Research results show the real threat to the hotel industry from Airbnb

Since the entry of Airbnb into the hospitality industry in 2008, media attention has largely focused on the disruptive nature of the service. Industry reports, as well as lively debates at hotel, travel and tourism conferences, have kept the spotlight on Airbnb’s growth and success. But despite all this attention, we still know little about its real impact on hotel sales.

In a recent publication in the International Journal of Hospitality Management, Dr. Manisha Singal (Virginia Tech University) and Dr. Jonathan Templin (University of Kansas) examined how Airbnb supply, price, and perceived quality affect the sales performance of incumbent hotels in the San Francisco market. In particular, they explored the impact of the development of Airbnb supply and users’ satisfaction on hotel sales patterns, and whether different hotel segments have been affected by Airbnb’s entry.

The findings revealed that:

Total Airbnb volume does not impact RevPar

Total Airbnb listings (i.e., total inventory) do not impact the growth trajectory of hotel RevPAR, which confirms the argument that Airbnb’s offering a supplementary service. These results are also consistent with a 2017 report on the Airbnb effect in Boston, and with an STR 2017 study of 13 global markets. However,

The average price of an Airbnb offer can have an impact on RevPAR

And that impact varies across different segments of the industry. Airbnb property prices had a positive effect on hotel RevPAR: the higher the price of the rentals posted on the platform, the higher the RevPAR of the hotels. Also,

• The increase in the quality of the Airbnb service has a direct adverse impact on hotel performance. The higher the average satisfaction score of an Airbnb property, the lower the RevPAR for the hotels in the sample.  More specifically, every increase in the review score of an Airbnb property had a negative impact of -$25.54 on hotel RevPAR for hotels in the sample. Finally,
• This last effect varies across segments. Airbnb rental prices had an effect on hotels’ RevPAR in the luxury segment, with an increase in RevPAR of $0.651 for every dollar increase in the average rental price of the Airbnb units.

In conclusion

Not just a supplement: The study reveals that Airbnb’s listings/offers do not merely supplement the lodging market, but rather show substitute characteristics in their long-term effects on hotel sales’ patterns.

Customers make comparisons: The effect of Airbnb on hotels sales is intricate, and appears to be based on customers’ dynamic comparison of the price and value offered by the two products.  The research results imply that guests do consider both products when booking rooms and compare the benefits of each through user reviews.

Signs of disruption: The results provide empirical evidence that Airbnb will disrupt the hotel business, and that the more Airbnb users are satisfied with their experience, the more likely it is that demand for hotel rooms will decrease. Hotel managers therefore need to be aware of the level of service and price offered by Airbnb and other sharing platforms in their market.  Airbnb offers in their locality can no longer be ignored and should be considered when developing revenue management strategies.

Airbnb is slowly disrupting the lodging industry, going beyond the supplemental role claimed by its founders.  The impact of the sharing economy is not related so much to the volume of the offers on the platform, but rather on the pricing and price-to-value proposition as perceived by guests.

Read more at ehotelier.com

RELATED TOPICS: Greece, Greek tourism news, Tourism in Greece, Greek islands, Hotels in Greece, Travel to Greece, Greek destinations , Greek travel market, Greek tourism statistics, Greek tourism report

Photo Source: pixabay.com