Marriott took a big leap in launching its own short-term rental business to take on Airbnb. But it's definitely still too early to expect the world's largest hotel chain to challenge on that front.
Marriott knows two things for certain about its homesharing business launched back in April: The offering is still tiny compared to market rivals, and Marriott Bonvoy, the industry’s largest loyalty offering at 133 million users, will likely be the catalyst for its growth.
Yet the hotelier does not have any idea how large the ancillary business will actually become, CEO Arne Sorenson said on an earnings call last week.
“We’re optimistic about the future, but we don’t really have any forecast for you yet,” he said.
Marriott’s hotel owners, however, will be paying close attention to the growth of company’s new venture, a business model widely viewed by experts as the biggest threat to traditional lodging today. In response, Sorenson said that 95 percent of Marriott’s homesharing offerings are two-bedroom units and above, which is much different than a standard hotel room.
“I think our owners, particularly in the U.S., are interested in how this will grow, and we’re working our way through that,” Sorenson added. “But we’ll be transparent with them about this and make sure they understand how we are growing.”
Homes & Villas by Marriott International now has 2,500 units available across the Americas and Europe, up about 500 homes since rollout. That’s compared to the millions of offerings available on Airbnb, Booking Holdings, and Expedia’s platforms — just three of the lodging company’s top competitors in the space.
Skift Research estimates in a new report that the likes of Airbnb, Booking Holdings, Expedia, as well as Chinese-based Tujia, and TripAdvisor account for 73 percent of all bookings in the sector. The consumer market for short-term rentals additionally totaled $107 billion in 2018, and is set to grow another 7 percent by the end of the calendar year.
“I think the reason we’re in is we’ve concluded it [homesharing] is not a temporary fad,” said Sorenson. “This is a space in the broader travel sector that we and other lodging companies as well as other participants in this sector have been watching for the last number of years.”
Trusted Hospitality Experience
During a CEO panel at the 2019 NYU Hospitality Industry Investment Conference in June, Sorenson said the greatest advantage hotels have over short-term rental companies is the ability to make the quality of stay less of a crapshoot for guests, claiming that aforementioned rental companies often leave the guest experience in the hands of the host.
Marriott Homes & Villas customers so far are, “very appreciative of having a loyalty linkage,” Sorenson told analysts last Tuesday. But they are also, “very appreciative of having brand and quality service behind it.”
Marriott said in April that 90 percent of guests that booked homes during its pilot program last year were Marriott Bonvoy members. That trend has continued since the lodging company brought the offering to market. Marriott Bonvoy members can earn and redeem points at any of Marriott’s home and villa locations, just as they do at hotels.
While Homes & Villas by Marriott International is viewed as an important cog in the chain’s loyalty and direct booking strategy, Marriott expects economics around its new venture to improve over time. Financial expectations for the business are also not material to the company’s short term results. Marriott additionally has yet to break out its homesharing business as a single item on its financial statements.
LukeWarm Industry Interest in Homesharing
Marriott’s entrance into the homesharing market earlier this year applied a mountain of pressure on its competitors to do the same. But it was not the first major chain to enter the space.
Choice Hotels, as an example, has offered homesharing to customers since 2016 through its Vacation Rentals by Choice Hotels platform in the U.S. Accor also purchased homesharing brand Onefinestay for $169 million that same year.
Despite reported growth in the short-term rental business, a few hoteliers have been hesitant to jump on the bandwagon. Hilton CEO Chris Nassetta has publicly negated any company interest in launching its own homesharing initiative, calling homesharing a “fundamentally different kind of business.” Hyatt CEO Mark Hoplamazian has also called the Chicago-based hotel’s chain’s past homesharing pilots “challenging,” while InterContinental Hotels shared similar sentiments in an interview with The Points Guy last month.
For the most part, the industry is looking at what happens with Marriott’s homesharing exploits before making any moves of its own, according to Wouter Geerts, senior research analyst at Skift Research.
“I think even Marriott is just in it to ensure its members don’t go to Airbnb, rather than actually making a big profit on it,” he said.
Homesharing is also a completely different business model, where hotels have to rely on partners to provide the service standards they expect, Geerts added. This is easier to check in a hotel where all rooms are concentrated in one building than with short-term rentals that are dispersed across the city.
“Homesharing is still extremely fragmented and not driven by on-the-ground brands. Instead it is driven by distribution brands, notably Airbnb,” said Geerts. “This is likely to change in the coming years though. Branded home managers like Onefinestay, Altido, and master-lease players like Sonder and Stay Alfred are pushing the brand to the fore. So we can expect hotels to start entering in the coming years.”
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Photo Credit: Pictured here is a Marriott rental property in Destin, Fla. Marriott launched Homes & Villas by Marriott International after a one year pilot in April. Marriott International