Summary
- Why it’s only a matter of time before Airbnb has a major impact on the U.S. hospitality industry.
- Starwood will experience growing pressure in the U.S. market from Airbnb.
- Airbnb and its peers will continue to take away room market share in the U.S.
If you haven’t heard of Airbnb yet, you will, as it’s positioning itself to be a major threat to Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT) and the hotel industry in the U.S. in general, providing a platform where those looking for a place to stay in major cities across America can find those offering to rent out their homes or single rooms in their homes.
Airbnb is also becoming an international threat as it is increases its presence in major travel destinations around the world, offering rentals in over 190 countries.
In the short term, the major threat will be in the U.S., as Airbnb offers over 1,000 rooms or homes for rental in numerous major cities – and that doesn’t include competitors or those people marketing their homes or rooms on their own.
The bottom line is: Airbnb, in and of itself, has the potential to change the way many people and companies rent rooms when traveling, and when including the potential of the competitive forces that will continue to grow as far as rooms available for rent, Starwood and its competitors face a trend that could crush the industry over time.
Airbnb
In this article, Airbnb is being used as a proxy for this growing industry.
When looking through the various homes or rooms offered by people on Airbnb, I was surprised at the variety available and the quality of those offered; that should be a concern for hotels, which tend to offer sameness in regard to rooms, with the exception being higher-end rooms.
Also of interest is, Airbnb also offers accommodations for business teams, which surprised me, as at the beginning of my research, I assumed this would be an area hotels would definitely have an edge in going forward, when competing against Airbnb.
Not only are there some stunning spaces to rent, but they include the amenities offered by hotels, including free WiFi and full kitchens, among other perks.
Challenge for the hotel industry
What surprises me most about this is I don’t hear a lot about the very real competitive threat the hotel industry faces with this new business model. The outward response of hotel executives tends to be one that they shrug off as not being of much concern to them.
Not only are thousands of people now offering nice rooms or homes for rent, but there is the strong probability that once more people hear about it, they will grow in numbers as they look for new ways to generate relatively passive income from their existing properties.
I also see the inevitable entry into this space by professionals who could buy up rooms and homes in order to improve them and offer them on the market. This could result in thousands of more rooms being put up for rent in the U.S.
The hotel industry can no longer look at what its peers in the existing business model are doing, as the entry into key markets of hundreds of homes in major cities is about to change the entire industry.
I believe those businesses not considering this a major threat will be caught by surprise and will scramble to adapt. By then, I believe, it will be too late.
It must be understood that the number of rooms or spaces that could be put on the market is almost limitless in large cities; anyone with a nice spare room or home could enter into this market and make more money on weekends, with less hassle than renting out a property on a monthly basis.
