Airbnb's impact on hotel industry

Home Buying

Airbnb’s Impact on the Hotel Industry: Insights From 1000 Travelers Who Use Both

May 13, 2019 | by Thomas O'Shaughnessy

Airbnb's impact on hotel industry

More than two million people[1] stay in an Airbnb every night, making it a disruptive force in the travel industry that can't be ignored. What started out as two roommates trying to earn some extra cash to pay their high, San Francisco rent has turned into a travel tech behemoth valued at $38 billion.

Initially, the idea of staying in a random person's home was viewed as absurd and dangerous, but public perception of peer-to-peer (P2P) vacation rentals has shifted significantly in recent years.

A 2016 Goldman Sachs study[2] found that, “If people have stayed in peer-to-peer lodging in the last five years, the likelihood that they prefer traditional hotels is halved (79 percent vs. 40 percent).”

In other words, once travelers discover Airbnb, they hop on the P2P vacation rental bandwagon.

This same study found that P2P app familiarity and usage is increasing, particularly among younger generations. 67% of respondents age between the ages of 18 and 24 had used a P2P service in the last 12 months. That number is lower among travelers ages 45 and up (about 29%), but it is steadily rising.

Clearly there's something about P2P vacation rentals that appeals to travelers once they've gotten over the initial mental hurdles of staying in another person's home.

To learn more, we surveyed 1,000 Americans who have used both Airbnb and hotels in the past 12 months. Airbnb is becoming the preferred choice of many vacationers across the country (and the world), but hotels still serve an important function for travelers who prefer more traditional and/or familiar accommodation options when away from home.

We also dug into the safety and privacy concerns travelers have towards Airbnb, as well as emerging competitors like Marriott's Homes & Villas luxury rental service.

To learn more, read our key findings and in-depth analysis below.

Key Findings

  • Airbnb is becoming the preferred choice of vacationers — 60% of travelers who use both Airbnb and hotels prefer Airbnb over comparable hotels when going on vacation
  • 68% of business travelers prefer staying in hotels when traveling for work, and they're more likely to have a negative experience at an Airbnb
  • It doesn't look like the supply of Airbnb hosts will slow down: 54% of homeowners said they'd consider renting out their homes with Airbnb or a similar vacation rental app, and 82% believe that Airbnb is a good way to make money from their property
  • While public sentiment towards Airbnb remains positive, 58% of respondents said they were concerned about hidden cameras, and 7% said they've stayed in an Airbnb and discovered a hidden camera
  • Marriott's Homes & Villas luxury rental service is making a splash among high-end travelers: half of luxury travelers have heard of the Marriott's new service, and they're intrigued by the benefits of Marriott's rewards program

Key Insights & Analysis

60% of Travelers Prefer Airbnb Over Comparable Hotels When Going on Vacation

Airbnb is, in many ways, a Pandora's Box for the hotel industry: Once vacationers give it a try, it typically becomes their preferred vacation lodging option.

We found that 60% of travelers who have used both Airbnb and hotels prefer Airbnb for vacation lodging.

Despite this preference, travelers reported similar levels of satisfaction with their most recent Airbnb and hotel experiences, averaging 4.2 stars for hotels and 4.3 stars for Airbnb.

If travelers report similar levels of satisfaction for both types of lodging, why is Airbnb the preferred option?

David Guttentag, professor at the Ted Rogers School of Hospitality and Tourism Management, identifies five types of Airbnb guests based on his 2016 study[3]:

  • Money savers: Choose Airbnb because of affordability
  • Home seekers: Interested in household amenities and larger spaces
  • Collaborative consumers: Motivated by the share economy philosophy and the ability to have an authentic experience
  • Pragmatic novelty seekers: While not regular Airbnb users, these travelers are drawn to the novelty of Airbnb
  • Interactive novelty seekers: Want to interact with their host or other locals

Our research confirms these findings. Additionally, we found that affordability, authenticity, and household amenities motivate the majority of Airbnb users in 2019.

The most common words travelers associate with Airbnb include “authentic” and “affordable,” and 77% of travelers surveyed believe Airbnb provides a more authentic experience than a hotel. "Price" also ranks as one of the top reasons travelers prefer Airbnb.

Airbnb's competitive advantage seems to stem from its ability to provide experiences that traditional hotel chains cannot, while simultaneously offering competitive rates.

Airbnb travelers get to feel like they're actually living in their destination city or town for a few days, with all of the household accommodations we've become accustomed to in our own day-t0-day lives.

The Majority of Business Travelers Prefer Staying in Hotels When Traveling for Work

While hotels appear to be losing market share among tourists, they remain the preferred option for a majority of business travelers. 68% of businesspeople surveyed said they prefer hotels to Airbnbs or comparable vacation rental services when traveling for work.

Business travelers know what to expect from hotels, and hotels can provide services and accommodations Airbnb cannot. In fact, 90% of Airbnb's revenue came from tourism and personal travel in 2017[4], indicating the company is still struggling to tap into the business market.

24/7 front desk services, on-site fitness centers, room service, complimentary breakfasts, and other amenities keep businesspeople coming back to hotels. Almost half of business travelers said familiarity was an important reason they prefer hotels.

These travelers are looking for reliable lodging they can trust, and hotels fulfill that need.

While business travelers are still using Airbnb for vacations, they are more resistant to change when traveling for work — much of which is based on entrenched, negative sentiments about the short-term vacation rental industry.

Business travelers are twice as likely to describe Airbnb as dishonest, and they're more likely to have a negative experience at an Airbnb.

57% of business travelers reported having a negative experience that violated Airbnb's guidelines compared to 35% of vacation travelers.

Keeping business travelers happy might be one of the most important goals for hotels in the coming years, as Airbnb continues to disrupt the personal travel industry.

