HAMILTON, Bermuda — Two perceived enemies of the hotel industry hit the stage at this year’s Caribbean Hotel Investment Conference and Operations Summit and extended an olive branch, of sorts.
As the session “A conversation with Airbnb and Expedia” got underway, Shawn Sullivan of Airbnb and Hari Nair of Expedia were asked a simple question: “How do you address the accusation that you’re bad for hotels?”
“At the end of the day, we are definitely competition,” Sullivan acknowledged. But Airbnb has also offered a platform for boutique hoteliers to attract guests, with about 15,000 properties represented, and has signed 360 agreements around the world that determine how it operates in everything from towns to entire countries. “We want a level playing field, which is why we do work with governments collecting taxes and working with governments on regulations,” Sullivan said.
Over the last 14 months, Airbnb has finalized 10 MOUs with governments that focus on aggregate data sharing, destination promotion, establishing stakeholder working groups, “which can include hoteliers if they’re interested,” Sullivan said. The company has also signed two tax agreements with Puerto Rico and the USVI, and has several more that will be announced in the coming months. “As a company, we decided several years ago that we wanted our hosts and our guests to pay their fair share,” he told attendees. “There is another massive sharing economy company which will go unnamed, but their approach to governments is a little different than ours. We actually want to be transparent, we want to be partners with destinations to kind of work through all these issues, in part because it’s not going away, and we think that it’s important to bring all the stakeholders together and work through these issues.”
Airbnb may not be as much of a threat to the hotel industry as some have believed. According to a recent survey from Morgan Stanley—disputed by Airbnb—the company's adoption growth has slowed in both the U.S. and Europe over the last year, as the percent of travelers who used Airbnb over the last 12 months increased only 25 percent, a “notable deceleration” in the adoption curve compared to 2016.
A recent Reddit thread discussed the different ways that Airbnb stays turned into “a problem,” including canceled reservations, scams, unsafe conditions and even discrimination. Traditional hotels can be sued in these conditions, but Airbnb guests have no such guaranteed legal protections.
Are OTAs OK?
Rather than merely an extra commission fee, Nair said, hotels should view Expedia as a channel for attracting new customers. “We are sending them to destinations, and we are sending them to your properties,” he said. “We don’t kidnap and hijack and send them nowhere—we send them to your places.”
After customers book a room on Expedia’s website, Nair suggested the hotel staff should “seduce” the guests so that they will book directly next time. “This is a very large industry, and a very large travel marketplace,” he said.
"When an [OTA] guest arrives at your hotel, seduce them so they book directly next time." - Hari Nair, @expedia— Jena Tesse Fox (@JenaFox) November 9, 2017
Expedia’s relationships with destination marketing companies and hotel companies have been changing and evolving over time, Nair added, implying that hotels have not kept up pace. “We see ourselves as a technology company, and as result of that, there are three key areas that hotel companies love to tap into: our data, our marketing platforms and our technology platforms,” he said. As such, the relationship between Expedia and the hotels it lists is changing from a transaction relationship to more of a partnership, he said, noting that Expedia and Red Lion Hotel Corporation, for instance, recently formed an agreement that allows guests who book a room on the OTA to sign up for Red Lion’s loyalty program without leaving the site—further evidence that OTAs do not necessarily need to be an enemy of traditional hotels.
Due to its purchase of home-sharing platform HomeAway, Expedia is also competition to Airbnb. The OTA’s own home-sharing platform saw a revenue increase of 31 percent to $224 million during the second quarter of 2017, and during the company's quarterly earnings call, then-Expedia CEO Dara Khosrowshahi said the company has plans to take HomeAway international over the next five years.
Still, Nair said, Expedia has no plans to shift its focus to home-sharing, and traditional hotels will remain its bread and butter. “We want to be able to show [customers] all kinds of accommodation that is out there,” he said. “It’s going to lead to some interesting learning and observations for us.”
Tourism and travel, as industries, are changing, Sullivan said, and the sharing economy and OTAs are reflections of consumer demand. “People, more and more, want local experiences, they want unique experiences, and they want to get to know the places that they’re traveling to,” he said. “There’s nothing that says hotels can’t do the same thing—they just need to do it. The hotels and others that recognize that and [prepare for] it are going to win, and the ones that don’t will stagnate.”
In the spirit of the free market, he added, competition can be healthy. “At the end of the day, it’s the consumer that will win when this all settles up.”