Airbnb may cap hotel rates at US political conventions

NEW YORK (Reuters) – This year’s Republican and Democratic U.S. conventions could prove what hotels have long feared: They could lose a steady bargain to Airbnb and other home-sharing services.

Normally, hotels would take advantage of the combined 100,000 people expected to flood Cleveland for the Republican presidential nominating convention next week and Philadelphia for the July 25-28 Democratic rally.

But because of what hoteliers call “phantom inventory” from roommate brokers, they may not be able to get the convention week markups they’ve seen in the past, which could presage a trend. to the reduction of prices as a rental between individuals. grow.

Airbnb, which forecasts 5,400 rentals for the two political conventions, is also helping people find accommodation in Brazil in August for the Summer Olympics, the next big event to watch.

Jeremy Adkison, a 28-year-old Democratic convention delegate, said he decided to give Airbnb a try because he thought a hotel would cost too much.

The Emporia, Kansas resident paid $442 for a five-night stay at a townhouse near the convention site.

Hotel rooms are still available in Philadelphia, but at those higher rates Adkison was trying to avoid. The Marriott Courtyard Philadelphia, for example, offers rooms for $989 a night, triple its normal rate.

It is not excluded for what the trade calls a period of “compression”. These periods of peak demand, usually associated with a nearby event, contribute 25-30% to annual hotel profits.

Marriott International Inc. TUESDAY representatives did not respond to multiple requests for comment.

“Airbnb hurts the ability of (hotel) businesses to collect expensive nights,” said C. Patrick Scholes, general manager of lodging and leisure equity research at SunTrust Robinson Humphrey Inc. impact is difficult to quantify, however, he added.

Research firm TravelClick found that hotel rates in Cleveland and Philadelphia rose 20.7% for the 2016 convention months compared to the previous year.

That’s solid, but well below the 34.75% increase in Tampa, Florida, and Charlotte, North Carolina, during the 2012 convention months, according to CBRE Hotels, another research firm. .

In addition, the convention bump had intensified until this year. In 2008, hotel rates rose 23.25% in the host cities of St. Paul, Minnesota and Denver in 2008 and 15.75% in the lodging-rich cities of New York and Boston in 2004, CBRE said. .

Certainly, hotel companies are reporting dynamic convention activity for 2016.

The Loews Philadelphia Hotel is 100% booked, spokeswoman Jaimi Blackburn said, adding that most other hotels in the city and immediate area are as well.

The Philadelphia and Ohio industry associations said the two political parties negotiated rates early for many of their delegates, so hotels weren’t getting maximum prices for those rooms.

COMPRESSION COMPRESSION?

Airbnb has always been linked to big events. The company’s founders came up with the idea for homesharing after a design conference in San Francisco in 2007 led to full occupancy of all hotels there, and Airbnb introduced its platform. form in 2008 for the Democratic National Convention in Denver.

The sector, which also includes smaller companies HomeAway and FlipKey, has grown rapidly. About 10% of business travelers will use one of these services in 2016, up from 8% in 2015, estimates consultancy Atmosphere Research Group in San Francisco.

Last summer alone, Airbnb hosted 17 million guests worldwide, up from 47,000 five years earlier.

In the past, however, these services have not significantly affected squeeze periods, when hotels can charge premiums of 26% on average, according to Morgan Stanley researchers.

“That may have changed,” with the number of nights qualifying as a squeeze down 24% in the first five months of 2016 from a year earlier, analysts said.

UBS Group AG said the drop in squeeze nights, partly due to Airbnb, could cut hotel revenue growth rates by almost a third in 2016.

Of course, factors other than Airbnb’s impact are at play. New hotels are being built and a slowing global economy is likely to affect businesses’ ability to take advantage of downturns, a said Jan Freitag, senior vice president of industry data provider STR Global.

Analysts will soon be looking beyond US political conventions to the next big test of hotels’ ability to capitalize on a big event: the Summer Olympics in Rio de Janeiro, where Airbnb is an official accommodation provider.

Airbnb said 30,000 people used its service to find accommodations during the Games, while there are fewer than 60,000 hotel rooms in Rio.

Fear of the Zika virus or global economic weakness could keep travelers away from the Olympics, but the Airbnb effect is “a valid potential overhang” for hotels, said Tuna Amobi, analyst at S&P Global Market Intelligence.

“There’s a lot more alternative accommodation on offer,” Amobi said, “which probably wasn’t the case at the last Summer Olympics.”

(This version of the story removes an extra letter in Heather Somerville’s name from the reporting credits at the end of the story.)