Airbnb: potential distribution partner or industry threat? Some hotel companies and booking sites say neither, while others are keeping a watchful eye on both the positive and negative effects Airbnb may create.
When you’re labeled an industry disruptor, chances are your name is going to pop up a couple of times as your contemporaries/rivals discuss their futures.
Airbnb’s ears must have been ringing these past few weeks, as Q3 2015 hospitality-related earnings calls unfolded with much chatter about the apartment-rental site’s role in the travel sector.
Airbnb has greatly shaken up the industry, but it has yet to have any clear effect on hotel companies’ incomes. A 2013 study by Boston University titled “The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry” found that “higher-end chain scales, as well as hotels that cater to transient business travel, should be the most insulated from Airbnb.”
Still, its reputation and increasing growth can not be so easily overlooked — or can it?
Hoteliers have a four-stage process when responding to industry disruptors, says Robert Cole, hotel marketing strategy and travel technology consultant.
“First stage is to ignore it, second stage is to ignore it, third stage is to panic, and fourth stage is complain,” Cole says. “But the kill it with fire approach toward Airbnb doesn’t make sense.”
Though Chris Nassetta, CEO, Hilton, conceded that Airbnb is a good business that will be around for a while, he said it is one that operates in a different space than the Hilton brand.
On Hilton’s earnings call, Nassetta highlighted the inherent differences between Airbnb and Hilton, saying neither can replicate the other’s business model or services.
“I just think it is serving a different kind of need,” Nassetta said. “It’s a different business segment onto itself. And the segments that we are serving largely, I think, will remain separate and distinct from that. I don’t think customers suddenly woke up…and said, ‘We really don’t care about consistently high quality products, and we don’t need service and we don’t need amenities.’ I just don’t buy it.”
And while he thinks Hilton will remain safe, it is the extended-stay category that should stay alert, Nassetta mused.
But Gerry Lopez, CEO, Extended Stay America, is not yet waving a white flag in the air. Instead, Lopez said in the company’s earnings call that there is currently no Airbnb-induced havoc seeping into the 30-day-category, and that Airbnb could become a distribution channel just as much as it could a competitor.
As it turns out, Expedia, which made headlines for its $3.9 billion purchase of HomeAway, doesn’t see Airbnb as either, said CEO Dara Khosrowshahi, who also acknowledged Airbnb’s presence may ignite pricing pressures in markets saturated with hosts.
“As far as Airbnb goes, you can tell by the results that any effect that Airbnb has had on us is immaterial at this point,” Khosrowshahi said. “We don’t see it in the business, it is not affecting us directly at all. If anything we think that Airbnb may be getting a new class of consumer into travel.”
The Ones Buying It
In contrast to Hilton’s approach are hotel companies that exercise a healthy skepticism regarding potential effects Airbnb can have on their businesses, both positive and negative.
“From our perspective, we’ve looked at this whole sharing economy dynamic as a broad consumer issue and the consumer behavioral change, and we’ve always been drawn towards it,” he said. “As we evolve over time, this is going to be a part of how people travel and how people experience the world not just in lodging, but in transportation and travel more broadly. And I think that means we have to go towards it and understand it better and better.”
Amid whispers of Hyatt’s advanced talks to buy Starwood, Hoplamazian does not currently see any opportunities to join forces with Airbnb as a distribution channel, saying that it is “not in the business of representing hotel rooms on its platform.”
Starwood also took a vocal stance toward Airbnb’s power, with interim CEO Adam Aron saying Airbnb is here to stay.
“Airbnb is real. It’s here to stay,” Aron said. “The shared economy is part of the way the world will work in the 21st century. Airbnb has been growing gangbusters in 2015. It hasn’t stopped Starwood from reporting three strong quarters in a row. I do believe that the world’s hospitality industry is large enough that it can accommodate Airbnb as a major player, as there are dozens of major players in the world’s hotel industry today. And we, not only Starwood, but anyone in the industry will be able to be a strong competitor, even with Airbnb alongside.”
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Photo Credit: An extended stay property from Homewood. Threatened by Airbnb or not? Homewood Suites
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