How big a problem is Airbnb?

SSTH Editorial Team | 28 Sep, 2017

Although the accommodation rental giant was founded about a decade ago, it was only in the last 4-5 years that Airbnb got onto the radar screen of hoteliers.

Over the last years the chorus of hotel sector criticism of Airbnb has grown louder and louder.

Hotelier associations from our own hôtelleriesuisse here in Switzerland to the AHLA (American Hotel & Lodging Association) have decried the lack of 'level playing field' between the likes of Airbnb and the traditional hotel industry, which is subject to far more regulation and taxation.

How big a problem is Airbnb?

Compression night impact?

So how seriously is Airbnb impacting the hotel sector?

A January 2017 STR study tends to minimise the effect of Airbnb on hotels.

First of all, it found that Airbnb occupancy was the highest in markets where hotels had high occupancy.

Secondly, an oft-cited impact of Airbnb is that puts downward pressure on hotel rates during compression nights (when occupancy is at or above 95%).

In fact, STR found that, despite increases in Airbnb supply, the long-range trend of hotel compression nights did not greatly vary in the seven US markets studied in recent years. Indeed, there 61 such nights in 2013, 75 in 2014, 76 in 2015 and 71 in 2016.

Also, there has been little weakening of hotelier pricing power during those compression nights.

In the seven US markets studied, hotels priced rooms 30.8% higher on compression nights than on non-compression nights in 2013, 25.6% higher in 2014, 34.9% higher in 2015 and 34.8% higher in 2016.

Related Article: Fight'em or join'em!

Effect of Airbnb on hotels

Airbnb still far from mainstream in corporate travel

In fact, to answer this question properly it is necessary to examine different segments of the hotel industry.

For instance, there is little doubt that lower grade urban hotels are being impacted to a degree by the accommodation rental platforms.

However, the effect on mid-to-upscale chain hotels is more debatable. These hotels typically depend for 60% to 70% on business travellers.

It is true that some tech companies like Salesforce and Facebook have become active users of Airbnb and the platform now counts among its clients more traditional corporations, such as Meritor, a manufacturer of axles, brakes and suspension, as well as Levi Strauss and Morgan Stanley.

According to Airbnb, 15% of its total room nights now come from business travel.

The company also has integrations, partnerships and data-sharing agreements with the big business travel management intermediaries like American Express Global Business Travel, Carlson Wagonlit Travel (CWT), BCD Travel and Concur TripLink.

Airbnb's effect on hotels

Only 0.27% of US business travel lodging expenses

However, in spite of these advances, it's difficult to maintain Airbnb has joined the corporate travel "mainstream".

In fact, Airbnb is still a long way off from broad adoption, as noted by Certify's SpendSmart Report for the fourth quarter of 2016, which highlighted Airbnb usage and showed that Airbnb accounted for only 0.27% of US business travel lodging expenses.

By comparison, the 15th-ranked brand, Residence Inn, alone, had a share of 1.18% or over 4 times that of Airbnb.

While Airbnb's share represented a doubling of the number of transactions compared to 2014, it remains an infinitesimal amount in relative terms.

Furthermore, analysis by Concur, the business expense tracking platform from November 2016 found that the number of companies for which a traveller expensed an Airbnb stay grew by 32% between the second quarter of 2015 and the second quarter of 2016.

While these growth rates are impressive, it must be recognised that they come off of a very low base.

Corporate travellers shun Airbnb

Business travellers are shunning the sharing economy when it comes to booking accommodation and prefer hotel chains to independent properties, according to a 2016 survey of more than 1’000 UK corporate travellers making frequent trips, carried out by the market-research firm AudienceNet on behalf of the Guild of Travel Management Companies (GTMC).

Only 2% of the more than 1’000 UK frequent corporate travellers surveyed expressed a preference for Airbnb-type accommodation. The study found that 75% of business travellers surveyed would rather stay in chain hotels and only 21% would choose independent hotels.

The survey found just 2% would prefer to stay in accommodation booked though sites such as Airbnb.

Corporate travellers shun Airbnb

Apparently, there was very little difference by age in terms of responses, which is surprising, given that younger business travellers are supposedly more oriented towards short term rentals.

When asked why they preferred chain hotels, the corporate travel respondents cited the fact that they expect certain standards and "know what they get".

Meanwhile, those opting for independent hotels liked the variety and friendliness of staff in such properties. 

The 98% who preferred not to stay in Airbnb-style accommodation cited safety, "fear of the unknown", the possibility that something could go wrong and "missing breakfast" as concerns.

Related Article: Why do people stay in Airbnb? 

In conclusion, there are certainly segments of the business travel market that are amenable to Airbnb-type accommodation – for instance, a group of professors attending an academic conference.

However, it's hard to see the typical 'road warrior' corporate traveller, who may be on the road 50 nights or more per year and travelling under a tight schedule, opting massively for Airbnb.  


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