Room for all, for now
1EVEN as they lobby regulators to crack down on residential sharing services, hoteliers play down the threat such companies pose to their industry. The top brass at the Marriott, Four Seasons and Hilton chains have all said that these firms do not compete for their core market of accommodating high-end and business travellers; a vice-president of The Ritz-Carlton group recently claimed she had not even heard of Airbnb. And Airbnb itself agrees, arguing that it does not displace existing lodging but is creating new demand. ?I?m optimistic that there isn?t going to be a war? with hotels, Brian Chesky, its boss, said in January.
A recent 1 seems to confirm that, for now at least, Airbnb is only nibbling at the hotel industry?s lunch rather than eating it whole. A team at Boston University examined hotel revenues in Texas, where Airbnb has grown much faster in some cities (like quirky, left-wing Austin) than others (like Fort Worth, more of a cowboy town). They could not find a significant influence from Airbnb on business and luxury hotels. But in places where it has established a presence, it cut the revenues of budget hotels by 5% in the two years to December 2013.
If Airbnb were to keep growing at its current rate?its listings are doubling every year?the Texas study suggests that by 2016 the dent in budget hotels? takings will be 10%. With their high fixed costs, that could push many of them into the red. Of course, Airbnb may hit the limits of either supply or demand before then, but smaller hotels are already blaming it for their woes. ?I see a direct correlation between our revenues going down and going up,? says Vijay Dandapani, the president of Apple Core Hotels in New York. ?We had continued growth until Airbnb.? The financing round that Airbnb has just closed, valuing it at more than all but the four largest global hotel groups, suggests that investors agree.
Moreover, Airbnb is beginning to make inroads into business travel. Ever more companies are letting staff book their own itineraries, and giving them incentives to be thrifty. Google sets a budget for each trip, and employees who underspend them get credits they can donate to charity or use for future perks like flight upgrades.
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Source: Room for all, for now, The Economist 1 published Apr 26, 2014. Viewed Apr 28, 2014.