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Hotels vs. Airbnb: Can Your Hospitality Business Survive in the Era of P2P Sharing Platforms?

January 20, 2016

Hotels vs. Airbnb: Can Your Hospitality Business Survive in the Era of P2P Sharing Platforms?

January 20, 2016

With Airbnb being the new accommodation buzzword and seemingly taking the world of foreign travel by storm, is it really that impactful? And is it really having the negative effect on the hotel industry that everybody predicted?

Actually, less than might be anticipated. At least for now.

While the essentials and basics demanded by the hospitality industry are met, Airbnb offers a much different experience than is found in hotels. More than 74 percent of Airbnb properties are located outside the main hotel districts. They therefore cater to people who are more interested in experiencing the culture and meeting the locals rather than the usual tourist-level experience found in glitzy, centrally-located hotel districts.

Yet, some Airbnb locations are actually tourist sites in and of themselves: their website boasts more than 1,400 castle listings, and other Airbnb opportunities enable booking everything from a private island to a ski lift to an igloo.

But the impact of travel industry trends such as Airbnb on the hotel industry is still minimal. The way both operate is different and they target different audiences. Accordingly, there’s still room for both.

According to Slate, “Airbnb and hotels serve fundamentally different markets. Airbnb is for the casual leisure traveler and might be ideal for a family or group of friends vacationing in Europe, for leisure travelers and transient segments but it’s less well-suited for the business consultant who travels to Toronto each week and needs reliable accommodation. There’s still meetings, there’s still conventions, there’s still groups of people. That business clearly isn’t Airbnb’s.”

As such, the marketing strategy of hotels and the target audience should vary from those of Airbnb.  High-end hotels should focus on targeting business travelers and people at the wealthier end of the financial spectrum. Usually word-of-mouth and reputation are enough marketing for this type of hotel, but working with online travel agents and TripAdvisor is still very useful, as many businessmen use those resources for booking their own itineraries and making reservation decisions.

During 2014, hoteliers hit all-time highs in occupancy, average daily room rates, and the profit made off each room. But Airbnb, which recently closed a $1.5 billion funding round, is now sitting at a towering $25.5 billion valuation. Airbnb itself has seen rapid growth from its inception in 2008.

With more than 2,000,000 listings in 192 countries, more than 60,000,000 guests and 34,000 listed cities, Airbnb has established itself as the world’s largest peer-to-peer hospitality service.

Airbnb offers the benefit of creating a sense of community and affords more living space, a kitchen, room for guests and an opportunity to feel like a “local”. But does a peer-to-peer platform like Airbnb have the potential to successfully expand from the leisure division and vacation rentals into the business sector?

They are beginning to make inroads into that market. Continuously more companies are letting staff book their own itineraries and giving them incentives to be thrifty. Google, for example, sets a budget for each trip, and employees who spend less than the allocated amount get credits that they can donate to charity or use for future perks, like flight upgrades.

Hoteliers, however, play down the threat to their industry. Executives at Marriott, Four Seasons and Hilton chains have all said that Airbnb does not compete for their core market of high-end and business travelers. Airbnb itself agrees, arguing that it does not displace existing lodging but is creating new demand.

Airbnb’s peer-to-peer sharing services business model focuses on a marketplace platform where hosts and guests exchange housing for money. Bookings can be made online or through the mobile app with integrated mobile payments such as mSwipe Plus. Throughout the application process, hosts and guests can find reviews and social media connections to build trust amongst users in the marketplace.

Airbnb’s brand awareness is greatly thanks to word-of-mouth and exposure on social media and from news stories, but they also invest money in online and social media campaigns, as well. Individual Airbnb renters, however, should invest their resources in improving their properties, providing excellent customer service, and the enhancing the amenities they offer in order to increase the numbers of reservations.  They should also write the property description geared towards the types of guests they want to attract, making it more personal and human than hotel marketing copy.

While Airbnb rentals and high-end hotels do not directly cross paths, it may be the case that budget hotels and motels have seen losses due to Airbnb. An average hotel room offers consumers a bed, bathroom and closet with varying levels of comfort. Alternatively, an average apartment offers the same luxuries plus a kitchen a larger living space. For families or groups on vacation, hotels can be limiting, while an apartment can be more accommodating.

In order to continue thriving after the emergence of Airbnb, budget hotels should focus their marketing efforts on social media and booking engines, where they can put an emphasis on the top-notch guest experience they offer. Having profiles on Yelp and TripAdvisor and working with online travel agents can also be beneficial to budget hotels and motels, as well as running PPC online campaigns.  Hostels can also benefit from these online marketing tactics, as they receive the majority of their guests via word-of-mouth and online peer reviews. In addition to these marketing efforts, operators of this type of accommodation should invest resources in ensuring a fun, safe, clean and comfortable experience for their guests, as well as an environment that promotes mingling with travelers from all over the world, so they will be more likely to receive positive reviews online, and subsequently more bookings.

Airbnb has no doubt affected the revenues of the budget hotels. As the sharing economy continues its rapid rise, Airbnb may soon disrupt high-end hotel revenues the way other sharing economy services like Uber did to taxi services. Only time will tell.

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