How Airbnb is Impacting the Hotel Industry 

While the demand for vacation rentals is rising, some city officials and hotel chains have begun to look at how Airbnb is affecting the hotel industry. While hotel chains are calling for regulations, hotel executives are adopting methods inspired by Airbnb, including limited-service hotels, customized mobile applications, and small rooms. Some of these practices are resulting in more competition and fewer rooms available. Other strategies include regulating Airbnb, which could lead to an even bigger impact on the hotel industry. 

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Business travelers prefer hotels to Airbnbs 

Many travelers now prefer staying at a hotel rather than an Airbnb. The luxury of a fully-equipped kitchen, free breakfast, and access to a fitness center is important benefits to business travelers. The familiarity of a traditional hotel will help business travelers feel more at home. Some even choose to live in an Airbnb instead of a traditional hotel room. Whatever the reason, a business trip can be an incredible opportunity to save money and calories. 

The popularity of short-term rentals has exploded in recent years, but this trend has largely been driven by millennials. Many millennials bring their personal travel preferences with them on work trips. Airbnbs lack amenities that many millennial travelers want, including a gym and free wifi. A typical hotel will have more of these amenities, including a swimming pool. It’s no wonder that business travelers still prefer hotels, even if they might be staying in the same city for a long time. 

Hosts respond quickly to market conditions 

Platformization of the hotel industry reinforces existing inequalities and segmentation in the industry and favors actors with an advantage. Platforms provide visibility to all hotels while bypassing strategies reduce the dependence of the hotel on the platform. But it is difficult to quantify the effectiveness of bypassing strategies, especially when the sample is so small. This paper outlines strategies to minimize hotel reliance on platforms. 

Airbnb is a good example of a company that adapts quickly to new market conditions. Its business model is flexible, enabling hosts to respond quickly to changing customer expectations. But its pricing algorithm is based on fixed capacity. Most hoteliers have not systematically adapted their pricing algorithms to accommodate flexible capacity. This disrupts existing pricing algorithms. But it doesn’t have to be this way. 

Increased competition 

As the number of travelers staying in hotels rises, the competition among hotel brands must evolve to keep up. Hotel brands should focus on the psychology and trends of the Airbnb crowd, and craft marketing messages, offerings, and organizations to resonate with this group. These factors can help a hotel differentiate itself from Airbnb and stay on top of its competition. Here are some key points to remember: 

Airbnb’s rapid growth spurred the hotel industry to take action. It has paved the way for new types of hotels. One example is the limited-service, small-room hotels. Other strategies used by hotel executives include customized mobile applications and limited-service hotels. The lodging industry has also pushed for stricter regulations. This study only looked at data from 2014, and the impact could be even greater today given the rapid growth of Airbnb in recent years. 

Impact on room supply 

While not a replacement for traditional lodging, Airbnb is an attractive option for some travelers. It has become a popular way to accommodate excess demand without affecting the supply of rooms. A study conducted by STR found that in major cities around the world, occupancy rates were high when Airbnb began operating. In these cities, Airbnb accommodated the excess demand without affecting the supply of existing rooms. However, there is a downside to the presence of Airbnb: the inability to raise rates and the resulting reduction in the growth of new rooms could hurt near-term revenues for hotels. However, the stabilizing influence of Airbnb will benefit the existing product over the long term. 

The study found that the increase in the number of Airbnb-assisted guest rooms negatively impacts three important metrics for hotel performance. The study examined ten major U.S. hotel markets and found that the increase in Airbnb room supply negatively affects the performance of all three metrics. Despite previous findings suggesting that Airbnb only impacts lower-end hotels, the study’s results suggest that the impact of Airbnb is becoming more widespread and is consistent with the theory of disruptive innovation.