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Is Airbnb the Hotel Industry’s Greatest Threat?

Is Airbnb the Hotel Industry’s Greatest Threat?

The rapid growth and popularity of Airbnb, which recently surpassed 10 million guest stays since its 2008 launch, has raised valid concerns among hotel executives. With media reports that the online home-rental marketplace is nearing a $10 billion valuation, should it close a large new funding round, Airbnb could become one of the greatest threats to the hotel industry.

A panel of female hotel execs discussed this hot-button issue during the Cornell/AH&LA Women in Senior Leadership event at the Willard InterContinental in Washington, D.C., March 31. “They are disrupting our industry in a way, frankly, none of us would have seen coming five years ago, and there will be someone after them and someone after them,” said Christie Hicks, senior vice president of Starwood Sales Organization, Starwood Hotels and Resorts Worldwide. “That change means we have to really adapt and understand what’s in the mindset of the consumer, and who is satisfying that need.”

Kristin Campbell, executive vice president and general counsel for Hilton Worldwide, said Airbnb is taking a technology platform, much like the OTAs did 10-plus years ago, and changing the way the business operates as a result. “What the industry probably wasn’t seeing a decade ago was how quickly that was going to change things and how permanent that was going to be.”

Many hotel owners have been up in arms because Airbnb hosts are not subject to traditional hospitality based regulations or requirements, such as paying lodging taxes or adhering to the same fire and safety standards as hotels. “If someone is going to play in this space, they need to participate on the same playing field as the rest of the players in the industry, so we need to be very careful about that,” Campbell said.

But those factors are beginning to change. For instance, in response to safety concerns, the company is giving away smoke and CO detectors to hosts around the world, starting with those with active listings in the United States. In New York City, Airbnb recently outlined a plan in which the company would collect and remit taxes owed to the city and state on behalf of its hosts to the tune of more than $21 million a year. The company recently brokered a similar deal in Portland to collect an 11.5 percent lodging tax on rentals, and will soon pay San Francisco’s 14 percent hotel tax as well. Portland has been named as Airbnb’s first Shared City, an initiative designed to give back to the communities it serves, and will also become home to Airbnb’s North American operational headquarters.

“They’re going to find ways to satisfy the regulators or still continue to grow off of product,” says Kate Henriksen, senior vice president of RLJ Lodging Trust. “I think we can push back as an industry as much as we can, but at the same time find ways to embrace it and incorporate it into our business model. I don’t think it’s going away.”

When Ellen Brown, executive vice president of acquisitions and development for Denihan Hospitality Group, asked the audience how many people had booked through Airbnb, one attendee said she had used it six to eight times in Europe because “it’s cheaper than hotel accommodations and you can exist a little more locally and authentically.”

Attendee Vail Brown, vice president of global business development and marketing for STR, also weighed in on the subject. “I guess the accessibility of technology is what makes Airbnb more of a threat than when vacation rentals came to the marketplace, because really conceptually it’s the same disruption,” Brown said. “ I think technology has just made it more immediate.”

The disruption is a result of the new sharing economy era, said Debbie Marriott Harrison, global officer of culture and business councils for Marriott International. “[Marriott CEO Arne Sorenson] is very concerned about [Airbnb], I hear him talking about it all the time,” Harrison said. “We’re also just as concerned at Marriott about the OTAs and how they’re commoditizing our business. At our board meeting in February, the board said the OTAs and Airbnb are probably the biggest threats to our business.”

But Airbnb alone is not causing a disruption in the hotel industry, Hicks insisted. “Whether it’s OTAs or the challenges around visas, or trouble hiring people because we’re not paying, all of that has an impact on what our industry is facing moving forward. So I think we need to be obsessive but not obsessed.”

Photo Credit: David Blecman

2 comments

  1. I run a licensed B&B in New Orleans and Airbnb & VRBO are offering 2220 illegal short term rentals in our city alone. The city are looking into ways of combating their illegal activities but as yet, have not arrived at an answer. What we are seeing here is people buying up cheaper properties and fixing them up and instead of long term rentals are going for the short term market. This means the renters in the city are finding it difficult to find places to rent as so much more money can be made with an illegal STR. Our B&B association is in discussions with City Hall but they seem to have their hands tied, legally. Let’s hope the large hotel chains, who, like us small B&Bs, are starting to lose business, have enough clout to get something done. This is not a witch hunt – we just want them to get their permits, licenses and pay their taxes as these are the same people that are complaining about the state of our roads, street lighting, crime, shortage of police, etc. If all those illegals got permits, etc., this year, New Orleans’ coffers would increase to the tune of almost $4 million!!! Cheers, Kevin Herridge, http://www.risingsunbnb.com

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