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  

Stephanie Hilger
Gio Palatucci
Matt Schwartz
Sridhar Laveti
Megan (Sterritt) Taylor
Gaurav Varma
Coming up in April 2019...

Guest Service: A Culture of YES

In a recent global consumers report, 97% of the participants said that customer service is a major factor in their loyalty to a brand, and 76% said they view customer service as the true test of how much a company values them. And since there is no industry more reliant on customer satisfaction than the hotel industry, managers must be unrelenting in their determination to hire, train and empower the very best people, and to create a culture of exceptional customer service within their organization. Of course, this begins with hiring the right people. There are people who are naturally service-oriented; people who are warm, empathetic, enthusiastic, pleasant, thoughtful and optimistic; people who take pride in their ability to solve problems for the hotel guests they are serving. Then, those same employees must be empowered to solve problems using their own judgment, without having to track down a manager to do it. This is how seamless problem solving and conflict resolution are achieved in guest service. This willingness to empower employees is part of creating a Culture of Yes within an organization.  The goal is to create an environment in which everyone is striving to say “Yes”, rather than figuring out ways to say, “No”. It is essential that this attitude be instilled in all frontline, customer-facing, employees. Finally, in order to ensure that the hotel can generate a consistent level of performance across a wide variety of situations, management must also put in place well-defined systems and standards, and then educate their employees about them. Every employee must be aware of and responsible for every standard that applies in their department. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.