Most CEOs said the same thing they’ve said about Airbnb countless times before — ‘We need a level playing field’ — but there are signs that some are starting to take the $31 billion alternative accommodations provider a bit more seriously.
Ask any hotel CEO what his or her thoughts are about Airbnb, the homesharing platform that’s valued at $31 billion — just a little less than Marriott International’s $38.7 billion market cap — and you’re likely to hear the same refrains:
“No, they’re not a threat.” Or “We just want a level playing field.” Or the admission that, “Yes, sometimes we see an impact on compression nights [periods when hotel occupancy is saturated because of a city-wide event or large convention.]”
That was the case at the NYU Hospitality Industry Investment Conference in New York City last week. However, there are signs that some CEOs are beginning to view Airbnb as more of a direct competitor, if not a threat, including Four Seasons Hotels and Resorts CEO J. Allen Smith.
And then, of course, there’s iconic hotelier Ian Schrager, who’s often been quoted as saying Airbnb is a “mortal threat” to the hotel industry — so much so, in fact, that his newest hotel, Public New York, is a direct response to it.
Skift spoke to a half-dozen hospitality CEOs, as well as other executives, to learn their thoughts about Airbnb, as well as the ongoing battle between the company and the American Hotel & Lodging Association (AHLA). Here’s what they had to say:
Marriott CEO Arne Sorenson: We Need a Level Playing Field
“Well I’m not deeply expert in all of these [things] that AHLA is doing,” Sorenson said. “But I think the core aim is to achieve a level playing field, period. And that means if we pay larger taxes, those platforms should pay larger taxes. It means if we’ve got to go through a process of getting approval and registered to do business in markets, they should be, too.
“And obviously, that becomes less controversial the more their [Airbnb-like platforms] growth is in dedicated units as opposed to someone’s extra bedrooms. But where there are dedicated units, they raise real questions around accessibility, around fire life safety, around lodging taxes, and to some extent what cities want around residential policy. How many units do they want to be essentially off the market to local residents because it’s some sort of micro hotel? And so there are dozens of questions in all of that, but in the first instance, it’s about a level playing field.”
Hyatt CEO Mark Hoplamazian: Airbnb Is Impacting Housing
“I guess, in short the AHLA is really leading the way in this effort,” Hoplamazian told a group of reporters. “The particular focus has been on listings … listings by, what could be described as, commercial owners of properties, multiple properties that, first of all, are problematic from a regulatory perspective but also, not really what the site was originally based on, which was allowing the individuals to rent a room in their house or rent their house.
“As a consequence of that, it feels much more like a ‘shadow hotel’ operation. That’s been their principal focus, which is to shine a light on those facts, which is that a very large proportion of total bookings and revenues are coming through those kinds of listings as opposed to the individual or home owner. And to really focus the minds of municipal policymakers on what the pending consequences of that are.”
He continued, “One of the consequences is distortions in the housing market, where you’ve got support for property values for residential properties that are derived from what could be considered to be ‘shadow hotels’ if you will. That’s not a natural marketplace.
“In some markets, I think San Francisco is probably high on the list, you see the consequences of that which are unaffordability and extremely high levels in growth of homelessness. It’s a problem that’s beyond the hotel industry’s focus and attention. There are serious municipal policy issues that are at stake here. That’s really been the primary avenue.”
Expedia CEO Dara Khosrowshahi: Appropriate Regulations Are Needed
Unlike some of the hotel CEOs attending the conference, with the exception of AccorHotels CEO Sebastien Bazin, Expedia CEO Dara Khosrowshahi’s company is anactive and direct player in the alternative accommodations space: Expedia owns HomeAway and sister brand VRBO, among others.
“With HomeAway, [we’re] more involved in traveling to resort destinations, beach destinations, resort destinations where vacation rentals have been rented out for a long period of time. It’s just the channel shift going from offline to online,” he said. “A lot of these destinations already have laws in place, [so] I think it’s the urban market that is appearing. I think any time a new business forms in a marketplace, regulations have a tough time catching up to the formation of new businesses because it just happens more slowly.”
“My caution is that, one, I’m not sure that I factually buy into [the idea that] real estate market prices are going up because of homesharing. They’ve been going up I think because of the technology sector and all the wealth created there; we could debate that.
