Airbnb, the room-sharing website with rooms in every city at low prices, has grown from a darling of the internet start-up scene into a global powerhouse. But is its presence a threat to hotels or a necessary, healthy injection of competition into the sector? Tom Vaughan reports
Next year it plans to overtake both Inter-Continental Hotels Group and Hilton Worldwide to become the world's biggest accommodation provider for travellers in terms of number of rooms available.
On paper, these are staggering statistics, but are Airbnb and similar online services such as Wimdu and One Fine Stay really poised to take a massive bite out of the hotel sector? And what can hotels learn from their emergence?
The appeal of these services is obvious, says hotel consultant Melvin Gold: "You can stay somewhere central that, on the face of it, looks appealing. You can match your look and feel to the place you are going to stay - if you want something classic, you can stay somewhere classic; if you want somewhere hip and trendy, you can find that, too."
Throw in prices that more often than not undercut hotel rooms, a user-friendly website and something Airbnb touts as the 'local' experience - the opportunity to pretend you are part of your destination's fabric, rather than a passing guest - and you have the basic allure of room-sharing sites.
Michael Levie, founder of CitizenM hotels, is one hotelier who feels the sites' presence in the market. "Their impact will undoubtedly affect hospitality - but that is difficult to assess in percentages," he says. "These are tough economic times and everything is slipping and changing, year after year. But I think there is no doubt that Airbnb has had an impact."
Recent studies back up this gut feeling.A January 2014 study by the University of Boston comparing revenue data from Texas cities where Airbnb operates with cities where it does not (or hadn't yet started operating), found that for every 1% increase in the number of Airbnb bookings, there is a 0.05% decrease in hotel revenue. It also found that small-scale, low-end hotels are most likely to lose customers to Airbnb, while those catering to business and luxury travellers have less cause for concern.
Popularity doesn't seem to be slowing either: in 2013, Airbnb reported more than six million new guests, while nearly 250,000 properties were added. The company is now worth a staggering $10b (£5.9b).
Yet despite these impressive figures, Michelle Grant, travel and tourism research manager at Euromonitor International, doesn't feel that Airbnb and similar sites are necessarily competing directly with the hospitality sector. "I'm keeping an open mind. I still don't believe it will be a major disrupter," she says.
"It's estimated that Airbnb did $2b (£1.18b) in bookings last year. The global hotel market did $480b (£283b) in room revenue. There were nearly two billion room nights sold in the US alone. When you look at the overall picture, it is still a small player."
The demographics of the customer base certainly suggest that the two aren't fighting for the same market. "Airbnb is definitely most popular with millennials [people born from the early 1980s to the early 2000s], but it is not always the case," says Grant. "We looked at Barcelona and the average age there is 36, so I'd say the age range is 25-40."
Much of the appeal comes down to the experiential nature of Airbnb and its glossy face online - something hoteliers shouldn't underestimate. "I think an important lesson hotels can learn from Airbnb is the importance of well-designed websites and mobile applications; a simple, clean interface with great visuals and useful content," says Grant. For example, in the early days of Airbnb, when it was a failing start-up, the brains behind it doubled their revenue by taking stylish pictures of the handful of apartments listed on the site.
Will the growth continue? Regulators are starting to catch up with the room-sharing movement - in New York it finds itself at the centre of a furore on illegal hotels - but Grant also believes that the nature of Airbnb and co has a limited market.
"I still think there is only a limited number of people who are willing to give the service a chance - you are staying in a stranger's home," she says. "It's not geared toward the service experience, and I think, for that reason, hotels maintain the edge."
Airbnb: the facts
â-ï The site was founded by Brian Chesky, Joe Gebbia and Nathan Blecharczyk in 2008 after they rented out airbeds in their San Francisco apartment for a business conference.
â-ï By 24 February 2011, one million listings were booked through Airbnb.
â-ï Of more than six million guests who used Airbnb in 2013, two million were American.
â-ï There are currently 600,000 properties listed on the website in more than 34,000 cities and towns, across 190 countries.
â-ï In the UK in 2013, more than 14,000 people let out their home or parts of their home, with the average host earning £2,822 and renting out their property for 33 nights.
â-ï In London, 72% of Airbnb rentals are outside the major hotel areas.
â-ï Since its inception in 2008, 15 million guests have used the service.
What do millennials want?
Michael Levie, co-founder, CitizenMNeed to know CitizenM launched its first UK hotel with 198 bedrooms in 2010 in Glasgow, and this has since been joined by a 192-bedroom property in London Bankside. Next year will see openings in Tower Hill (370 bedrooms) and Shoreditch (185 bedrooms). Founded in Amsterdam in 2009, the brand now also has hotels in Paris, Rotterdam and New York.
"Millennials and the new generation want honest, personalised service and for it to be about an experience," says Michael Levie, co-founder of CitizenM. "That is a completely different kettle of fish for many hoteliers."
