What hoteliers can and should be doing.
By Alicia Hoisington
When Airbnb first landed on the scene, Bashar Wali had a spiel in his pocket, always at the ready for anyone who asked him about the sharing-economy site.
“There were two types of Airbnb customers,” says the principal and president of Provenance Hotels. “There’s the couch surfer who wants to go crash somewhere at $25 a night because that’s all he or she can afford. And those are not hotel customers… looking for exclusively value.”
He says those guests were not ones to focus on because they weren’t ever going to be hotel guests. But the second type of guest was different. This type of guest was a forward-thinking, creative class that Wali calls the “arriving class.” This class of guests has the means to spend money at hotels but desires an authentic experience.
“If I really want to experience Tribeca, how much in a hotel will I get for the feel of Tribeca as opposed to staying in someone’s apartment on a side street in Tribeca?” he says. “Those would have been hotel customers, but because they are choosing that localized, authentic experience, Airbnb became a better option for them.”
Because Airbnb became a better alternative than hotels for this group of people – and now represents about a $30 billion valuation – Wali says the hotel industry realized it had to do more to attract this emerging group of guests.
As such, hoteliers took note and responded in a variety of ways.
Appeal to the millennial mindset
Tim Johnson, director of e-commerce at LBA Hospitality, says that Airbnb appeals to the “millennial mindset,” mostly from families and small groups of people. In response, brand companies have been busy developing new products to compete with the likes of Airbnb to win the millennial customer, Johnson says.
In January of last year, Hilton Worldwide introduced the midscale Tru by Hilton brand. Geared toward millennials, the cost-conscious brand touts an affordable experience for its guests.
“The brand will appeal to a broad range of travelers who span generations but think alike; they are united by a millennial mindset – a youthful energy, a zest for life and a desire for human connection,” according to the news release announcing the brand launch. Tru boasts many millennial-focused features, including but not limited to:
- The Hive, 2,770 square feet of open-space lobby where guests can engage in either of four unique zones for lounging, working, eating or playing;
- The Play Zone with table games, a big-screen TV and tiered seating; and
- Command Center, a front-desk featuring a social media wall with real-time content and an always-open market with refreshments, wine, beer and meal options.
Johnson also cites Marriott International’s Moxy brand as a millennial target. The brand launched in 2014 and currently has six hotels open, with 62 in its pipeline. Like Tru, Moxy also features “zones” in its public space that appeal to lifestyle-focused millennials:
- Library/Plug In, where guests can enjoy some quiet time;
- The Welcome zone has a living-room feel;
- Beverage + Food zone is a coffee house by day and bar at night, and it also offers 24/7 self-service grab-and-go options; and
- Lounge zone acts as the conversation center, bursting with energy, the daytime hangout and nighttime party place.
Other big-box brands that were designed with millennials in mind include: Marriott’s Aloft and Element brands (formerly from Starwood Hotels & Resorts Worldwide); Marriott’s AC Hotels; Hyatt Hotels Corporation’s Hyatt Centric; Hilton’s Canopy; and Best Western Hotels & Resorts’ GLo.
Offer the unique experience
Perhaps one of the biggest reasons people flock to sharing-economy sites such as Airbnb is because they want to have a unique, local and personalized stay experience, sources say. That has caused the hotel industry to shift its way of thinking to cater to personalized, authentic experiences to win an emerging guest demographic.
“The ultimate goal is to continue to provide a unique customer experience from booking to checkout,” Johnson says. One way LBA does that is by providing localized packages to guests, offering experiences from tickets to local events to local dining experiences.
For example, the hotel management company has a property near the University of Alabama, the market’s top demand generator. The company leveraged its partnership with the school to provide amenities upon arrival that tout the local influence.
“You have to continue to go above and beyond the standard advanced purchase, free parking or free Wi-Fi packages,” Johnson says. “Unique and authentic to each market is what’s successful. More folks are not staying in the room; they are getting out and exploring, so packages need to enable them to explore from a one-stop shop in the booking process.”
Wali says hotels that offer unique and local experiences can win the customer over sharing-economy sites because hoteliers always put guests first. When it comes to Airbnb stays, he says it’s 100 percent about the owner or host.
“It’s what the rules are, when can I pick up the keys?” he says. Additionally, Airbnb rentals can’t provide as much security as a hotel can.
“With Airbnb, you think who else has the key; when was the last time the shower was cleaned; is that really a smoke detector or a camera?” Wali says. “You don’t have to think about that in a hotel environment.
“So, if you are able to get the [unique]experience you want without the security sacrifice, the smarter guests will focus on hotels.”
Much of that unique, local experience can shine through in a hotel’s design. As more guests spend less time in their hotel rooms, brands are responding by revamping public spaces, Johnson says. He cites Courtyard by Marriott’s outdoor experience that evokes guests to enjoy social gatherings on an outdoor patio. Likewise, Residence Inn offers a social hour Monday through Thursday to encourage engagement.
Specific design elements can speak to local surroundings, too, Johnson says. For example, LBA manages the Hilton Garden Inn Charleston in South Carolina that overlooks the Ashley Marina. Upon entering the hotel, guests can see local influences in the design. The hotel features large lampshades that show images of Charleston inside. The hotel’s bar is made with oyster shells from the marina and Ashley River, pulling in elements from the locale to add to the design’s authenticity.
