March 28, 2013

Airbnb poses only a small threat to hotel industry


The meteoric rise of Airbnb.com, booking more than 10 million nights since its inception in 2007, should not cause the hotel industry to worry about the vacation rental market. Both business models have co-existed for a significant amount of time without infringing significantly on each other’s growth.

It is likely that vacation rentals will appeal mostly to leisure travellers with lucrative business travellers firmly loyal to hotels, thanks to corporate travel policies, loyalty programmes and the standardised experienced a hotel offers. To compete for leisure travellers, hotels have advantages over the vacation rentals that they can emphasise to stem losses in the leisure traveller segment.

Thanks to Airbnb.com’s success (and the launch of similar websites), there is greater awareness of the vacation rental market, but it has existed for many decades. In fact, Wyndham Worldwide owns one of the oldest vacation rental brands—the British Hoseasons (founded in 1940).

According to Euromonitor International, combined self-catering and private accommodation (the two accommodation types that compose the bulk of vacation rentals) accounted for US$77 billion in room revenues in 2011 globally, up 98% from 1999. Total worldwide hotel room revenues was US$429 billion in 2011 and grew 83% over the same time period.

Despite being a significantly larger market, the hotel industry turned in a very strong performance against the vacation rental market. However, it does seem that the vacation rental market may be more resilient to global economic downturns as evidenced by growth rates in 2000, 2001, 2009 and 2010, because it’s not as dependent on finicky business travellers as the hotel industry. There may be a bit of a substitution effect with leisure travellers seeking out less expensive accommodation options during times of economic distress—which may be something hotels need to keep an eye on.

Get the full story at Euromonitor

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