4 April 2018 | Andrew Sanders
Hotels vs. Short-Term Rentals: Who's Winning the Tech Race?
Although short-term rental bookings through companies such as Oakwood, Bluegreen, and Airbnb have increased in recent times, do they truly pose a significant threat to traditional hoteliers?
The nature of the answer seems to depend on who you ask. However, one thing is certain: the growth of short-term rental companies should not be ignored. However, instead of viewing these offerings as trouble, it's wisest for hotels to up their game to improve the guest experiences that make them stand above alternative rentals, while simultaneously adding the most useful new technologies to enhance the customer journey further.
So, how much market share have short-term rental companies captured? As an example, a report from hotel industry research firm STR indicates that Airbnb's supply in Tokyo tripled over the 12 months ending in July 2016, in comparison to the hotel growth rate of 3.2% for the same period. However, although Airbnb's growth rates are very high, it's essential to note that "Airbnb data starts at a low base - hence, high growth rates." In other words, the early expansion numbers that these companies are achieving are not likely to be sustainable in the long term. Another important statistic is U.S. occupancy rates by day for the top seven markets in the country, which found hotels selling 8 out of 10 rooms while half of Airbnb's inventory remained empty. Again, while short-term rental companies should not be ignored, their potential threat may often be overstated.
There's no question that hotels offer a multitude of services and amenities which are not found in short-term rentals. However, one of the challenges facing hoteliers is the rapid evolution of technology and changes in consumer expectations. In our mobile-driven world, people expect a seamless and personalized experience that is easily managed via their smartphones, laptops, and tablets. In fact, this has become so important that 70% of travelers say a hotel's website, app and other digital tools impact their decision to make a booking, according to a study by digital customer experience agency Magnani Caruso Dutton (MCD). Moreover, the expectations for superior technology offerings continue throughout a guest's entire stay.
One thing that Airbnb does an excellent job of is keeping close tabs on the complete user journey, with guests going through the discovery and booking phases, followed by both the host and guest leaving their reviews of the experience at the end. Of course, Airbnb and other companies using this model end up with a plethora of data, which can be analyzed and applied to improve the customer experience.
Airbnb recently added new tiers to its arsenal in an attempt to better compete with top level hotel brands. Airbnb Plus and Beyond by Airbnb are aimed at higher-end customers who want to experience alternative accommodations without lowering their standards. The Airbnb Plus tier promises homes that are verified for "quality and comfort," while Beyond by Airbnb is the company's luxury offering, built around the entire travel journey including hospitality, custom experience, and higher-end properties. Although it's too early to gauge the success of these products, it will be very interesting to see if they gain traction in the near future.
While hotels typically provide a far superior overall guest journey, many are struggling with underlying technology that isn't properly integrated into third-party and data management systems. Tech silos can significantly reduce the value of the data received, while also increasing the difficulty of adding new technological offerings into the mix. It's unquestionably important to add the tech that is most valuable, not merely to start using everything that's available. At the same time, developing a fully-integrated system for all of a hotel's operations is one of the keys to success, allowing for the most effective data analysis to illuminate the implementation of new technologies based on the specific desires of the modern traveler.