Hotel Chains Adopt Room-Sharing Strategy

By Razvan Cimpean

It was just two years ago that Share Better SF—a coalition of landowners, housing advocated, neighborhood groups and unions— proposed that San Franciscans decide whether or not to restrict short-term rentals. Proposition F, also referred to as the Airbnb initiative, was defeated 55 percent to 45 percent. However, hotel chains still strive to find a new strategy to combat room-sharing platforms such as Airbnb, this time by adopting their model.

Increasing growth

According to a 2016 Morgan Stanley report based on a 4,000-response survey (U.S., UK, France and Germany consumers), Airbnb presents an increasing threat to hotels, even greater than expected. Not only this, but the report also suggests that Airbnb will negatively impact a hotel’s ability to keep the same rates and occupancy. In 2015, a survey conducted by the global financial services firm showed that 12 percent of leisure and business travelers have used Airbnb. The company also predicted that adoption would reach 18 percent by the end of the following year. In the second edition of the report, published in November 2016, Morgan Stanley researchers note that “Airbnb usage has increased more than we thought it would and cannibalization of traditional hotels has also been higher.”

For this year, Morgan Stanley estimates that about 23 percent of business travelers and roughly 25 percent of leisure travelers would use Airbnb. That’s almost double compared to 2015, and adoption is projected to grow. However, the 2015 report stresses that while only 7 percent of Airbnb users stay one night, only a quarter of traditional hotel users stay that amount of time. This difference suggests that, while traditional hotels have been affected by Airbnb’s growth, their business model attracts different types of customers.

Buying the competition

It comes as no surprise that hotel chains are trying different methods to combat the growth of room-sharing platforms. In 2015, HyattHotels invested in onefinestay, a luxury alternative accommodation company, but was forced to sell its shares following news of AccorHotels’ acquisition of the hospitality company. Accor also took full control of Squarebreak, the operator of secondary homes, and purchased the private vacation rental platform Travel Keys. In the end, the French multinational hotel group will combine its rental brands under one name. In return, Hyatt Hotels announced this August it is investing in Oasis, the holiday home rental company. Previously, Accor was an investor in the platform. Oasis is expected to benefit from Hyatt’s distribution and to implement the Hyatt loyalty program.

Last April, AccorHotels paid $168 million for onefinestay and planned a large geographic expansion. However, 2016 was not a great year for the luxury rental brand, which only reported a 7-percent revenue growth year-over-year, reaching $22.3 million. However, onefinestay lost $37.3 million the same year, 73.5 percent more than in 2015. This speaks to how Accor’s decision to acquire onefinestay is a long-term investment more than anything else.

It is too soon to say whether hotel chains’ attempt to reduce home-sharing platforms’ impact on their revenue through the acquisition of or investment in Airbnb-like companies will be a successful move or not. One thing, however, is clear. Traditional hotels no longer remain indifferent to the growth of room-sharing websites, even if this means buying the smaller and unprofitable ones.