SHOULD HOTELIERS FEEL THREATENED BY AIRBNB ?

Much focus has been on Airbnb’s ability to become a new kind of online travel agency, we shouldn’t lose sight of the fact that it continues to be a major disrupter to the traditional hotel industry, too.

af ter a recent announcement from Airbnb that bookings in Nigeria have increased by 213% as of June 2018, with Ghana and Mozambique coming in second and third, what does this mean for hoteliers in Africa? While the results mean that there is increased interest by international guests to visit Africa, a win for the economy, are hoteliers losing out because of the online booking platform?

Since Airbnb started, 3.5 million guests have arrived at listings across Africa as a whole, with two million guests having arrived at listings on Airbnb in South Africa – roughly half of these arrivals occurring in the last year. Africa also features three of the top eight

fastest growing countries for guest arrivals on Airbnb, namely Nigeria, Ghana and Mozambique.

People are becoming more comfortable staying at Airbnb establishments globally, so when they are looking to visit cities such as Cape Town, they are prepared to consider that option; it is a type of familiarity or loyalty almost. Also flights to Africa are still expensive so if people can find accommodation for the whole family at a reasonable rate rather than having to book two or three rooms, it can make the trip affordable. Business travellers will continue to want hotels, for service, security, loyalty points at the company’s expense. Leisure guests will look for more space but how many of them would have stayed in a hotel is debatable. What is not debatable is that for too long African hotels have not provided the accommodation that all travellers want or need, so new concepts like Airbnb, Stay at Once, mid-market hotels and serviced apartments are all starting to address those issues. Whilst Airbnb is undoubtedly gaining a portion of hotel guests, that portion isn’t nearly enough to unseat traditional lodgings. Furthermore, not only are companies like Airbnb delivering real income and employment to local communities, they’re also helping to bolster national tourism economies and proving beneficial to second tier destinations.

As far as hotel managers are concerned, the competition their hotels face from peer-topeer platforms has several unique features that differentiate it from competition with other hotels . First, the Airbnb platform has

near zero marginal cost, in that a new room can be incrementally added to (or removed from) the platform with negligible overhead. Because of this, Airbnb can scale supply in a near frictionless manner to meet demand, even on short timescales.

By contrast, increasing hotel room supply involves buildout, causing significant marginal costs for hotel chains. Second, Airbnb offers a much wider range of products and services than hotels: Airbnb users can rent anything from an apartment to a tent. More importantly, because Airbnb leverages existing housing inventory, it can potentially expand supply wherever houses and apartment buildings already exist. This is unlike hotels, which must be built at locations in accordance with local zoning requirements. Therefore, competition by Airbnb is potentially harder for incumbents to adapt to, compared to competition by other hotel firms.

When comparing the Airbnb offering with that of traditional hotels it’s important to note that ‘location’ is consistently rated the most important factor in accommodation purchasing decisions. Most hotels have an advantage with central locations and easy access to transportation while holiday rental maps often look much like a doughnut around the center of the city.

There are other issues we should also take into account. For one, consider the power

Since Airbnb started, 3.5 million guests have arrived at listings across Africa as a whole, with two million guests having arrived at listings on Airbnb in South Africa – roughly half of these arrivals occurring in the last year. Africa also features three of the top eight fastest growing countries for guest arrivals on Airbnb, namely Nigeria, Ghana and Mozambique.

of loyalty programmes as a way of retaining and growing business. Marriott Rewards, for example, the biggest loyalty programme in the world, brings a potential 100 million travelers to its hotels. The members are not likely to forego their Reward points in favour of another type of accommodation offering. Amenities are another consideration, as some holiday rentals may have a swimming pool they are unlikely to have facilities such as a spa, kids club or restaurant.

Just how big of a threat is Airbnb to hotels in the next few years, however, will likely hinge on the company’s success in converting business travelers into regular Airbnb users. While Airbnb is growing in use among leisure travelers, 70 percent of room nights in the lodging industry are generated by business travel. Despite being disruptive, companies like Airbnb and Uber are not setting out to kill traditional business models, but to complement them. But the biggest conclusion here, is that hoteliers can’t afford to dismiss the impact, however large or minuscule it may be, that Airbnb is having on the lodging industry, and on their bottom lines, too.

Takeaways About Airbnb’s Potential Impact on the Global Hotel Industry Airbnb’s growth rates are very high.

Hotel demand decreased and Airbnb demand increased in two of the 13 markets — New Orleans and Paris —suggesting Airbnb may have had an impact on hotel demand. However, STR noted terrorist activity in Paris and large event shifts in New Orleans may have negatively impacted hotel demand, too. Paris is Airbnb’s largest market in the world.

Occupancy, or utilization rates are considerably lower for Airbnbs than for hotels.

When we look at occupancy by day for the top seven markets in the U.S., they were selling eight out of 10 rooms. On the Airbnb side, almost half of the inventory is occupied.

Airbnb guests are a bit different from hotel guests*

Airbnb data crunching showed that over the past year, the average age of an Airbnb guest was 35 and 53 percent of all guests were female. According to the Lodging Industry Trends 2015 report from the American Hotel & Lodging Association, 50 percent of all hotel guests were aged 35 to 54, and 63 percent of guests were male. Airbnb guests are “primarily leisure oriented” and that, according to Airbnb, about 10 percent of Airbnb bookings are for business travel.