The travel industry is being disrupted. First there were the budget airlines which made it possible for an increasing number of people to travel who would never have been able to before. But these budget travelers needed a place to stay in when they got to their destinations — and five-star hotels and old-time backpacker hostels were not going to cut it for them.
At the forefront of the disruption is the seven-year-old Airbnb — an online marketplace where people can book (or list) their homes, apartments, castles, what-have-you — which is now reportedly worth more than $25 billion according to a CNN Money article.
According to a company release, it now lists two million accommodations in 34,000 cities, with the Asia Pacific corridor being its fastest-growing region.
“APAC (Asia Pacific) is the fastest growing [region] for the company… [there’s been] a 400% growth in the past year from an inbound basis and about the same 400% outbound as well,” said Julian Persaud, regional director (APAC) for Airbnb, during the Oct. 20 Web in Travel (WIT) conference held in Singapore.
He added that China is the fastest-growing country, having had a 700% increase in outbound travels in the past 12 months.
“We’re seeing more and more independent travelers,” he said before explaining that the trend is most likely because of the “millennial state of mind” which focuses on independence and free-thinking.
There are currently around 9,000 Airbnb listings in the Philippines, said JJ Chai, regional director for Southeast Asia, during the launch of their partnership with local telecommunications firm, Smart Communications, on Oct. 29. The listings are located mostly in Metro Manila and tourist destinations such as Tagaytay and Palawan, with a rising number cropping up in locations such as Davao.
During the Singapore conference, Mr. Persaud said that the company is gaining traction in the business travel sector, estimating that 10% of Airbnb bookings are for business travel. These are business travelers who stay in their destination for a week or two, who therefore might find the need to rent something with a kitchen or who would like to live like a local for the duration.
The San Francisco-based company, which has both a web site and an app for mobile phones, has seen a shift to mobile users, with Mr. Persaud reporting that 33% of end-to-end reservations are now done through mobile (mostly from the app) when it was 20% last year.
HOTEL SUBSTITUTES?
“We don’t position ourselves that (modern-day hotel company) way. I don’t think we’re substitute for hotels. It’s generally a different experience,” Mr. Persaud said of the concerns raised against online rentals drawing customers away from hotels.
“It’s not necessarily a substitute — we’re not trying to get all the people using Airbnb to not use hotels. I think what’s happening is that the overall pie is growing to an extent,” he explained before adding, “We offer a different experience: ours is about bringing guests and hosts together. Our focus is not on [being] hotels. It’s about great travel experiences… experiences on Airbnb tend to be more memorable.”
In a similar vein, Dan Lynn, vice-president of Asia Pacific for HomeAway (a vacation rental marketplace much like Airbnb, which boasts of more than a million listings), described this as being the early stages of the vacation rental industry moving from offline to online.
“I think HomeAway is squarely focused on families and groups and we feel the ‘home away’ experience is a much better way for a family or a group to travel than maybe staying in interconnected hotel rooms,” he said during the WIT conference on Oct. 20.
He added that with the kind of service they offer, they don’t think they are a threat to the hotel industry as “there is a need for this type of travel” and “it encourages more travel.”
“You can’t build hotels fast enough,” he remarked on the rising demand for travel and consequently, accommodations.
Statistics portal, Statista.com, said that the global hotel industry had a revenue of $457 billion in 2011 and is expected to reach $550 billion in 2016. (http://www.statista.com/statistics/247264/total-revenue-of-the-global-hotel-industry/)
CONFIDENT HOTELIERS
Meanwhile, some hotels are dismissive of alternate accommodations’ effect on the industry.
“I strongly do not believe that they are a major threat to the core value proposition we have,” Hilton CEO Christopher Nassetta said in a CNN Money report posted on Oct. 28.
He added that Airbnb will find it “extremely hard… to replicate what we’re doing,” which includes amenities that a lot of hosts do not provide on the service — though he admitted that they are “keeping a watchful eye” on the disruptor.
There are those who do not share his sentiment. The Hotel Association of New York City (which includes brands such as Hilton and Starwood Hotels), said that the Airbnb, in particular, is hurting the city’s hotel industry. Its commissioned report showed that in the past 12 months until Aug. 31, 8% of the total rooms rented are Airbnb locations, making $451.4 million in gross revenue. This number will jump to $805.3 million in 2018, according to a Bloomberg report on Oct. 31. The HVS Consulting and Valuation report (made in behalf of the association) also pegged “economic losses to the city at $2.1 billion including $76.5 million in lodging taxes.”
“Obviously, some of the revenue that would have gone to the hotel industry is now going there,” Vijay Dandapani, chairman of the association, said of Airbnb in the Bloomberg report.
“They’re a de facto hotel company with none of the regulation that every hotel has to comply with,” he added.
AT YOUR SERVICE
Meanwhile serviced residences have found ways to co-exist with the up-and-comers in the hospitality industry. In August, Reuters reported that CapitaLand, Ltd., the owner of the Singapore-based Ascott, had led a consortium of existing investors to invest $50 million in the Airbnb-like Chinese company Tujia.com, with the addition of a $40-million joint venture to operate serviced residences in China. It is aiming to increase its units in the said country by 6,000 in 2020 from the 14,000 it currently owns.
“We have certainly taken the stance of embracing a shared economy… we really do see it as a complement and as another distribution channel of our type of product (corporate housing or serviced residences), and leveraging that form of platform,” said Craig Ryan, managing director (APAC) for Oakwood Worldwide at the WIT conference.
“We have moved beyond the traditional brick-and-mortar to establishing our own marketplace whereby we have a network of supplies of our own branded product,” he said
Speaking to Travel Daily in September, Mr. Ryan talked about the positive influence of the service while also noting that concerns regarding security should make guests act with caution, as “Airbnb have limited ability to apply due diligence,” though he lauded the company’s efforts to push governments to develop guidelines for the industry.
“It’s pushing us to think outside the box. It’s a good thing for the consumer; it brings more product in cities that may be restricted. And because of the price point it may be even encouraging more people to travel,” Mr. Ryan asserted.
“Airbnb is here to stay. We encourage further focus on the accommodation sector as a whole, and if more people are travelling then every sector of the market will get their share,” he said.
