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The travel landscape has evolved substantially since the dawn of the internet in 1991. Today’s tech giants – Amazon and Google – started between 1994 and 1996. In the travel space, Expedia and Booking.com (then bookings.nl) also launched in 1996. A big year for Chinese players was 1999, with Alibaba and Ctrip both launching. Online travel agents brought new opportunities for hotels, but also disrupted the traditional relationships between hotels, travel agents, and Global Distribution Systems (GDS). Younger companies like Airbnb are now stepping forward as the next wave of disruption in the lodging industry.
Short-Term Rentals Are Booming
We are at a stage today where it is unlikely to imagine a lodging landscape without short-term rentals. Often labeled as one of the biggest disruptors in the travel industry, Airbnb has moved into the mainstream. Short-term rentals have a long history in many countries, often unregulated and in the form of informal exchanges. Companies like HomeAway and Airbnb have paved the way for the short-term rental market to move online, and have given homeowners an easier entry into the business of hosting. Today we see that short-term rental bookings are mostly made online using an intermediary. In this aspect, the short-term rental category is miles ahead of the hotel industry.
Hotels and short-term rentals are clearly different, which leads to different booking behaviours – you can’t just walk into a short-term rental and book it for the night. The impact of short-term rentals on hotels is also not very clear-cut. While individual hotels (especially in city centers or during major events) might feel the pressure of the added lodging stock.
Overall, the lodging industry is booming and hotels are benefitting from this today, just like short-term rental platforms. This is forecasted to last, although an uncertain future with Trump tariffs, Brexit, and the situation in the Korean Peninsula, can all destabilize economic growth, and with it, squeeze the lodging industry.
The Rise of Airbnb
It’s a well-known story by now: Airbnb’s rise has been astronomical. There are only a few people in its San Francisco headquarters who will really know how astronomical exactly. Having said that, we can do a lot with the information that is out there, and Euromonitor International regularly investigates the short-term rental market and its largest players.
A global comparison shows how Airbnb is the largest player in many countries, but there is still a lot of room for growth as well. Airbnb, however, realizes that it needs to prioritize value over volume, and is taking a multipronged approach to achieve future growth. Introducing Airbnb Plus and a boutique hotel category on its platform is one way. Adding value to its offering through additional services like its “experience” proposition Trips, restaurant bookings powered by Resy, its Superhost and Superguest loyalty programs, and eventually maybe even a flight metasearch platform are some other ways.
Airbnb is already so much more than a short-term rental platform. Its influence on the lodging industry is not to be underestimated. Hotels like AccorHotels and Marriott are adding short-term rentals to their portfolios. Meanwhile, the two main online travel agencies Expedia and Booking Holdings are scrambling to increase their rental stock. Is there a better compliment than having Booking CEO Glenn Fogel stating that he “recognize[s] we are not the leader in this space” (Q3 2017 earnings call), and the Expedia CFO Alan Pickerill saying his company has “got a ton of respect for the Airbnb team” (Q4 2017 earnings call)? You can bet these companies are looking closely at the next steps Airbnb will take.
Euromonitor International is a leading provider of global strategic intelligence on consumer markets, with offices in London, Chicago, Singapore, Shanghai, Vilnius, Santiago, Dubai, Cape Town, Sao Paulo, Tokyo, Sydney and Bangalore and a network of 800 in-country analysts worldwide. Euromonitor International’s analysis of the global travel industry covers a wide range of categories, including tourist flows and expenditure, lodging, transportation, car rental, cruise, tourist activities, travel intermediaries, online and mobile travel.