Hotels Playing Up Services to Push Strongly Into Short-Term Rentals

Santa Fe, New Mexico hotel La Fonda's move to branch into short-term rentals to accommodate the demand for hotel guests is yet another affirmation in the world of blended travel.

Hotels have been playing the rental game for a while now, but now is the time to play the wild card — economies of scale. To pander to the globe-trotting "bleisure" traveler (business plus leisure), all hotels need to do is strike that delicate balance between privacy and community, hyper-personalize amenities to imbue a sense of home and there they can have it — a customer who doesn't care if it's a rental or a hotel so long as it has room service.

Recently speaking at Skift’s Future of Lodging event in London, Richard Clarke, managing director at AB Bernstein agreed that the demand for overnight hotel stays has grown at about 4 percent a year, on average fairly steadily for a long stretch of time. This long-term growth is driven by a rising middle class in emerging markets.

Latent Demand

In January last year, La Fonda bought the Old Santa Fe Inn. Then, a month later, the hotel partnered with AdobeStar Properties, which bought and renovated different buildings around town to create 26 short-term rentals. 

Some hotels are responding differently — hotel owner operator MCR Hotels bought 70 hotels during the pandemic and is closing on four soon, with another 12 in the pipeline, its chairman and CEO Tyler Morse told Skift.

Chris Silcock, Hilton’s chief commercial officer repeated Hilton’s stance that it wouldn’t necessarily get into the short-term rental or vacation rental space — remaining one of the only major brands to forsake the sector — because it seems that it is a difficult area to ensure high quality and to build hospitality services around it.

But even those hotels are yielding to consumer demands in different ways — through “powerful personalization” and other things.

“The idea of hotel brands saying this is where the customers are going so then we are there as well,” said Jan Freitag, national director of hospitality market analytics at the CoStar Group. “The homes and villas by Marriott is an exploration of this.”

An AB Bernstein report cited a ResearchGate study of consumer ranking for hotels and rentals and found that consumers ranked hotels higher on cleanliness, service, and ease of checking in and out. And hotel companies can play up its strength.  

“Scale is the biggest advantage,” said Jamie Lane, vice president of research at AirDNA. “The power of having commercial laundry, people don't talk about much, but it’s a big deal — the fact that hotels already have that within a central location can be a big benefit.”

An in-house cleaning staff, commercial laundry and a concierge service — who wouldn’t want these at an Airbnb, if it’s also private and personalized. 

Behold the "Bleisure" Traveler

Speaking at Skift’s Future of Lodging forum, UnderTheDoorMat Group CEO Merilee Karr noted that changing consumer preferences towards short-term rentals even for business trips will cause the blending and merging of different players in the accommodation industry. Citing examples of Accor acquiring luxury rental brand onefinestay and Marriott launching Homes and Villas in 2019, Karr noted that the industry will only see more of this interplay.

The pandemic has exposed the potential for blending different types of hospitality services creating the “muddled middle.” As consumers shape the trend of “bleisure” (business and leisure) travel, operators in both short-term rentals and hotels are thinking about how to serve the same consumer with a variety of options based on the type of the trip.

“If you look at hotel owners and operators, you see a lot of investment in hotel residences and service apartments,” Karr said. “There is now a muddled middle, where operators born in the short-term rental space as well as hotels are coming to the middle ground.”

Demand and supply have nudged one another in short-term rentals too — Europe is tracking record-setting demand pacing over the next six months, up by 33 percent annually and 25 percent compared to 2019. 

Property managers of rentals aspire to their hospitality being compared to that of a boutique hotel to please guests.

Jeremiah Gall, founder and CEO of Breezeaway, a property operations platform for the short-term rental market, told Skift earlier that guests also expect hotel-like hospitality now. “10 years ago, you took your own sheets, toiletries to a rental, but now that’s changed — we know everything is going to be sanitized and very clean when we check-in,” Gall told Skift earlier.

Good for Business?

Some think this blend of everything in hospitality might be a good thing for business.

“It puts operations on a sustainable, profitable path,” Lane said. “We typically see that it's hard to scale short-term rentals outside of a market, but by partnering with local hotels, it would make it profitable and sustainable in the long-term.”