One report from Morgan Stanley found that 42% of Airbnb customers had replaced a traditional hotel visit with the digital service. What’s more, Airbnb isn’t subject to regulations and fees common among hotels such as those in the UK, which are expected to charge a 20% VAT.
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But hotels aren’t just sitting back and accepting Airbnb’s dominance. Traditional brands have been expanding their business models and services to try and compete – with modest success. This pushback has prompted an impressive shift in hotel operations that will be felt in the industry for years to come.
When considering the impact of Airbnb, it’s important to remember that customers aren’t necessarily embracing the platform because they prefer it over hotels. Sometimes, Airbnb is the only feasible option for many customers. Airbnb’s greatest success stories come from cities with limited room availability during peak seasons, such as New York, Los Angeles, and San Francisco. Meanwhile, Airbnb listings are far more limited in cities with lower demand such as Atlanta, Houston, and Memphis.
What’s more, lodging demand spikes during key holidays and special events throughout the year. Notable examples include Christmas, summer holidays, sports tournaments, festivals, and even college graduation season. As room availability decreases, prices for remaining rooms increase, driving customers to alternatives like Airbnb.
Hotels brands are recognizing this long-term problem and are addressing it by acquiring new locations for guest bookings. Brands must strike a careful balance — create too many new rooms, and they risk overshooting demand and losing revenue. Create too few, and Airbnb remains the more competitive option.
One strategy to avoid this pitfall has been investing in unique properties distinct from traditional hotels that directly compete with Airbnb listings. We’re already seeing hotels purchasing smaller brands that appeal to Airbnb’s audience, including Marriott International. Marriott subsidiary Moxy, for example, offers compact rooms that are connected to communal spaces like bars, restaurants, and gaming areas. Moxy even provides mobile-focused services like keyless entry via smartphone app and offers cheaper rates than standard Marriott locations.
Hotels large and small have also started emphasizing hospitality experiences that Airbnb once pioneered. Residential designs are becoming a major part of new hotel constructions — the Roost Apartment Hotel in Philadelphia includes in-room kitchens and modern furnishings along with traditional front desk services. And Boston hotel brands Aloft and Verb are designed with intimate and personalized visual styles that often reflect the local community.
In fact, locality is a common theme in most new hotel developments. One of Airbnb’s strengths is its ability to offer residential bookings unique to specific regions, often within walking distance of local attractions. Hotel brands now recognize how much this approach appeals to millennial travelers, and cater to it wherever possible. Soho Beach House in Miami is one example, where journalists created an in-app guide to food, art, and fashion in the surrounding area.
“People who choose Airbnb are seeking an intimate, non-manufactured experience,” Elizabeth Lowrey of Elkus Manfredi Architects told the New York Times. “They want to be embedded in the fabric of a community, where they can feel the uniqueness of place. This desire for authenticity is driving today’s hospitality design — each hotel must tell a story; it must be a place of context, reflective of its neighborhood and community.”
Beyond standard hotel services, brands are also experimenting with experience packages that compete with Airbnb’s comparable platform. Marriott currently offers vacation deals that go well beyond rooms, packaging deals that include venue-based activities. Some of these bundles include romantic outings, kid-friendly activities, spa getaways, and much more. These partnerships can be very attractive to customers seeking a combined travel or excursion deal, especially if it can be obtained at a reasonable price.
Some have argued that Airbnb represents the future of hospitality, and it certainly does — but that doesn’t mean they have the monopoly on it. Rather, Airbnb’s disruptive influence has been possible by leveraging the weaknesses intrinsic to traditional hotel brands. Hotels have responded by working to correct those weaknesses, offering new services, and even expanding subsidiary portfolios in the process. While Airbnb certainly isn’t going anywhere in the near future, it seems traditional hotels are here to stay as well.