Home-sharing options like Airbnb have hotels worried


  • Travel
  • Saturday, 09 Jul 2016

A homeshare rental might not give you a pool like this one in the Orlando Hotel, Los Angeles. — Hotel Orlando

Tired of “sterile hotels”, Brooklyn resident Kelly Dwyer turned to home-sharing site Airbnb three years ago when planning a Southern California trip, finding a Silver Lake apartment that came with two roommates: a dog and a cat.

“It was such a good experience that it sort of pulled me in,” said Duncan, 40, a pet owner and musician. “I can’t remember the last time I stayed in a hotel.”

Hotel executives have long shrugged off Airbnb and other short-term rental websites. The home-sharing businesses weren’t considered a threat to the US$176bil (RM710.64bil) hotel industry because they were believed to primarily serve penny-pinching millennials.

But eight years after Airbnb launched with a single air mattress for rent in a San Francisco loft, the hotel industry is starting to worry that short-term rental sites may pose a serious problem.

Not only is the company expanding, there is evidence that competition from rental sites is holding down hotel rates in some areas.

(FILES) This file photo taken on April 28, 2016 shows a woman browsing the site of US home sharing giant Airbnb on a tablet in Berlin. Airbnb is in talks to secure a new round of investment that would value the company at around $30 billion, the New York Times reported on June 29, 2016. If it succeeds in securing the new funds, the short-term home rental company will have tripled its valuation in two years, the Times said citing anonymous sources.</p><p>/ AFP PHOTO / John MACDOUGALL
For many young travellers, the quirky extras found at Airbnb properties are what attract them – extras they won’t find at traditional hotels. Photo: AFP

Airbnb, the most popular of the home-sharing sites, has an estimated two million listings worldwide, with revenue of about $2.4bil (RM9.69bil) in the United States last year. The business has been valued at US$24bil (RM96.9bil), higher than the US$21bil (RM84.79bil) valuation of hotel giant Marriott International.

Even more concerning for hotel managers is Airbnb’s torrid growth. In Los Angeles County, Airbnb listings increased 42% in the seven months ended in January, a Los Angeles Times review found. In some neighbourhoods, the increase was much larger.

“Hotel companies are going to start paying a lot more attention to Airbnb now that their numbers are as big as they are,” said Jamie Lane, a senior economist for the hotel research arm of real estate firm CBRE.

The industry came out firing recently with a study contending that a growing number of Airbnb landlords are really running “illegal hotels” in major cities, including Los Angeles, which lets them avoid taxes and regulations that hoteliers pay.

That study, by the Pennsylvania State University School of Hospitality Management, concluded that nearly 30% of Airbnb’s revenue in 12 big cities comes from people who rent out their properties at least 360 days a year, drawing an average of more than US$140,000 (RM565,000) annually.

Traditional hotels welcome competition, said Vanessa Sinders, a spokeswoman for the American Hotel & Lodging Association, the trade group for the nation’s 53,000 hotels, which commissioned the study.

But she added that the growing number of Airbnb properties operating year-round aren’t required to meet the health, safety and cleanliness standards that hotels must maintain.

“Competition in our industry thrives because everyone plays by the same set of rules designed to protect homeowners, guests and communities,” she said.

Home owners in different kinds of destinations are willing to rent out their homes to travellers. This is why home-sharing sites like Airbnb are increasingly popular. — Wikimedia Commons
Home owners in different kinds of destinations are willing to rent out their homes to travellers. This is why home-sharing sites like Airbnb are increasingly popular. Photo: Wikimedia Commons

Airbnb rejects such contentions, saying most of their hosts live in the homes they rent.

“In Los Angeles, 82% of Airbnb hosts in LA share the home in which they live, and furthermore, 80% of entire home listings in LA are rented for less than 90 days a year,” Airbnb spokeswoman Alison Schumer said.

