The ero­sion of trust in hospi­tal­ity — a sil­ver lin­ing for ho­tels?

The Insider - - CONTENTS -

The ho­tel mar­ket is fore­casted to sus­tain a 5-6% growth in 2018, reach­ing US$170B in gross book­ings. Strong leisure and busi­ness travel de­mand is driv­ing up Av­er­age Daily Rates (ADR) and Rev­enue Per Avail­able Room (RevPAR) and help­ing to main­tain an oc­cu­pancy rate of ~66%. Life is good!

Or is it?

Although ho­tels seem to be hold­ing their own, the growth in al­ter­na­tive ac­com­mo­da­tion rentals is threat­en­ing to es­ca­late an over­sup­ply prob­lem that al­ready plagues many seg­ments of the mar­ket. And the lack of reg­u­la­tion and over­sight with th­ese va­ca­tion rentals and home-shar­ing busi­nesses is al­low­ing the likes of Airbnb and [Ex­pe­dia’s] HomeAway to of­fer sig­nif­i­cantly lower prices to cost­con­scious con­sumers.

The sit­u­a­tion looks pretty grim for the fu­ture of tra­di­tional travel brands if cur­rent trends con­tinue. But one can­not for­get the trump cards ho­tel brands still hold in a trust­d­e­fi­cient world. It’s time for them to dou­ble-down on their strengths when com­pet­ing with th­ese dig­i­tal dis­rup­tors.

Mis­trust in the shar­ing econ­omy

The global al­ter­na­tive ac­com­mo­da­tion mar­ket is large, grow­ing and ex­pected to reach US$106B in 2018 — mostly through the ef­forts of the hon­chos of home shar­ing, Airbnb and Ex­pe­dia.

Home shar­ing ser­vices are also ripe with trust is­sues from both users and hosts alike. A quick pe­rusal of ver­i­fied re­views on Con­sumerAf­ shows that their ex­pec­ta­tions are not be­ing met by the ma­jor play­ers in the space, par­tic­u­larly when it comes to qual­ity, avail­able ameni­ties, book­ing and over­all ex­pe­ri­ence, prop­erty man­age­ment, and cus­tomer/host sup­port.

Ex­pe­dia’s ac­qui­si­tion of VRBO/HomeAway in 2015 was so poorly man­aged (and con­tin­ues to be based on feed­back I hear from both guests and hosts) that class-ac­tion suits were filed.

In an at­tempt to re­duce the num­ber of un­wel­come sur­prises ex­pe­ri­enced by guests, Airbnb in­tro­duced a new cat­e­gory of “ver­i­fied ac­com­mo­da­tions” — Airbnb

Mean­while, On­line Travel Agen­cies (OTA) con­tinue to cap­ture the at­ten­tion of more and more trav­el­ers and their wal­lets ev­ery year.

Be­cause as much as Airbnb and Ex­pe­dia of­fer a more au­then­tic lo­cal ex­pe­ri­ence and lower prices, they fall short in many other, crit­i­cal ar­eas.

There are many rea­sons peo­ple have been grav­i­tat­ing to­wards th­ese Shar­ing Econ­omy ser­vices over the past few years, not the least of which is price. So why are there fewer US trav­el­ers us­ing th­ese ser­vices in 2018 than in 2017, choos­ing in­stead to book di­rectly with ho­tels?

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