By Elaine Sahlins, MAI, CRE, Managing Director, Hospitality & Gaming, Valuation & Advisory
Yes, Airbnb continues to expand, but has it had a major impact on longer stays and overall hotel performance? That depends on where you are and who your guests are. Airbnb is primarily used by leisure travellers in major urban areas. According to a recent analysis by STR on Airbnb data in 7 major markets for the 12 months ending July 2016, Airbnb guests stay longer and pay less than hotel guests. Airbnb occupancy levels are highest on Saturday (52 percent) and Sunday (48 percent) while midweek occupancy levels range from 42 to 49 percent, well below the average hotel occupancy levels of 76 to 82 percent levels for the composite urban locations. Anecdotal discussions of the impact of Airbnb on the hotel industry are plentiful online, and other experts have developed analyses that show direct costs to the hotel industry, but a direct empirical presentation has yet to be produced. It is reasonable to assume that some portion of Airbnb guests are bypassing hotels and that average rate in some markets has been affected.
The use of Airbnb by business travellers can be expected to grow. Airbnb is aggressively tapping into the business travel market and recently integrated with major management systems, such as American Express Global Business Travel and BCD Travel. According to a report by CNBC that cites the company, business travel on the Airbnb site has grown by three times since last July, and the service is now seeing 14,000 new companies sign-up each week for its business travel services. The home-sharing giant is already being used on business trips by the likes of Google and Morgan Stanley. However, new research from Concur, a travel management and data company, reports that most commercial travellers using Airbnb are associated with small companies. Concur looked at more than 320,000 Airbnb expenses totalling $77 million over two years, and found that early adopters of the service have worked in the fields of technology and higher education. Concur’s research shows that after a period of 32 percent year-over-year growth in the number of organizations using Airbnb, from Q2 2015 to Q2 2016, Airbnb’s rate of expansion in corporate travel could actually be slowing.
Hotels are investing in their branding and amenities offerings to compete with the experiences sought after by Airbnb users and provided by local hosts. Hotel companies and municipalities also continue to pursue regulation of health and safety standards and compliance with local tax requirements for non-hotel lodging. In many urban areas, other pro-renter groups are also challenging the short-term rental companies as a threat to markets which are already struggling with rental housing shortages. The long-term and cyclical impacts of Airbnb are still playing out. With the moderation of hotel performance in many markets, the challenges of Airbnb to traditional hotel operators may become more pronounced.
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Elaine Sahlins, MAI, CRE is a Managing Director in the Hospitality & Gaming practice of Cushman & Wakefield where she provides appraisal and consulting services for hotels and casinos. With over 25 years of experience, Ms. Sahlins has performed valuations and market and feasibility studies of hotel and gaming properties throughout the United States relating to financing, feasibility and other real estate issues.