Is the ‘sharing economy’, spearheaded by the likes of Airbnb, shaking up the traditional hospitality industry in the same way Uber has pounced on the taxi trade?
Founded by designers Brian Chesky, Joe Gebbia and their tech-savvy pal, Nathan Blecharczyk in 2008, Airbnb is the online community marketplace that enables homeowners to rent out a room, or their entire home, to independent travelers and has grabbed the lion’s share of the lucrative short-term apartment rental market worldwide. Why Airbnb does short term holiday lets so well…
Have you stayed in an Airbnb holiday apartment lately? From airbeds to castles… The blue oceanstrategy in a shared economy in a new age! Gina Baksa finds out… Airbnb’s revenue in 2013 was a staggering $250 million, and with more than 10 million nights booked to date, the hotel industry is feeling the heat. No longer an edgy upstart, Airbnb is now a force to be reckoned with. Fancy a night in a castle? Check. Your own island in Fiji? It’s yours. An aeroplane? Climb aboard. Cash rich baby boomers with influence and purchasing power are collecting these unique experiences to impress their friends, share on social networks, and add to treasured memories. Eschewing stuffy impersonal hotel rooms, travelers across all demographics are increasingly choosing to experience unique apartments, houses, boats and even tree houses on their vacations. This group has huge influence and purchasing power – and most importantly, they are social network savvy. They like to share their good – and their bad experiences. Such is Airbnb’s reach and financial muscle, it makes a booking every two minutes and the company is reportedly worth an estimated 10 billion dollars – more than all the world’s hotels groups bar the top four. Growth due – in part – to last year’s cash injection from TPG Capital and other private equity firms. Quick to adapt to current trends, online hotel booking sites such as booking.com are already featuring short-term holiday rentals alongside its hotel and flight
Certainly Airbnb brings in cash to local infrastructure – restaurants, bars, museums and retail – and it creates jobs: 200 new positions are earmarked in Dublin this year alone. But what about occupancy taxes to local authorities? Tax which hotels are forced to pay. Considering its listing base now runs into the hundreds of thousands, the fact most Airbnb users contribute no local taxes in the cities they stay in has created a significant profit margin for buyers, sellers and Airbnb bosses. And angered many hoteliers who are demanding more stringent regulation. Civic authorities in San Francisco only made Airbnb legal last year via its Airbnb Law and forced Airbnb to charge users 14% tax to bring it in line with the city’s hotel tax legislation, while New York authorities have come down heavy on multiple rentals from a single user – calling them ‘illegal hotels’ and demanding regulation and payment of taxes. And what of market share? Airbnb’s listings are doubling each year – and could well become the world’s largest ‘hotel’ group by the end of next year, beating IHG and Hilton. At the upper end – the Hiltons, Marriott and Crowne Plazas – will continue to attract their core luxury and business clients, but many corporate expense accounts are now listing Airbnb usage. Yet the top dogs remain bullish: Christopher Norton, EVP of global product and operations at the Four Seasons dismissed Airbnb with a single soundbite: “Our guests don’t want the Airbnb feel and scent… [they expect] a level of service that is different, more sophisticated, detailed, and skillful.” Some brands such as the Marriott are feeling the Airbnb wolf at their door and investing in upgrading their boutique chains – partnering with designer Ian Schrager to help attract a different clientele. At the budget end of the hotel chain, however, it’s a different story, according to a recent study from Boston University that claims Airbnb has been taking around 5% business from budget hotels in areas with successful penetration. And in a recent Economist interview, president of New York’s Apple Core Hotels, Vijay Dandapani, admitted that: “We had continued growth until Airbnb. There are some hotels here who are like ostriches and have their buried in the sand, but I am of the view that this is a full-blown threat.’’ Around 80% of listings in New York are priced at $200 per night, often less, which means that the city’s hotels are losing potentially one million room nights a year. Airbnb is now looking at long-term rentals and nibbling at the heels of serviced apartments – one category that thought it was safe from attack. The company’s hire of hotel guru Chip Conley as global head of hospitality (he founded boutique hotel group Joie de Vivre) means Airbnb is going full guns – perhaps to snare more the lucrative business and luxury market. And even chocolatiers Spegelaere has refurbished an apartment specifically for the Bruges short-term holiday rental market at sweetchocolatedreams.be. Has Airbnb impacted the hotel market in Bruges? Apparently not, according to one top hotelier I spoke to, who seemed almost put out that I could suggest such a thing. The city’s top hotels probably won’t notice a drop in bookings due to Airbnb, but at the lower end of the scale, tired and run-down B&Bs, guesthouses and hotels in Bruges will go out of business, unless they revamp and re-think their business models. Many solo travelers, couples, families and business people now want a more unique experience when they visit a new city; an accommodation that is homely yet sophisticated.