“With that aside, I think regulations are needed, but I think that appropriate regulations, constructive regulations that are not designed to stop advancement, but are designed to benefit the customer and appropriate regulations for this new sector let say, may not be regulations that may not completely mirror the hotel industry. I do believe in an eveplaying field. I think folks should be paying occupancy taxes just like hoteliers do, so I think this could be a nice local revenue stream as well. I think it’s important to register these homes.”
HomeAway, along with Airbnb, recently settled its lawsuit against the City of San Francisco by agreeing to automatically register all local hosts in compliance with short-term rental laws that went into effect in 2014. However, HomeAway also recently filed a federal lawsuit in Chicago alleging that a somewhat similar law is “deeply flawed.”
“I think a lot of good is happening, it’s just right now there’s a bunch of thrash as regulations catch up,” Khosrowshahi said. “There’s the additional complication that every single local municipality wants their own flavor, which is very difficult for platform companies like ours to build out 50, 60, 70 different flavors.
“What we’re hoping is that you get to some consensus. Is it appropriate consensus? Is it constructive consensus? Because travel is a good thing. This is a new product that consumers want. Let’s not try to block it and then go there and roll out the regulations appropriately.”
AccorHotels CEO Sebastien Bazin: We Need More Transparency
AccorHotels has a number of investments in alternative accommodations platforms that include Oasis and Squarebreak, as well as owning luxury homesharing provider Onefinestay. Accorhotels is also planning to acquire Travel Keys, a luxury vacation rental specialist.
“We’ve been asking for one thing, very simple, which is transparency,” Bazin said. “And for all listings to be reported someplace, so that we know who is behind that home. Is that a primary homeowner, who obviously has a right to put it on the listing? Is it a multi-owner with three or four sites? Is it a commercial developer and is that why he has a big building on which all the flats in it happen to be on Airbnb?
“The first thing is listings. Listings within a home, so I guess you know how many rooms, how many nights, etc. The second thing is taxes. We as a hotel have so many taxes on so many different items, I guess 90 percent of the European owners of Airbnb do not declare any taxes. The minute that they start having to pay taxes, then it’s going to be much easier to understand who is getting the initial income.
“I’m not asking for those to pay, I’m just asking for an even playing field. But I’m not asking for Airbnb to stop because they will continuing growing, and as I said many times, I wish I could have invested in Airbnb. I just want to make sure they have the same constraint as we do and the same opportunities.”
Best Western CEO David Kong: Regulations for the Public Good
“In general, I don’t think anyone in this industry has anything against the sharing economy or home sharing for that matter,” Kong said. “I think the industry just wants to make sure that there is an even playing field. It’s not just for our industry. It’s for the general public as well. There are reasons why health and safety and accessibility rules are in place. It’s to provide and care for the general public. When you have companies like Airbnb that purposefully skirt these requirements, it can negatively impact the reputation of the accommodation industry.
The other thing to consider is the taxes,” Kong continued. “We all have to comply with tax regulation and Airbnb somehow doesn’t have to do that. It seems unfair and not in the best interest of the community they are trying to serve. I believe regulation is important because it will level playing field and protect the best interests of the public, at large.”
Loews Hotels CEO Jonathan Tisch: It’s a Matter of Safety
“We as hotel companies spend a lot of money protecting and keeping our guests and our team members safe,” Tisch said. “The safety and security of anybody that walks into a hotel is paramount, anybody that works in a hotel is paramount. [That’s] yet another issue where that is not necessarily in turn with somebody renting out their home.”
Preferred Hotels & Resorts President and CEO Lindsey Ueberroth: our workforce is Being Impacted
“We have a residence collection because that vacation rental space is huge,” Ueberroth said. “We felt that we had a sweet spot sort of in between what an Airbnb is all the way up to an exclusive resort. We sort of sit in the middle. We have a lot of hotels that actually have a residence product. Let’s really kind of create a platform around that as well as examples like the AKA hotels here, which really lend themselves to more of long term stay, or families that want a hotel experience, but they really want a residential component.
“The residence space is something we’re very interested in growing. We think that we can add that layer of the seal of approval of a brand, the quality assurance process, the fact that it can be booked directly through a consumer, or through a travel professional. We kind of have a nice way to wrap around that, the whole vacation rental/residence area that’s becoming increasingly popular.”
