Hotel Vs Airbnb: Where does the Future of Hospitality Real Estate Lie?
Around 2 million people were staying in an Airbnb every night in 2018. That was pre-pandemic and things have changed a lot since then. But this number does show what a disruptive force Airbnb has been to the travel and hospitality industry.
What started as two roommates looking to earn a little extra money to help cover their high rent in San Francisco turned into a disruptive startup that is valued at $113 billion as of 2021.
If you turn the clock back ten to fifteen years, the idea of staying in a stranger’s home was considered dangerous. Airbnb was originally thought of as absurd because no one would want to stay in a random person’s apartment in a foreign city or country.
However public perception has changed dramatically. Peer-to-peer (P2P) vacation rentals have grown significantly in popularity in recent years.
A Goldman Sachs report from 2016 found that “If people have stayed in peer-to-peer lodging in the last five years, the likelihood that they prefer traditional hotels is halved (79 percent vs. 40 percent).”
Basically, once a traveler discovers Airbnb, this often then becomes their preferred vacation accommodation.
A large factor fueling the growth of Airbnb is the discoverability of P2P apps. As a population we are becoming more ‘tech-literate’ and even older generations that were once reluctant to embrace the shift in technology now have iPhones with the Airbnb app downloaded.
There is something about P2P vacation rentals such as those offered on Airbnb that appeals to travelers. But does this mean that Airbnb is going to make hotels obsolete? We don’t think so.
There are a lot of hotel real estate investors who have been nervous about the rise of Airbnb. Rightly so, it has impacted the industry and looks as though it will be sticking around for the long term. But that doesn’t mean that it will consume the whole market. There are still many travelers who are looking for experiences that Airbnbs struggle to offer but that hotels can provide.
Here are some of the reasons that hospitality real estate is still a great investment.
Business Travelers Prefer Staying in Hotels
It is true that hotels have been losing the market share when it comes to tourists. But are tourists the only travelers? Far from it.
Among business travelers, hotels remain on top. According to a study conducted by Clever, 68% of business travelers surveyed reported having a preference for hotels over Airbnbs or P2P vacation rental services when they are traveling for work.
Hotels provide stability for business travelers. When they arrive they know what they can expect from hotels, and they will be provided with services and types of accommodations that Airbnb rarely offers.
In 2017, 90% of Airbnb’s revenue came from personal travel. It has been struggling since the beginning to attract the market of business travelers.
This has changed marginally due to the pandemic affecting the way people travel. For example, the percentage of long-term stays (at least 28 nights) on Airbnb almost doubled from 14% of nights booked in 2019 to 24% of nights booked in Q1 2021.
Long-term stays are growing in popularity as remote work allows travelers to work and travel at the same time. However, for shorter business trips, hotels are still the go-to option. Hotels also have the potential to accommodate the long-stay market if they can adapt their service to better fit travelers who will be staying 28 days or longer.
Some of the major appeals of hotels to business travelers include 24/7 front desk services, on-site gyms, pools, room service, mini-bars, complimentary breakfasts, etc. These services make business trips run smoothly and allow travelers to land in a new place and immediately be comfortable.
Business travelers are searching for reliable accommodation they can trust. Hotels fulfill that need and often business travelers will become repeat guests at a hotel if they frequently come to a location for business trips.
An important point to note here is that business travelers are well aware of Airbnb. Many of them use Airbnb or similar P2P apps for their vacation but they are resistant to making this change for their work travel.
According to the same Clever report, business travelers are almost twice as likely to describe Airbnb as dishonest than tourists. In addition, 57% of business travelers have reported having a negative experience in an Airbnb compared to the much lower 35% of vacation travelers.
As a hotel, real estate investor, keeping business travelers happy should be one of your top priorities in the coming years as they are likely to become a larger part of your income.
How can your hotel ensure that it keeps its business travelers happy?
Clever found that some of the most important amenities among business travelers are:
- WiFi (85%)
- Free parking (70%)
- Complimentary breakfast (69%)
- Housekeeping (59%)
This shows that the mindset of the business traveler is focused on checking in and getting down to business.
Many Guest Prefer Predictability Over Popularity
Airbnb is growing in popularity but hotels will always have predictability on their side. And it’s not only business travelers that crave comfort and predictability.
Airbnb stays are often unique. Every home is different and often a representation of the owner. This leads to a wide disparity in guest experience. What one guest enjoys another might hate and as guests move from one Airbnb to another they will have widely different experiences.
Hotels, in comparison, have often got years, if not decades of experience, in creating a service that is consistent and streamlined. The ambiance, the check-in, and check-out procedures, and more are the same every time a guest comes back and are often similar between hotels.
For many travelers coming to an unfamiliar place is in and of itself a little stressful. Adding a new type of accommodation and an unfamiliar home can add to the stress. In contrast, hotels offer a zone of safety.
Hotels have brands that instill confidence in guests. When a guest comes to your hotel they might know that there will be security such as in-room safes, cameras, and a dedicated 24-hour staff.
Hotels are also often located at the center of cities where all the activities are taking place. Travelers staying in hotels don’t have to take a long journey to the local attractions. In contrast, Airbnbs are often in suburban or residential areas around cities as they are people’s homes. The long-distance to travel into the city and hours spent on public transport or in Ubers to get to attractions can be off-putting to guests. In addition, the lack of security measures within an apartment or home can make guests uncomfortable with leaving their valued possessions there.
Privacy Is a Major Concern For Airbnbs
According to the Clever study mentioned previously, a shocking 7% of Airbnb users have found a hidden camera in their rental.
There have been numerous news articles about such things happening and this is an issue that, if not addressed by Airbnb, could impact the trust its users have in the future.
Sentiments towards Airbnb are currently generally positive but this will quickly change if growing numbers of users begin to notice privacy issues such as hidden cameras.
The same study found that over half of respondents had privacy concerns staying at a vacation rental like an Airbnb, and 58% said they’re concerned about hidden cameras within their unit.
While these incidents might seem like they would be one-off, freak incidents, they are becoming more frequent. A separate study from IPX 1031 Exchange found that the number was even higher than 7%, with a huge 11% of Airbnb travelers discovering a hidden camera in the property they rented.
Hospitality Remains a Safe Investment
As a hotel investor, what does all this mean for you? Airbnb has certainly been a disruptive force in the hospitality industry, but that doesn’t mean that it has made hotels obsolete. Hotels offer plenty to different types of travelers, that Airbnbs simply don’t.
Airbnb is simply the latest challenge that the hotel industry is facing, but this is an industry that has been around for centuries and has remained a popular option for both business and vacation travelers. The key for investors is to keep a sharp eye on trends within the industry as they are happening and continue to offer services that Aibnbs can’t keep up with.
If you are interested in investing in hospitality, reach out to our team today.