Airbnb and HomeAway: What You Need To Know (Part 2)

If one believes popular media, private rentals are crippling hotel sales. I have already debunked this idea, but it is true that the sharing economy is changing the hospitality landscape and offers new challenges and opportunities to hotels. Hotels and private rentals are not mutually-exclusive, and hotels can benefit from the sharing economy by considering the changing demands of travellers and by focusing on those services which make them stand out from alternative accommodation providers.

Private rentals are stirring the pot

Airbnb and HomeAway have been busy in recent weeks. Airbnb closed a deal with the UK Government on 26 March, allowing its hosts to share their rooms for up to 90 days without registration, and it was named the official alternative accommodation supplier of the 2016 Olympic Games in Rio de Janeiro. HomeAway, meanwhile, made a minority investment in Canadian rental platform CanadaStays to strengthen its position in Northern America. With developments like these, private rental platforms will increasingly compete with hotels for sales. Arguably, there are a number of ways in which private rental platforms can outperform hotels:

• Lower overhead costs, due to lower service standards and fewer regulations to adhere to (as well as issues around taxation), mean private rentals can often offer lower rates than hotels.

• The use of mobile technology with interactive features, and allowing hosts and guests to communicate directly, improves the consumer experience and suits the demands of contemporary consumers.

• Private rentals cater to the “authenticity” trend by offering live-in experiences in residential areas, rather than the transient and mundane experience of a hotel room. Furthermore, private rentals offer a type of freedom which cannot always be found in hotels, for example, due to the absence of kitchen facilities.

Hotels still have a lot to offer

Hotels have attributes which put them ahead of peer-to-peer accommodation in other aspects:

• Hotels are reliable and predictable: when booking a hotel room from a popular chain, travellers generally know what to expect. For private rentals such as Airbnb, quality control is an issue, as online ‘Airbnb horror stories’ show.

• With many staff on the payroll, hotels have in-house cleaning and concierge services as well as a 24-hour reception with well-trained staff at the guests’ disposal.
• Luxury hotels in particular offer services not found in many private rentals, such as swimming pools, spa facilities, in-house restaurants and bars.
• Hotels are often positioned in prime locations close to transportation hubs and tourist attractions.

How can the rise of private rentals be beneficial to hotels?

It is a myth that the sharing economy is only for tech-savvy millennials looking to save costs by lowering their demands for traditional hotel service and luxury. The number of consumers using sharing economy platforms is increasing and the user base is maturing.

This does not mean, however, that there is no place for hotels and their services. The growth of the sharing economy, with private rentals and car-sharing as its poster children, offers multiple opportunities, and not only for these sharing economy platforms. Rather than focusing on the threat of the sharing economy, hotels can learn from these changing demands and consider what opportunities are on offer. Hotel management should be progressive and consider the following:

• Open up to the local community: One thing the sharing economy is achieving is shaping connections between local communities, businesses and visitors. Hotels are often too focused on offering services to their guests, without looking at how they can service the local community, for example by promoting the hotel restaurant and bar as a local meeting place.

• Use well-trained and professional staff effectively: Private rentals which are located in the vicinity of a hotel can benefit from a key pick-up and drop-off service if hotels offer a 24-hour reception service to private rental guests arriving late at night. This could be extended to airport transportation, laundry services, and a baggage drop-off service.
• Explore the provision of sharing facilities on-site: Hotel management could consider offering bike-sharing and car-sharing facilities on-site. This will pull more tourists and locals to their premises and will subsequently benefit traffic to the hotel restaurant and bar. Agreements with bike/car sharing platforms on revenue distribution could mean that hotels profit from the uptake of these facilities.

Discussions on the similarities and differences of service provision between hotels and private rentals will most definitely increase over the coming years as the hotel industry comes to grips with the challenges and opportunities offered by the sharing economy. Getting a head start by considering its implications now is vital.