Is Airbnb a Threat?

NATIONAL REPORT—Which trends and threats will affect your company? That was the question Jamie Lane, senior economist, CBRE Hotels, explored in a webinar yesterday, presented in conjunction with Tambourine. Not surprisingly, Airbnb and the sharing economy was a major topic of discussion. So is it a threat?

“We’ve spent a lot of time studying Airbnb over the past year,” said Lane, acknowledging that the sharing economy has been around for a long time, but Airbnb has become the dominant player in the marketplace. “As we’ve thought about if it’s a threat or not, we’ve composed a competition index, where we look at three variables that we think are important to understanding Airbnb: the total supply compared to the total supply of traditional hotel rooms; the rate Airbnb is able to generate in the market compared to the rate of traditional hotels; and active unit growth—how fast is Airbnb growing in that market.”

The answer to whether or not Airbnb is a threat to your hotel? It depends. “The greater the percent of Airbnb in a market, the greater the potential competition,” said Lane, noting that Airbnb really dominates the space in the top 10 U.S. markets such as New York, Los Angeles, San Francisco and Miami. “What we found was the top five markets for revenue—New York, L.A., San Francisco, Miami and Boston—generated 55% of Airbnb’s revenue in the U.S. They’re very concentrated in top gateway city markets, and these are the markets that should be paying the most attention.”

Lane noted that it makes sense that the hotel markets with the highest RevPAR have generated the most Airbnb units coming into that market. “Airbnb operators are seeing profit opportunity and bringing those units online to satisfy it,” he said.

Airbnb premiums also make a difference. “As we break up the markets between where Airbnb is more expensive and less expensive than traditional hotel rooms, [the latter]is more of a threat,” he said. “That’s what we see in high-cost, high-ADR markets. These are where Airbnb offers a discount to traditional hotels.”

And, while the greater the growth, the greater the concern a hotel should have, Lane noted that it’s a different type of growth than traditional hotels. “As major events come to a city, Airbnb units increase to accommodate the special event and the supply disappears after the event. It’s very fluid supply and very opportunistic,” he said. “New supply does impact rates traditional hotels are able to achieve, [and]we could see that impact the amount of traditional hotel supply coming into the market. That could be a good thing [for existing hotels].” Lane noted that supply growth is one of the major factors that creates headwinds for hotels, and markets that have seen a lot of new supply—like Austin, TX; Pittsburgh, PA; New York, Houston and Albany, NY—were among the bottom markets for RevPAR growth in Q1.

“The fluidity of Airbnb supply suggests historic price premiums may not be realized during peak demand periods, but it also may be a potential opportunity for hotel owners and operators to provide services to Airbnb hosts and guests,” he added, noting that this could mean housekeeping, concierge services, or to act as a front desk where guests can retrieve their keys, among other things.

—Nicole Carlino