What was once a disruption in the hotel industry is now the norm – and a force to be reckoned with.
The Eli Broad College of Business’ School of Hospitality Business hosted Ed Watkins, a veteran writer, reporter, and editor who has covered the hotel industry for over 40 years, to discuss the “sharing economy” movement.
In recent years, the hotel industry has witnessed a boom in this so-called sharing economy, with the major player being Airbnb. Hotels not only have to compete amongst themselves now, but now among these other providers.
Airbnb has more listings than the five largest worldwide hotel companies have rooms available combined. Watkins delivered powerful statistics to demonstrate the global sharing economy movement, and Airbnb’s enormity:
- Airbnb is present in 191 countries
- The company has 4.1 million listings
- It has more listings than the five largest worldwide hotel companies have rooms available combined
Airbnb started as an air mattress in an apartment in 2008 and has developed into the empire we know today. Unsurprisingly, hotels look down on Airbnb, criticizing them as “unfair competition.”
“Not being a traditional hotel company structure, Airbnb has the ability to avoid cost factors such as occupancy taxes, commercial real estate taxes, safety and security regulations, as well as devalued investments. Hotels can only cut their rates so low due to fixed costs, which is less of a problem for homeowners who rent their place out via Airbnb services,” Watkins explained.
The hotel industry and cities alike have fought back against service providers like Airbnb by launching campaigns against shared services, and have filed suits over the avoiding occupancy taxes. Some cities have gone as far as imposing regulations to level the playing field. However, Airbnb is sustaining its place in cities and even devising new approaches to holding its competitive edge. Specifically, Watkins discussed:
- Customized packages to include air travel, room accommodations, and tours.
- Focused on the “hospitality” aspect of travel by encouraging hosts to offer bathroom amenities, welcome baskets, and souvenirs similar to those in standard hotels.
- Targeting a new segment of customers outside of leisure travelers. An official partnership with WeWork will accommodate individuals traveling for business with office and meeting spaces to rent in non-hotel areas.
“Companies like Airbnb have implications far greater than the lodging industry,” Watkins explained. They are shifting urban affordable housing, and homeowners are turning properties into full-time Airbnb units; this trend will eventually push residents out of cities because of the upward pressure on housing prices. A positive impact of this shared service trend is a spike in tourism: more people can now travel to desired destinations with more options as a result of lodging availability and options.
What’s next for Airbnb? Watkins predicts governments will soon support companies like Airbnb because of the opportunity to regulate and collect tax revenue. On an industry side, he believes hotels will adopt the, “if you can’t beat them, join them” mentality. In fact, some already have: 75,000 hotels worldwide are now listed on Airbnb. Hotel growth may plateau, as banks will feel less likely to invest in building new hotels.
Like it or not, a “sharing is caring” mentality is the new normal.