I came home from walking the dogs the other day to find a notice left on my door by my estate management. I sometimes feel they’re there to keep me in my place rather than keep people out.
Anyhow, the gist of the memo was to tell me that they’d discovered that at least one of the residents had done some illegal partitioning and was illegally subletting their place and that it was illegal to sublet our place for a period of less than six months. There were a lot of illegals in the memo.
In Singapore, there’ve been increased rumblings of people renting their places through sites like Airbnb and Travelmob and I hear there’ve been lots of private meetings held between the Singapore Tourism Board and these companies to sort out the grey areas.
Around the world, authorities are all figuring out what to do with the rise of the sharing, P2P, collaborative economy, whatever you may call it. It’s really about People Power and regimes are all struggling to deal with this grey economy.
Credit: Momente, Shutterstock
What’s not grey is the rise in the numbers of people who want an alternative to staying in hotels. The idea is not new really. There’s always been the traditional bed and breakfast – I’ve had wonderful experiences staying in B&Bs in New Zealand and Britain.
In Paris recently, I chose to stay in Citadines, a service apartment brand owned by Ascott Hospitality, and increasingly, I find them the way to go in cities. As travellers become more savvy and confident on the road, you don’t really need all the services of a hotel to make you feel safe and comfortable.
Citadines St Germain
The Citadines at St Germain des Pres has a great location on the Left Bank and really, you can walk to any of the major attractions from here. You get wifi in the room (limited to two devices though) and a little kitchenette for those jet-lag time snacks. The entire staff acts as your concierge should you need anything. It’s not as formal as in a hotel.
B&Bs and service apartments however still fall within what is recognised as hospitality and operate within a certain set of rules. What Airbnb has done is scale the entire sector of private rentals – what took a company like Hilton maybe 40 years to build, it took four years to build. It now has 800,000 accommodation listings and has served six million guests.
More and more, I am meeting younger people in Asia who prefer this alternative way of travelling and have stayed in rented homes/villas. And it is in Asia that companies like Airbnb and Homeaway are targeting for their next phase of growth.
This growing segment of travellers is what PhoCusWright calls “The New Gen Renter”. Its report on “Share This! Private Accommodation & The Rise of The New Gen Renter”, released this June, said that in the US, traveller use of private homes and apartments has risen from 8% of travellers in 2010 to 14% in 2013.
These were the other findings:
- Private accommodation renters are young – more than half are under 35.
- A new generation of private accommodation renters, or new gen renters (NGRs), represent 31% of all rental travelers. These renters are young (18- 34) and early adopters of new technology.
• More than half of NGRs (53%) are male.
The hospitality industry has of course been concerned about this trend and a report, “Airbnb – a hotel threat or opportunity” prepared by UBS Evidence Lab, which surveyed hoteliers as well as Airbnb guests, said that “hotels most at risk are ‘economy and budget’ and those with low business mix”.
I share the key findings here.
“In general, based on our UBS Evidence Lab study, we expect an impact from models such as Airbnb’s on hotels that do not offer a competitive service. In terms of those hotels most at risk from the Airbnb model, we see those with low business mix exposure and a high percentage of ‘economy or budget’ rooms as most vulnerable. Hoteliers should be vigilant, given the relatively high awareness of Airbnb and the conversion rate from site visit to booking that we found.”
The UBS report estimated that Airbnb generated over US$2 billion in system sales from travellers. It said some respondents’ reasons for using Airbnb are difficult to counteract – social accommodation, wide selection, new concept – but asked if this strong growth could be an opportunity?
Could shared accommodation open up markets, as low cost airlines did for aviation? Could it be an additional driver for hotel investment and innovation? And 58% of respondents did say they wouldn’t book accommodation from a private host.
Respondents’ top reasons for using Airbnb were 1, price, 2, offers shared accommodation and 3, unique accommodation offered. The conversion rate (site usage to booking) was at 60% compared to hotels’ 51% for leisure and 41% for business (hotels 54%). There was also high Airbnb site usage satisfaction rate – 4.3 out of 5.
A study by the Boston University School of Management, which looked at the impact of Airbnb on the hotel industry in Texas, showed that a 20% increase in Airbnb listings would impact hotel revenues by 1%.
The UBS study said it found “some complacency” among some hotel managers but “we’re likely to see a greater response from the hotel industry to the threat from Airbnb (and shared accommodation in general) than we have seen hitherto, as more and more react to the threat”.
While it says it sees local regulatory risk as a key threat to Airbnb, the study said, “Nevertheless, we think Airbnb could respond by arguing that the guest spend likely benefits a broader spectrum of the local community. Hotels could use regulatory issues to pressure cities and government to legislate and enforce laws against shared accommodation.”
As a “New Gen Renter”, and as someone who owns a private apartment that could be listed on sharing sites, I think the hotel industry should see this as an opportunity rather than a threat. Nothing good ever comes from holding back the tide of change, especially one as big and democratic as this movement.
It’s the way the world is going, it’s what some customers want. I hear of some hotel groups that are looking to list their inventory on these sites – think about it this way. In the past, hotels listed their inventory on OTAs such as Expedia and Booking. Now they can also list on these new gen sites. It’s another channel of distribution.
Everyone wins, especially the customer.