She added, “Is Airbnb a threat? In some ways, but I think it’s been great for the industry. I do think, when you read about all this stuff, I do think the playing field needs to be leveled a bit in terms of some of the regulations and the things that they should have to abide by and follow.
“What’s interesting is we met with our hotel advisory group, and they were saying the effect it’s having on them is less about the loss of room nights but, depending on where they’re based, that the apartment rental market is drying up so that their employees are having a hard time finding places to live. It’s impacting their workforce. It’s impacting their ability to hire and hire well. Their potential employees are having to commute too far to get to the hotel … It’s having other unintended effects that I don’t think we all really thought about beyond room nights.”
Dream Hotel Group CEO Jay Stein: Airbnb Is Having a Small Impact
“I think it’s a small impact, to be honest with you,” Stein said, when asked if Airbnb was having an impact on his hotel business. “On certain nights, it has had an impact, and even a small impact is a big deal. One, 2 percent, if I get that 1 or 2 percent, it’d be great to have it. But I think the way the laws are moving and the way the government is moving, they [Airbnb and other homesharing platforms] need to be put into a box so they operate like a business.
“They can’t just be a cowboy and make a whole bunch of money, not have regulations, and have, basically, hotels that don’t follow hotel rules. That’s changing and I think they’ll fall into a classification that people that want that, they’ll pay taxes, and they’ll have insurance and other types of things.”
He added, “But the big part of Airbnb, where there were whole buildings that were becoming Airbnb buildings, will go away, and I don’t think they’ll find any way to get traction, particularly in New York and now, we’re seeing in other cities. So, I think that’ll be pretty common.”
According to a recent UBS report, Stein may be correct in his assessment that Airbnb’s growth is slowing, at least in New York City, which has some of the strictest short-term rental laws in the U.S.
Meininger Hotel Group CEO Hannes Spanring: Airbnb Is Very Positive
Berlin-based Meininger Hotel Group has a collection of 18 hotels and hostels throughout Europe.
“I see [Airbnb], actually, as a very positive sign,” Spanring said. “People always ask me, ‘What do you think is a disruptor? I don’t think [it is]. Not for our customers or our clientele because I think it, in a way, more opened up the market for us. [It’s] something else [other] than those typically five-star and four-star hotels. I mean, people like when they are going there. Normally, in an Airbnb, they’re staying a little bit longer. I do not think that this is any competition to us, but it’s more pointing out that there is something more actually in the market.”
Red Lion Hotels CMO Bill Linehan: Concern for Timeshares, Online travel agencies
“VRBO, and vacation rentals have been around for years, and so have various timeshares and rental units,” Linehan said. “It’s a different type of accommodation. What Airbnb has done is it’s really made it easy for everyone to get into that marketplace. I would love to see the reports and the market penetration of Airbnb on timeshare rentals. If individuals and companies are concerned about its erosion to lodging, what about this erosion to timeshare rentals? That’s where I think it really is.”
He also said Airbnb is becoming more of a direct competitor to online travel agencies (OTAs) such as Expedia and Priceline.
“I also think that what they’ve built is they’ve built an online platform that, quite honestly, perhaps the OTAs might get concerned [because they’re becoming a new type of OTA],” he said.
When it comes to hotels, Linehan said, “For me, in the hotel space, where they are impacting our business is very much where we need more supply. They are an alternative lodging. They are not, however, a hotel. A hotel has a lobby. It has services. It has a staff. It has experience. You don’t know what you’re getting. You have some reviews and so forth, but you’re getting another residence. You’re not getting a hotel. It’s an alternative lodging.
“So are many other alternative lodgings. Is it one that we are concerned with? One that needs regulation and fairness? Absolutely. What the AHLA is doing, I’m fully supportive of it, yes. But am I going to whine and complain about what are they doing, and say, ‘This isn’t fair,’ and so forth? They are an alternative. What they’ve done is they’ve harnessed and created a new lodging alternative that I don’t think impedes all of lodging. It’s just another option. … Just like I’m not going to villainize the OTAs for having an opportunity for me to go somewhere and get more market share.”
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Photo Credit: AccorHotels CEO Sebastien Bazin in knows that Airbnb will continue to grow, and feels strongly there needs to be more transparency about the identity of hosts. He's pictured above in a promotional video. AccorHotels