Hotels not budging on Airbnb

Airbnb

Though Airbnb is growing nearly unfettered throughout major cities in the U.S., the industry has seen surprisingly little pushback from hotel operators. Instead, advocacy groups and local governments have been the most heavily involved in curtailing the expansion of Airbnb by pushing legal restrictions, but what is keeping hotels mum?

The answer could be found in a paper released by the American Hotel & Lodging Association, which released a paper commissioned from Penn State's Center for Hospitality Real Estate Strategy that showed 40 percent of Airbnb's revenue comes from owners with multiple units. What this means is that a huge chunk of Airbnb's revenue comes from what has previously been described as "illegal" hotels which are in operation all year long, and while Airbnb has since contested the findings of the report hotels still have yet to speak out.

According to The Washington Post, investors fielding questions to the brands during earnings calls are often told that Airbnb doesn't pose a significant threat to the traditional hotel business model, as long as local governments continue to regulate the home-sharing site with the same laws hotels contend with. Currently, Airbnb is affecting the ability for hotels to capitalize on demand during peak periods in major cities, but with a number of regulations on their way the brands expect Airbnb's growth to gradually slow.

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"Our view is it that in the higher kind of compression period for leisure travelers it may be an alternative, but we do not believe that it's directly competitive to our portfolio," Neil H. Shah, CEO of Hersha Hospitality Trust, said during a Q4 2015 earnings call. "It's just not coming up as a truly significant impediment to growth for our operators today."

This has been reiterated a few times throughout 2015, as Chris Nassetta, CEO of Hilton Worldwide, told an investor during a Q3 2015 earnings call that Airbnb's success is restricted to the urban market, making them unfit to take other main profit centers for hotels. "They thrive when there isn't enough capacity in the market," he said. 

But while some may be content with letting Airbnb grow astride their business, Choice Hotels is going on the offense by partnering with a number of independent vacation rental management companies to offer alternative lodging options separate from their hotel business. Stephen Joyce, CEO of Choice Hotels, told USA Today that Vacation Rentals by Choice Hotels will integrate with the company's rewards program, while participating management companies will be able to use Choice's reservation system, training and business services.

"It’s a huge business. It’s $24 to $28 billion," Joyce told USA Today. "We don’t have to get much of a share to do really well."

The best course of action is unclear at this time, but Choice may be on to something. Fortune reported that a survey from Goldman Sachs found that travelers who use Airbnb are unlikely to return to booking hotels. The findings show that 79 percent of consumers who had never used Airbnb or other "peer to peer lodging" options prefer traditional hotels, but that number fell to 40 percent for travelers who had used these sites. Additionally, millennials aren't alone in this statistic. Nearly 67 percent of respondents between 18 and 24 said they had used home-sharing sites in the past year, while 75 percent of respondents between 25 and 35 and an additional 64 percent of those between 35 and 44 also said yes. Travelers over 44 had a use ranging from 29 to 23 percent.

Whether hotels are going to be involved in the sharing economy or not is no longer a question. But the state of the sharing economy, once the law catches up to it, is still ambiguous. Will the law catch up? New York has $10 million that says it will, and many more cities are poised to follow.

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