by Randy Hulce
Rich, first, let me remind you that I am a big fan of yours and always find your Siegel Sez observations, musings and expert commentary enlightening and entertaining. However, I would like to address your recent comments regarding Airbnb, the porn filming (which happens every day in hotels) and the destruction of a home by Airbnb “guests.” While you do fairly point out that such incidents are “isolated” when compared to the millions who successfully utilize Airbnb, you may have unintentionally spotlighted and therefore exaggerated a fear that most hotel investors, owners and operators are happy to believe in – that Airbnb is a terrible thing, unregulated, not safe, your home will be destroyed, they are not paying their responsible share of taxes, etc. I agree with you, these isolated incidents “make me wonder” too. Yet playing to fear by highlighting a couple of statistically insignificant horror stories will indeed provoke a negative response and color the debate with a deeply tarred brush. But beyond that, I wonder what?
Airbnb, like Uber, and many other forms of the “sharing economy” are here to stay. Airbnb is this era’s equivalent of something that all the major hotel brands fiercely fought years ago – OTAs and the game changing nature of channel distribution of hotel demand. That fight was futile as otherwise brand loyal consumers embraced the change with a rapidity not to that point before observed. Likewise with today’s consumer acceptance of Airbnb – as indicated by its growth and market cap value – which at an estimated $10B exceeds all but a couple of the largest global hotel brands. At each of the conferences I have attended in the past several years, Airbnb is a big topic of concern, addressed with few words other than to describe it as a bad thing that needs tough regulation to ensure it becomes a true “level-playing-field-competitor.” While that may indeed be desirable, I would caution ignoring the reality of the Airbnb supply on the economic demands and desires of the traveling consumer, while asking – and waiting for the government to provide more regulation. And because Airbnb rentals don’t report to Smith Travel Research, the sound of one hand clapping of an operator who celebrates over penetrating its non Airbnb populated competitive set, can be severely muted.
For example: I recently attended a destination wedding that was to take place in a globally branded resort hotel. Hotel management refused to negotiate a slight discount for a wedding block of 40+guest rooms. The millennial and technologically comfortable bride and groom to be, promptly found on Airbnb, superior accommodations at nearly half the rate, literally adjacent to the hotel. The loss of room and food and beverage revenue was of course significant, but was in fact compounded by the failure of the hotel operator to accurately forecast their demand. As the day of the wedding arrived, the hotel was stuck with unsold inventory, which they subsequently dumped into Priceline and Hotwire at rates far less than what would have been an acceptable wedding block rate. The failure to acknowledge Airbnb supply forced this operator to make a strategic error. The result may actually be apparent with a reported decline in the STR Weekly Revpar Index but will indicate so relative only to its uniquely selected comp set, which leads an operator to conclude that someone in their comp set did something better than they did, when in fact, it was a “non competitor” that impacted their performance.
As to the Airbnb experience – it was excellent. A very professional property manager greeted us, escorted us to the rental unit, demonstrated how everything worked, guided us around the facility’s amenities and advised us about neighborhood attractions, restaurants, stores and pharmacies. We enjoyed the free Wi-Fi, the pool and fitness facilities, the ease of public transportation, the views, the extra space, the fully equipped and stocked kitchen, washer and dryer and much more. Previous travelers had signed a guest register, left books behind from all over the world (different languages) and overall gave us a feel of global connectivity with our fellow man we wouldn’t perhaps have gotten from a typical hotel stay. Our experience was wonderful, and as a hotelier for over 35 years, I am left to sheepishly say, I will use Airbnb again.
Was it a typical experience? I don’t know, but because of the general acceptance of peer review in social media and the obvious success of Airbnb globally, it is highly probable that my experience is statistically much more significant and likely than the negative stories of porn filming and property destruction that garners viral negative attention. My point is that by repeating the isolated negative incidents, we may be lending credence to a futile strategy of fighting the existence of a new competitive supply and distribution channel with a hope certificate strategy that bad things repeated often enough will make it go away (like in politics). Instead, it would be much more prudent to recognize the overwhelming global acceptance (and positive guest experience) and engage this competitor with well thought out pricing, marketing and operating options – those are the things that “make me wonder.” And unless others wonder and respond with sound economic sense, as with the OTAs of the previous era, the wave of change will likely swamp those boats that are poorly captained.
Wishing you all the best and thanking you again for allowing me the opportunity to ponder about the notions of inevitable change within our industry.
Editor’s note: Have an opinion? We welcome your comments. Contact Michelle Renn at firstname.lastname@example.org.