In the market for accommodation, hotels have had a pretty good year but Airbnb is facing growing competition and regulatory pressure
No hotelier is taking the current good times for granted, witness the migration to asset-light strategies, but 2017 has been excellent for most major groups. The global economy has been growing well, business is better than expected and overall price prospects for 2018 look good - a rise of 3.7% according to Carlson Wagonlit Travel.
Yet, while upfront it is the trend towards ‘smart hotels’ that is getting publicity, behind the scenes the focus is on technology to cope with slowing growth. Hotel groups are moving corporate customers away from fixed, negotiated hotel rates and the trend is to go for dynamic pricing.
To appeal to the customers, beacon technology has become a favourite with hotel marketing teams this year. More groups are encouraging people to use their iPhones or Apple Watches to personalise and control their stay. Hilton Worldwide, for one, is now showing a video of guests sailing through reception with a few clicks, and then using apps to pre-set preferences like temperature, lights, and favourite TV channels or streaming services.
Hotel groups are moving corporate customers away from fixed, negotiated hotel rates and the trend is to go for dynamic pricing.
However, ‘smart hotels’ are also excellent for hoteliers hungry for data – the new industry maxim being that the revenue manager of yesteryear is the data scientist! As Joie de Vivre Hotels founder, Chip Conley has stated: “...if you have a lot of data scientists, you’re both able to find the right customer for you.” And with business getting tougher, and disruption growing, hoteliers need to know what the customer wants!
Words of warning
Warnings are coming from the likes of top global estate agency CBRE of slowing occupancy rate rises, in the US especially, with one factor being falling inbound travel numbers. It is forecasting a 0.1% US occupancy increase and a 2.3% rise in ADR, giving a 2.4% boost to RevPar. (RevPar grew at over 3% from 2010-2016.) CBRE is also going for a gain in new US lodging supply of 2%, above the long-term rate of 1.8%. With hourly wage rates currently increasing at over 4%, it adds, “you can see the math becomes challenging”.
Generally, hoteliers can take comfort that internationally prospects for prices, at least, still look good.
In the UK, too, commentators are being downbeat about prospects – lower sterling being offset by the dampening effect of Brexit on business travel. Consultants PwC says they “don’t expect growth in 2018 to match 2017...” They still see the industry moving “upwards and onwards”, but at a slower pace. Occupancy is forecast to rise by 0.2% and RevPar by 2.4% against 2017’s 2.3% rise in occupancy and 6% for RevPar.
Generally, hoteliers can take comfort that internationally prospects for prices, at least, still look good. The Global Business Travel Association forecasts rising prices across EMEA, with 6.3% in Western Europe, 6.6% in Eastern Europe, although only 0.6% in the Middle East and Africa. It expects a 3.5% rise in Asia Pacific (though Japan is expected to fall by 4.1%), and a fall of 1.2% in Latin America.
Airbnb up against it
Online private accommodation aggregators continue to flood the marketplace with new inventory, despite the resistance from hoteliers and those living in many US and European tourist cities. Yet, while Airbnb has been the headlined target of letting restrictions, the competition is rising fast. Analysts at major US investment bank Morgan Stanley have lowered their forecast for Airbnb’s market share, also suggesting that alternative accommodation growth may be plateauing.
Morgan Stanley is now expecting Airbnb to reach 6% of the global accommodation market by 2020, compared to its last year’s forecast of 9%
Morgan Stanley is now expecting Airbnb to reach 6% of the global accommodation market by 2020, compared to its last year’s forecast of 9%. In 2017, Airbnb could have notched up as much as $2.8billion in sales, up by around 65% from a year earlier. Chief among Airbnb pitfalls are these regulations ensuring guests’ safety and, increasingly, the need to fend off the OTAs. Last week, according to Agence France Presse, reported that the City of Paris is threatening to take the company to court if it does not delist hundreds of apartments whose owners have failed to register with the capital's authorities.
In response to its troubles, Airbnb is seeking to expand into areas less sensitive to over-tourism. Its co-founder, Nathan Blecharczyk, was quoted last month, in online magazine China Money Network, as saying that China would be its largest source of new business by 2020. Yet this comes amid fierce local competition: in November Xiaozhu.com, a Beijing-based short-term vacation home sharing platform, raised $120 million, following on a $300 million October fund-raising for by another short-term holiday rental platform, Tujia.com.
Perhaps to show it has got the message, while maintaining that 2018 will be its “best year ever”, Airbnb has just published its 2018 accommodation booking trends. Korea and Vietnam appear high up its list of countries showing the most gains, and trending homes lead with nature lodges (up 700%), ryokans (600% growth) and yurts (up 155%)!
June 2018, London