Hotel Revenue Management in the Age of Airbnb

By Will Song Co-Founder & Vice President of Revenue, Lights On Digital | October 22, 2017

Hoteliers today have a similar fear to that which the large hotel owners had just a couple of decades ago when OTAs arrived on the scene. With OTAs, it suddenly became possible for smaller, independent hoteliers to compete with the big guys. With Airbnb, it has suddenly become possible for single individuals who aren't even in the business to compete with actual hotels. Airbnb is to hotels as Uber is to taxis.

This prospect can seem a little worrisome for hotel owners who have worked tirelessly to distinguish themselves and attract guests in an already highly competitive and fluctuating market. In reality, Airbnb still only accounts for about 4% of total demand and 3% of total revenue market-wide. So it's not quite the apocalyptic threat as some would lead you to believe. However, it's still growing and worth watching if only for the market segments they are penetrating. Those include:

  1. Leisure guests travelling in larger groups
  2. Guests with longer lengths of stay (averaging 6.8 days compared to hotels' 3 days)
  3. Price-sensitive guests

With listings offering daily rates that are, on average, $16 lower than hotel daily rates, it's no surprise that the more price-sensitive customers are opting for Airbnb. However, Airbnb's market penetration is not strongest among only the price-sensitive. Here are some of the key Airbnb trends:

  1. Urban centers have more competition from Airbnb than suburbs and rural areas
  2. Boutique & lifestyle hotels are more directly impacted than corporate or traditional hotels
  3. A growing number of millenials are choosing Airbnb over hotels for the "authentic experience" of staying in a local's apartment
  4. Competition from Airbnb peaks on high compression dates

Despite this competition, hotels still dominate when it comes to occupancy rates. This is primarily due to the instability of Airbnb's supply. That instability is due to the fundamental nature of Airbnb.

New listings tend to flood the site right around peak demand dates. If there's a major festival or event happening in the area, locals will use the opportunity to make some extra cash by putting their apartments up on the site. A significant number of those listings are then abandoned once the event has passed. This means the website is pretty well saturated with inactive listings. Moreover, many of these units will never actually rent, active or otherwise. Supply fluctuates rapidly and there is, as of yet, no meaningful way of regulating availability or standardizing quality so that customers can be assured of a consistent level of cleanliness, safety, and service.

Step 1: Data, Data, Data

Choose a Social Network!

The social network you are looking for is not available.

Close

Hotel Newswire Headlines Feed  

Dean Minett
Rick Skinker
Janelle Schwartz
Stephanie Hilger
Ed Blair
Gio Palatucci
Eileen McDargh
Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.