Everything hoteliers need to know about the alternative lodging industry in 2023
Alternative accommodation options, also known as short-term rental properties or “Airbnbs”, have grown in popularity in recent years and are increasingly seen as a viable alternative to traditional hotels. As a hotelier, it is important to be aware of this new neighbor, its value drivers and its KPIs in order to stay competitive and attract a diverse clientele to retain or gain market share.
Grow in number
The alternative accommodation industry has seen exponential growth in the supply of properties over the past few years. Europe is the strongest market with over 6.5 million properties offered for short-term rental. North America is currently at about half that number with 3.3 million listings, but this market is growing rapidly in various states.
Looking at US cities like Austin, Houston, Las Vegas, and Miami, we see rapid growth with more than 25% increase in listings from 2019 to present. This brings the total number of registrations in these cities well above the 10,000 mark. Comparing 2019 levels to current levels, we see the strongest growth in France (+22%), Belgium (+ 16%), in Great Britain (+12%) and in Spain (+12%) for Europe. Keep in mind that European markets were already strong in numbers in 2019. Alongside this, Airbnb has made leaps and bounds in its support and assurance for hosts since its inception. As a result, fewer Airbnb hosts show up each year.
It’s not all rainbows and butterflies though in the world of short-term rentals. In some cities or countries, local governments are developing stricter regulations regarding short-term rentals, as they correlate growth with rising rents and housing shortages for the local population. In Amsterdam, the Netherlands, for example, properties can be rented for a maximum of 30 days per year and even then strict registration and operating rules apply. As a result, we saw an 18% drop in supply in the Netherlands. In New York, US landlords must be present, which means it is only possible to rent shared accommodation as a guest. The supply of goods has decreased by 26%.
Compete for the same guest
Hotels and alternative accommodation establishments compete to attract customers in the short-term rental market. Both types of accommodation offer travelers a place to stay while on vacation or on a business trip.
However, there are key differences between the two types of accommodation, which can make them appealing to different types of travelers. For example, hotels are often more expensive than rental properties and offer a range of amenities and services, such as a swimming pool, fitness center and on-site restaurant. Short-term rentals, on the other hand, can be more economical and offer a more unique and local experience. As a result, hoteliers and Airbnb hosts may be competing for the same group of travelers, depending on location, property type, budget, purpose of travel, and length of stay. The overall average length of stay for Airbnb bookings has varied between 4 and 5 nights between 2019 and today.
Alternative accommodation options have been popular with vacationers for some time, but they are also becoming more popular with business travellers, especially those looking for accommodation for longer stays. Leisure travelers or business travelers who combine leisure activities with their business trips may be more interested in short-term rental accommodations than hotels for a variety of reasons. The cost-effectiveness of these options could be particularly appealing to those who will finance a longer stay out of their own pocket. Additionally, business travelers appreciate being able to book a fully furnished apartment or house, as it allows them more space and flexibility than in a traditional hotel room. This is becoming quite an asset as more and more people have the ability to work from anywhere and for longer periods of time.
Additionally, Airbnb’s partnerships with companies such as Concur and TravelPerk have made it easier for companies to book and pay for Airbnb listings through their corporate travel programs.
Become professional quickly
The alternative hosting industry is rapidly professionalizing. One factor that has contributed to the professionalization of the market is the rise of online platforms, such as Airbnb and HomeAway, which make it easier for owners to list and rent their properties.
Airbnb just reported its most profitable quarter at the end of Q3 2022 with total revenue of $2.9 billion. This is a 29% increase in revenue from the third quarter of the previous year, which was again breaking records at the time. Platforms like Airbnb often have strict guidelines and regulations for hosts, which has helped improve the overall quality and professionalism of the market. Initiatives like Airbnb’s AirCover reassure travelers and hosts that they’re protected in case something doesn’t go as planned. Alternative accommodation options can also be found on more hotel-centric platforms such as booking.com or expedia’s vrbo.
Additionally, many alternative accommodation providers now hire professional management companies to manage the day-to-day operations of their properties. These companies manage hundreds or even thousands of properties in various locations and take care of tasks such as marketing, reservations and property maintenance, which can help improve reliability and quality of experience. client.
You can expect to see the lines between alternative accommodation options and more traditional forms of accommodation like hotels blur even more over the next few years.
The price of a hotel room and rental property can vary greatly depending on the location, size and amenities of the property. Generally, hotels tend to be more expensive than rental properties, but that’s not always the case. Keep in mind that short-term rentals often charge guests a separate service and cleaning fee per stay, making properties more economical for longer stays.
Alternative accommodation property managers are also implementing dynamic pricing strategies for their listings. Worldwide, 55% of properties have a dynamic price. Another 18.5% of building owners/managers say they want to start implementing dynamic pricing strategies this year. 75% of landlords use or plan to start using technology solutions to do this, making the short-term rental industry a technology-savvy industry.
High occupancy and early pick up
The drastic increase in the alternative accommodation offer could lead to lower occupancy, but the data tells a different story. If we look at Airbnb occupancy for the current winter months of December, January and February and compare to 2019 levels, we see a 96% increase in occupancy of alternative accommodations. For hotels, we are still seeing a slight decline from 2019 levels.
We’ve been doing a lot of research lately on hotel booking models versus Airbnb. We find that, for most destinations, Airbnb pick-up follows a similar curve to hotel reservations, but reservations are made much earlier. We call this the hotel pick-up delay. This makes alternative accommodation support an excellent early predictor of hotel demand.
One explanation for the hotel pick-up lag could be that Airbnbs has some uniqueness (location, amenities, experience) that could drive potential guests to book early in response to perceived scarcity. Hotels, on the other hand, have more predictable availability and plenty of rooms, which could make them a more popular choice for last-minute bookings.
What hoteliers can do in 2023
- Understand your competition and your competitiveness – Research Airbnb properties in your area to get an idea of the types of properties, prices offered, and availability over time. This can help you understand how your hotel compares to this new competitor and identify potential threats.
- Know your target market – Determine who your target market is and what they value in a home. This can help you adapt your offer to better meet the needs of your customers and make your hotel more competitive.
- Offer unique experiences – Consider what makes your hotel unique and how you can differentiate it from Airbnb properties in your market. This could include offering unique experiences or amenities that Airbnb properties cannot match. It’s more and more important
- Take advantage of technology – Use technology to understand the market alternative lodging industry at the individual property level. Build a strong online presence and leverage data to optimize price and demand. This can help you attract more bookings and stay competitive in the market.
About OTA Insight
OTA Insight empowers hoteliers to drive smarter revenue, distribution, and marketing results through its market-leading commerce platform. With live updates, 24/7 support and highly intuitive and customizable dashboards, OTA Insight integrates with industry tools including hotel management systems, leading RMS solutions and data benchmarking providers. OTA Insight’s team of international experts supports over 60,000 properties in 185 countries. Winner of the Best Rate Shopping & Market Intelligence Solution, Parity Management Software and Business Intelligence categories in the 2021, 2022 and 2023 HotelTechAwards, OTA Insight is widely recognized as a leader in hotel business intelligence.