Nationwide, Airbnb lists about 173,000 units, equal to about 3.5% of the more than 5 million rooms rented out by traditional hotels – not enough to pose a serious threat to the hospitality industry, according to a study by CBRE’s hotel research arm.

The study analysed Airbnb’s operations from October 2014 to September 2015.

The study goes on to say that Airbnb properties have started to pressure hotels to keep rates low in a handful of cities where home-sharing units are plentiful, including Los Angeles, San Francisco and New York.

In Southern California, Airbnb may be keeping hotel rates from skyrocketing in areas such as Santa Monica, Hollywood, Beverly Hills and Marina del Rey, according to CBRE.

For example, hotel room rates around Los Angeles International Airport rose nearly 13% in 2015 over the previous year while rates in the Santa Monica and Marina del Rey area increased only 5.6% , CBRE found.

In Santa Monica and Marina del Rey, Airbnb has one bedroom listed for every two hotel rooms, the report said.

Around the airport, Airbnb has one room listed for every 4.4 hotel rooms.

In addition, Airbnb’s rates around Santa Monica and Marina del Rey are nearly 30% lower than the hotel rates in the same area, according to the CBRE report.

Around Los Angeles International, the Airbnb rates are 8% cheaper than hotel rates.

“If Airbnb is impacting hotels in any way, it’s in the ability to raise rates,” said Brandon J. Feighner, director of CBRE hotel valuation and advisory services.

Another area in Southern California where hotel rates may be held in check by Airbnb is Venice, where the home-sharing site had 1,741 listings in early January, according to data collected by Inside Airbnb, a site that tracks the company’s short-term rentals.

That figure was 25% higher than the number of listings in May 2015, a Times analysis shows. The tourist-friendly area leads all Los Angeles County neighbourhoods for Airbnb listings, ahead of Hollywood and Santa Monica.

The homestay option might mean meeting more locals in your destination country when you travel. Photo: Wikimedia Commons
The homestay option might mean meeting more locals in your destination country when you travel. Photo: Wikimedia Commons

Mark Sokol, an owner of the 120-room Hotel Erwin in Venice, said he feels pressure to keep his rates low because too many short-term rentals in Venice have turned into illegal hotels that operate year-round and don’t pay the fees and workers’ salaries of traditional hotels.

“When you have that much supply, it definitely has price pressure,” he said.

Some hotel owners say they don’t worry about competition from Airbnb because only hotels can offer guests the assurance of a clean room, with amenities such as a coffee maker, a television and a comfortable bed.

“Hotels are going to provide a standard hotel experience whereas Airbnb can be an adventure or a nightmare,” said Ken Pressberg, owner of the Orlando, a 95-room boutique hotel near the Beverly Center.

As young travellers advance in their careers and earn more money, he said he believes they will eventually abandon Airbnb for traditional hotels.

A survey of 1,650 adults by the travel search site Hipmunk found that 74% of millennials have stayed in a home-sharing property for a business trip, compared with just 38% for Gen Xers and 20% for baby boomers.

To lure young people away from short-term rentals, many hotel owners are investing in their properties, such as upgrading WiFi speeds in the lobby, adding electronic tablets in the rooms and offering meals and drinks that are unique to their hotels.

“Airbnb is just another competitor that you have to keep your eyes on,” said Phil Anderson, general manager of the DusitD2 Constance Hotel in Pasadena.

But for many young travellers, the quirky extras found at Airbnb properties are what attract them – extras they won’t find at traditional hotels.

Tasmin Lofthouse, a 22-year-old marketing assistant from Blackpool, England, said she has booked an Airbnb property for her trip to Los Angeles in June because she wants to avoid the “commercialised and touristy” setting of a hotel.

“From what I’ve seen so far, Airbnb hosts are willing to go the extra mile, and some even let you help yourself to any homegrown vegetables or fruit they may have,” she said. “I doubt you’d see that at a hotel.” – Tribune News Service/Los Angeles Times


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