The Impact of AirBnb on Hotels and Hospitality Industry

The emergence of multi-sided technology platforms, collectively known as the “sharing economy”, has enabled individuals to collaboratively make use of under-utilized inventory via fee-based sharing. Consumers have so far enthusiastically adopted the services offered by firms such as Airbnb, Uber, Lyft and TaskRabbit.

The rapid growth of peer-to-peer platforms has been aided by their ability to scale supply in a near frictionless manner as well as the rich selection of goods and services they have on offer. As an example, Airbnb, a provider of travel accommodation and a pioneer of the sharing economy, has served over 30 million guests since it was founded in 2008.

Although Airbnb remains privately held, its valuation of over $10 billion now exceeds that of well-established global hotel chains like Hyatt. Yet incumbent firms, despite both facing higher marginal costs and offering less personalized products than peer-to-peer platforms, have mostly downplayed competition from platforms like Airbnb

AirBnb has quickly become a threat to hotels as travelers choose to book with independent hosts on the website rather than with traditional hotels. While every hotelier is aware of the threat and stiff competition that it poses, do you know the quantifiable impact the vacation rental site actually has on the industry as a whole?

Recently, the Hotel Association commissioned a report by HVS Consulting & Valuation on the financial effect of Airbnb on the hotel industry. The report focused on the effects in New York City, so results may vary in different areas, but it gives strong indication about what is happening and the impact is great on the hotel industry not only in NY city, but it widely spreading allover USA city and other countries outside the USA territory.

HVS estimated that hotels lose approximately $450 million in direct revenues per year to AirBnb.

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