Since launching in 2009, the progressive chain - where guests check themselves in to stylish, affordable rooms in design-led spaces - has grown to seven sites.
"New generations don't want to sit in a restaurant - they are used to communal spaces, listening to headphones. Their office is their laptop, and they want to be inspired by the spaces they are in and be among like-minded people," Levie says.
The design side of CitizenM is the icing on the cake, but to attract milliennials, any hotel needs a few basics, he says. "A good shower and free high-speed internet is a minimum - it is like running water. The space doesn't need to be gigantic, it just has to be comfortable.
"I always joke that there is a coffee test - if you stay in a hotel and you have an appointment, do you invite people to you and have a meeting in the lobby, or do you meet them somewhere else so they don't see where you are staying? The idea is that the hotel is part of your lifestyle - you are proud of it and comfortable in it."
As for Airbnb, Levie believes that in some circumstances it might be a more appealing option. "There are certain times where Airbnb might be a possibility for some people, but not the preferred choice - say if you are staying one or two nights or on a business trip. If you are travelling with your family or for a longer time, perhaps it is a better option.
"I think the hospitality industry is a little way away from that personalised service, so sometimes it suffers - I mean, who wants to stand at a front desk checking in and out? Some hotels encourage the Airbnb and sharing community. If it is convenient, quick, fast and where the location is, great; I still think that hospitality wins."
Timothy Griffin, general manager, the Hoxton, London
Need to know The original 208-bedroom Hoxton hotel in London's Shoreditch launched in 2006. Following its sale to Ennismore Capital in 2012, the new owners revealed plans to create a portfolio of hotels, located in key European cities and New York. The second Hoxton will open in London's Holborn in September, with other launches confirmed for Amsterdam, Paris and New York.
"When you look up what defines millennials, one of four or five points is that they are civic-minded," says Timothy Grant, general manager of the Hoxton Shoreditch.
"We have spent a lot of time making sure we are embedded in the community - our Hox events showcase local talents, such as musicians and artists. We really try to be part of something bigger - that really appeals to millennials with a strong sense of community."
For eight years, the Hoxton has been one of London's most fashionable haunts - a design-led hotel and restaurant in the heart of Shoreditch, the country's unofficial millennial capital.
"Other defining points are that millennials aren't attached to institutions and they are very well-networked to friends," continues Grant. "We aren't a chain, we are an independent property, and we work hard at making sure we are connected through social media. We are very active on Facebook, Twitter and Instagram. Hotels should be experiential - people these days want to experience something and then immediately share it with their friends."
As for room-sharing sites, Grant does not feel they are a threat. "We don't look at them too closely," he says. "It's a different market - the people who use these sites want a different experience and are less concerned about service. However, what we feel we do have in common is an authenticity in the experience - we are embedded in the local community."
The Hoxton's airline-style pricing means the earlier you book, the cheaper it is, with prices ranging from £69 to £299 and - like Airbnb - offers guests the opportunity to grab a bargain.
"The design is absolutely critical. Hotels are by definition experiential, and it's about how things touch and feel," Grant explains. "That's why our lobby is great - it is open, inclusive, and is full of people running businesses from their laptops. The design is thought about right down to the granular detail and that's really important to a millennial. Who wants to hang out in a space that doesn't feel right?"
After eight years as an independent, the Hoxton has unveiled lofty expansion plans with future openings at the rate of one a year. "We are really excited, especially about the forthcoming London site," says Grant.
"Lots of people said 'why Holborn?' but we've done our research and there are lots of TV production and fashion people, plus it is so close to Covent Garden - it is kind of a forgotten part of London. The view is not to become a chain of hotels, but a series of independents, each with a specific look and feel, and all about the community they are in."
Airbnb: A regulation-free zone?As Airbnb continues its hockey-stick growth, the concern from many in the hospitality industry doesn't stem from a fear of competition, but the lack of a level playing field between online room sharing and accredited hotels and guesthouses. David Weston, chief executive of the Bed and Breakfast Association, has been campaigning heavily on the issue.
"There is a two-tier system developing: those with signs outside their properties who are subject to inspection by fire regulators and food hygiene inspectors, who have to pay for copyright for music and liability insurance - among a list of other stipulations that grow year-on year - and those who can rent their room through online sharing sites, not pay for any red tape, and can therefore undercut those who do."
Hotel consultant Melvin Gold agrees it is creating an inequality: "Room-sharing sites are competing against normal hotels and B&Bs - you can't have something completely unregulated going up against regulated sectors - it's not fair."
The issue is not with the sites themselves, says Weston, but the regulators. "Airbnb is a great new innovation, but our concern is with the regulators - they are asleep on the job and not awake to the changes in the market," he adds.
"Either abolish these regulations - what is the point of having them if they are not applied across the board? Or apply them across the board. What we have now is a member of ours doing it legitimately, living next door to someone who doesn't.
"Our message is that we can compete with anyone, but let's compete under the same rules."