How can hotels accomplish this? It might be best to stick to the basics.

We found the most important hotel amenities include WiFi (85%), free parking (70%), complimentary breakfast (69%), and housekeeping (59%). In other words, business travelers are looking to check in and get down to business — or relax and leave fueled for a busy day ahead.

In other words, hotels that remain focused meeting these types of baseline expectations and needs will continue to attract businesspeople for years to come.

Over Half of Homeowners Would Consider Renting Out Their Homes Through a Third-Party App Like Airbnb

As the demand for P2P vacation rentals grows, it appears supply will comfortably meet or exceed that demand. 54% of homeowners surveyed indicated they'd consider renting out their property through a third-party app.

More importantly, 82% indicated they believe renting out their home as a vacation rental is a good way to make money from the property. Even if homeowners aren't willing to rent out their property at this very moment, they believe apps like Airbnb and VRBO could help them pay the bills.

In the right markets, Airbnb can help homeowners shave a little off their mortgage each month by enabling them, for example, to rent out a second bedroom.

The true threat to hotels is the virtually limitless supply of potential vacation rentals — anyone who owns a home can sign up for Airbnb and start renting it out once they've filled out the application.

Whether renting out your second bedroom will end up being profitable is entirely dependent on the local market, and it's not always the hottest housing markets that make for the best Airbnb rental properties.

AirDNA, a vacation rental data analysis firm, found that unassuming towns and cities often offer the highest returns for hosts.

According to AirDNA's research[5]:

“Renting out a private room in your place could cover your rental cost altogether. Markets such as Detroit, MI, Memphis, TN, Cleveland, OH, Indianapolis, IN, Louisville, KY would make hosts between $2,500-$5,500 in annual profit.”

When the supply of Airbnbs in smaller cities can't meet the demand, the cost to rent an Airbnb rises and homeowners benefit. As home prices continue to rise, Airbnb will continue to become a popular option among homeowners looking for supplemental income.

7% of Airbnb Users Said They've Found a Hidden Camera in Their Rental

Our study found that consumer sentiment towards Airbnb is generally positive. Only 12% of respondents associate Airbnb rentals with being uncomfortable and 10% with being unsafe.

However, travelers are unsettled by the recent hidden camera scandals Airbnb has been involved in.

53% of respondents said they have privacy concerns staying at a vacation rental like an Airbnb, and 58% said they're concerned about hidden cameras within their unit.

While these incidents might appear to be one-off, freak incidents, we found that 7% of respondents had found a hidden camera within their unit.

7% might seem a little high, but a recent survey from IPX 1031 Exchange[6] actually found that 11% of Airbnb travelers have discovered a hidden camera in the property they rented. It's possible that Airbnb's laissez-faire, share-economy business model attracts voyeuristic (read: creepy) hosts.

It's worth noting that 52% of respondents indicated they'd experienced some type of refund policy violation since using Airbnb. The most common violations are fairly benign – misleading listing descriptions and dirty towels – but they can become quite serious, e.g., 9% of respondents indicated they found an animal within the rental.

These incidents don't appear to be deterring travelers: 72% of respondents say they plan on staying at an Airbnb within the next 12 months, and 71% of respondents believe Airbnb has a positive impact on the global tourism and travel industry overall.

Airbnb's value proposition is strong for vacation travelers, and potential safety and privacy concerns don't appear to be dissuading them once they've gotten their toes wet with P2P vacation rental model.

Marriott's Premium Rental Service Is Making a Splash Among Luxury Travelers, but It's Not an Answer to Airbnb

In late April, Marriott announced a new vacation rental service called Homes & Villas, which offers 2,000 luxury homes in more than 100 cities.

Marriott will offer unique and/or eccentric rentals, such as Italian villas and Irish castles. While only 36% of Clever survey respondents had heard of Homes & Villas, 50% of "luxury travelers" — i.e., those who indicated they stay at high-end hotels or vacation rentals — reported being familiar with the service.

From a marketing perspective, this is a pretty impressive feat, considering our survey was conducted only nine days after Marriott's announcement.

When asked why they'd try out the new service, 63% said because of Marriott's trustworthy brand, while 54% were interested in the potential bonus rewards and loyalty points they'd be able to use across Marriott's hotel line.

Cornering the luxury travel market by offering premium vacation rentals — an approach Airbnb can't easily imitate — is an intriguing move by Marriott.

Many have named Homes & Villas “Marriott's answer to Airbnb.” However, this new service doesn't address Airbnb's core value proposition: affordability and authenticity.

Staying in an ancient Irish castle is a fantasy for many, but it's not necessarily going to give travelers a truly authentic and immersive experience. For many, this is the primary appeal of Airbnb — and it's unlikely that any established hotel brand is going to be able to beat them at their own game.

Methodology

The proprietary data featured in this comes from an online survey commissioned by Clever Real Estate and conducted by Pollfish. In total, Pollfish surveyed 1,000 travelers who had stayed at both Airbnb and hotels in the last 12 months. The survey was distributed using organic sampling from May 8, 2019 to May 9, 2019.

Secondary research was gathered from the sources below.

Sources

  1. Airbnb: Fast Facts
  2. Goldman Sachs: P2P Vacation Rental Survey
  3. Ryerson University: Why Tourists Choose Airbnb Over Hotels
  4. Forbes: Are business travelers using Airbnb?
  5. AirDNA: The Best Places to Buy a Vacation Rental Home in 2018
  6. IPX 1031: Do Airbnb guests trust their hosts?

Contact

Clever Real Estate

6358 Delmar Blvd suite #300

Saint Louis MO 63130.

E: thomas@movewithclever.com

P: 1-833-2-CLEVER