ATLANTA — During the close of his presentation at the 27th Annual Hunter Hotel Investment Conference on Wednesday, Mark Woodworth of PKF Hospitality Research asked the hundreds of industry professionals in the audience if they were concerned from a competitive standpoint about Airbnb, the online service that lets people rent out their homes to travelers. Only five attendees raised their hand.
Woodworth, who is president of Atlanta-based PKF, politely chided the group saying that Airbnb and similar room-sharing ventures are absolutely threatening the hotel industry.
The San Francisco-based company is valued at approximately $20 billion, according to the latest report from Bloomberg. By comparison, hospitality giant InterContinental Hotel Group’s valuation currently stands at $9.3 billion.
Woodworth reported that 76 percent of Airbnb’s 27,392 room listings in New York City are under $200 per night, a highly competitive rate given the industry’s low vacancy rate.
Airbnb travelers don’t have to pay traditional occupancy taxes like hotel users do, although Airbnb travelers do have to pay “transient occupancy taxes” in select cities such as Portland, San Francisco, Amsterdam, Chicago and Washington, D.C.
Airbnb has voluntarily rolled out the tax program in those markets and will likely roll out the tax collection initiative in more markets in the near future. There is also legislation under consideration in states such as California that would require homeowners who rent out rooms on Airbnb and other sites to pay an occupancy tax.
The supply of rooms provided by Airbnb is growing. Currently, there are 18 Airbnb markets that offer more than 5 percent of the traditional hotel supply, according to PKF. In Austin, the listings offered by Airbnb total roughly 20 percent of the existing hotel supply, and in New York City that metric is more than 27 percent.
“The data indicates that increases in Airbnb supply negatively impacts ADR growth,” concluded Woodworth.
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Woodworth’s comments came during the “Statistically Speaking” panel, which included Vail Brown, vice president of global business development and marketing for STR, and Katie Moro, global director of business intelligence product at TravelClick. The event, which runs through Friday morning at the Atlanta Marriott Marquis in downtown Atlanta, has drawn more than 1,200 attendees.
During the opening “Leadership & Experience” panel, moderator Don Landry, owner of Louisiana-based Top Ten Hospitality Advisors, also wanted to hear how hotel industry leaders felt about Airbnb and similar room-sharing websites.
“Airbnb has figured out how to take the franchise model and really make money without ever owning any real estate,” said Landry.
Besides cutting into the revenue stream, a concern from hoteliers is that Airbnb doesn’t “play by the same rules” as the hotel industry.
“So many of us in this room develop hotels to certain standards: handicap access, certain construction standards — our guests pay city taxes. What we as an industry need to be very careful about is that we’re all competing on a level playing field,” says Javier Rosenberg, chief operating officer of Carlson Rezidor Hotel Group. “There are a different set of rules that don’t apply to [Airbnb], and I think that’s extremely unfair.”
Rajiv Trivedi of La Quinta Inns & Suites takes a turn during the Leadership & Experience panel. Other members of the panel included, from left, moderator Don Landry of Top Ten Hospitality Advisors; Liam Brown of Marriott International; Javier Rosenberg of Carlson Rezidor Hotel Group; and Pratik Patel of AAHOA and REM Hospitality (Photo courtesy of Ben Rose Photography)
What Can Be Done By Hoteliers?
At the end of the leadership panel, AAHOA Chairman Pratik Patel urged hoteliers to lean in on the issue and “fill the void” that Airbnb plans to fill.
“Stop worrying about everything else. Go back to the basics,” said Patel. “As an industry, we should capture what’s good about what we think is our biggest threat.”
One of those voids is that Airbnb’s inventory, which is on target for 2 million rooms by the end of the year, is only available 30 percent of the time, according to panelist Liam Brown, an executive with Marriott International.
“At the end of the day, Airbnb is just a remarkable example of a transformation in a particular business,” says Brown. “Uber is another example.”
Following the Uber analogy, Patel posited that the taxicab industry would be better served if it sought to fill the void left by the mobile app-based transportation network instead of trying to prevent the public from using it.
“Where would [the taxicab industry] be today now that there have been some negative instances that have come out of the Uber technology?” asked Patel, referring to the multiple criminal allegations that have surfaced involving Uber drivers and their passengers.
Panelist Rajiv Trivedi, executive vice president and chief development officer at La Quinta Inns & Suites, agreed with Patel’s assessment and said that the industry’s most effective weapon is continuing on its current trajectory. The value-add proposition of the hotel industry is that it offers a pleasant experience for guests and builds brand loyalty through customer service.
“Airbnb can get away without any regulations, but as inconsistency in the experience arises, people are more cautious,” said Trivedi. “As their shortfalls become more evident and public, you will see a shift back to the right direction.”
— John Nelson
Note: All data for Airbnb figures were courtesy of Inside Airbnb (www.insideairbnb.com).