February 21, 2017

Why Airbnb is not the Uber of hotels


Will hotel chains find themselves besieged by new competition like GM and Ford who are wrestling hard with Uber and Tesla? Or worse, like Kodak and Polaroid who were decimated by digital photography?

To the collective relief of Marriott and Hilton, Airbnb is not quite the Uber of the hotel industry. Had hotel chains built, developed, and operated their own properties, they would have faced the same predicament as automakers. But they did not.

Funded and built by third party investors, Hilton has a long history of pursuing an asset-light business model, with revenue coming predominantly via management and franchising fees. Marriott has similarly followed the same asset-light strategy, under which it seeks to maximize franchise agreements in order to minimize the number of owned and leased properties in its portfolio.

To be fair, franchising is far more time-consuming than the platform strategy wrought by Airbnb. Airbnb operates a simple pay-per-booking model, charging a 3% fee to the host and anywhere from 6% to 12% to the guest on the value of the booking.

Get the full story at Forbes