by Steven Richmond
April 19, 2017
A great deal of electronic ink has been spilled in recent years over the threat Airbnb poses to traditional hotel operators. Pundits often draw on the effects of ridesharing services on taxi companies to support claims that home sharing services will be the death of hotels. So US hotel operators are near collapse in the face of this inevitable march of progress, right?
Not so much. While 2016 wasn’t the best year for US hotels, several key industry metrics actually moved favorably. While many operators saw room occupancy rates decline slightly for US rooms, this was generally outweighed by growth in average daily rates (ADR), boosting revenue per available room (RevPAR – a composite of occupancy rates and ADR). The leading market participant, Marriott International, actually reported across-the-board improvements in occupancy rates, ADR, and RevPAR for its North America operations.
So why isn’t Airbnb killing US hotels? The company loves to tout its large number of worldwide listings (at the time of writing, more than 3 million). Marriott, by comparison, claims about 1.2 million hotel rooms globally. This comparison requires some additional context, however. A much higher percentage of Airbnb’s inventory is international than is the case for many leading hotel chains. Almost 64% of Marriott’s rooms are located in the US. For Airbnb, that share is less than 20%. Coupled with the fact that Airbnb sees much lower occupancy rates than traditional hotels, it quickly becomes clear that Airbnb has a ways to go before it catches up to its leading competitors in the US market.
There is also something to the argument that Airbnb and hotels are less than perfect substitutes. Many Airbnb listings – most prominently, those classified as shared rooms – aren’t really comparable to a hotel stay and aren’t likely to appeal to your average hotel-staying traveler. Rather, they appeal to an entirely different market: the ultra-budget-conscious traveler, who without the option of a low-cost homestay probably wouldn’t be traveling.
Even when the accommodations are reasonably comparable to hotel, there is evidence that Airbnb and traditional hotels serve different markets. For example, Airbnb has yet to make significant inroads with business travelers. Hotels, which usually offer amenities such as conference rooms and locations near business districts, better meet the needs of these travelers.
For additional information and analysis of US industry trends, see Lodging Services: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group. The report also includes numbers and analysis covering US lodging service revenue by category of establishment for 2006-2016 with projections to 2021. Establishment segments include:
While you’re there, check out some of our related reports, which include Amusement Parks: United States, Gambling: United States, and Travel Services: United States.
About the Author
Steven Richmond is a Market Research Analyst for Freedonia Focus Reports. He holds a dual degree in economics and international affairs, with experience as an analyst covering multiple industries.
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