Airbnb is becoming a real threat to the hotel business in big US cities
admin | Jan 02, 2016 | Comments 0
Altogether, 2015 was a good year for the US hotel industry. For the month of November, US hotels improved on three key metrics: room occupancy, average daily rates, and revenue per available room, according to STR Global, a hotel industry research firm. Year to date, hotel performance is also up across the board. But in big US cities, Airbnb is making a more noticeable dent in the hotel business.
Airbnb’s US bookings are disproportionately concentrated in the top metropolitan markets, according to a report from Bank of America Merrill Lynch earlier this month. While the top 10 markets account for only 13% of bookings at traditional hotels, those markets make up 40% of equivalent bookings for Airbnb.
That distribution is important because it means Airbnb is also edging into hotels’ territory significantly more in those cities. Across the US, Airbnb represents only about 1-2% of hotel demand. But in some of those top cities, Bank of America estimates that Airbnb makes up closer to 5-7% of hotel demand.
The same is true on the supply side. Nationwide, Airbnb’s entire-home and -apartment listings are thought to make up 2-4% of the overall hotel room supply. But in the biggest US markets, those same Airbnb listings account for an estimated 8-15% of the hotel supply.
One city where the hotel industry has been particularly vocal about its Airbnb concerns is New York. In October, the Hotel Association of New York City released a report from HVS Global Hospitality Services that put Airbnb’s share of local demand at nearly 8%, and its share of revenue at 4.6%, or a “direct loss” to the hotel industry of $451 million from September 2014 to August 2015.
“There’s not one hotelier in New York City who wouldn’t tell you that this is a real problem for their business,” Shaun Kelley, senior research analyst for gaming, lodging, and leisure at Bank of America Merrill Lynch, said during a recent panel in New York City.
Airbnb has logged tremendous growth since its founding in 2008. Over the summer, the company closed a $1 billion funding round that valued it at more than $24 billion, and projected its 2015 revenue would climb to $900 million. The company also forecast hitting $3 billion in earnings before interest, taxes, depreciation, and amortization in 2020.
US-wide, that might still be the case. But the city-level data on Airbnb’s bookings makes that story a lot harder to believe.
Filed Under: Hotels
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