Pay attention to tech
Airbnb first and foremost is a technology company, sources say. The appeal to the millennial mindset comes in the form of a user-friendly booking process – one that many hoteliers can learn from.
“Home sharing has been around since the 80s, so it’s not new,” Wali says. “But the ease of use and user interface have become so simple and intuitive.”
He says that Airbnb as a tech company has shown hoteliers the value of ease of use and pushing them to realize that a mobile website and ease of booking on the go can be more important than its respective desktop version.
According to recent research from Opera Mediaworks, mobile is No. 1 for travel research and booking, and 70 percent of millennials prefer smart phones for research purposes. Almost half (45 percent) of the 1,000 people surveyed say they use mobile apps when booking accommodations and activities on mobile devices, and 85 percent use mobile to book travel activities.
“Hospitality has always been behind [in tech], but it is starting to speed up,” Wali says. “Airbnb had a hand in that. Hotels are trying to follow suit.”
Johnson agrees. “One thing I can say about Airbnb is its booking process is user friendly, from site to mobile app. That’s where they see the rise in booking. They appeal so much to millennial mindset.”
For its part, LBA takes the millennial mindset and its involvement with technology seriously. The company created a 13-person Millennial Advisory Committee. The group meets to discuss initiatives to attract millennial talent and guests. The committee’s conversation recently turned to the power of marketing and the growing online customer acquisition method of working with bloggers.
“That approach we took gave us the ability to connect with guests in a natural way, a way millennials respond to,” Johnson says. “Millennials are not responsive to pushy forms of online advertising. They like to hear others talk and communicate. So as far as tech goes, it’s honing in on online customer acquisition methods.”
Another area to focus on as it relates to technology – that Airbnb often nails – is the residential feel. That is, guests want the same technology, if not better, at the hotel as they have at home.
“If at home I have 100Mbps Wi-Fi, I don’t want to go to a hotel and share 20Mbps with 300 other people,” Wali says. “You have to have as good as what people have at home, if not more, on Wi-Fi. Now the challenge is as good of service as at home, being able to watch Netflix, Amazon Video, etc.”
Consolidation and OTAs
“Some look at Airbnb becoming the next OTA,” Johnson says.
He might not be far off in his thought, as 2015 saw Expedia, one of the largest online travel agencies, acquire vacation-rental company and Airbnb competitor HomeAway for $3.9 billion. Additionally, Airbnb announced in December its intention to offer flight booking on its site. With its many other recent product launches, the site begins to look more and more like an OTA.
Johnson says both traditional OTAs and companies such as Airbnb will continue to move up the “travel food chain.”
“They will both vertical-ize in the package area, meaning that in addition to purchasing your accommodation and flight, you can also purchase local demand-generator tickets to museums, theme parks and make reservations at the most appealing dining attractions in the market,” he says.
Indeed, Airbnb announced in November its plans to become a one-stop shop for travelers. Through its Experiences service, travelers can book activities, such as a pottery workshop. Meanwhile, Airbnb’s Places lets guests find recommendations for events, restaurants and the like in their desired destinations.
But Wali says itineraries and concierge services are something hotels have always offered.
“Ultimately, hotels aren’t going anywhere,” he says. “There’s always going to be a need for a hotel. Truth be told, what’s happening now, is you’re starting to see Airbnb moving more in the direction of hospitality as opposed to the other way around.”
Wali says that as Airbnb grows it will become more like a clearinghouse for accommodations. In addition to homes and rooms on the site, he says the site potentially will start to see listings from smaller hotels.
“All of a sudden Airbnb becomes like an Expedia, and it’s going to lose that appeal it has now where it seems exclusive and it’s offering you these things that only folks in-the-know will find,” he says.
What does the future hold?
As the hotel industry is constantly evolving, so too is Airbnb and its ilk. While what’s on the horizon for the company might be hazy as new product launches are constantly announced, sources say the sharing-economy site should continue to be top of mind for hoteliers moving forward.
Specifically, Johnson says hoteliers should keep a wary eye on business travelers migrating to Airbnb.
“Business travelers are typically the bread and butter of hotels,” he says. “Business travel appears to be relatively safe from Airbnb for now, but I do think that it could become a problem if left unchecked. The biggest concern at this point would be Airbnb taking more and more advancements in terms of targeting business travelers.”
Over the past couple of years, Airbnb has introduced programs to target the business traveler. According to a recent report from Morgan Stanley Research, “Who Will Airbnb Hurt More – Hotels or OTAs?… One Year Later,” some business travelers have switched to Airbnb. In 2015, 12 percent of business travelers had used Airbnb, and figure climbed to 18 percent in 2016. By 2017, 23 percent of business travelers are expected to use Airbnb.
“This could become a problem,” Johnson says. “We should continue to keep it top of mind.” ■
A hostel boom: The new competition?
Unique to the scene is the emergence of chic hostels, concentrated mainly in urban locations. And while some might see hostels as a way to compete with Airbnb, Fredrik Korallus, CEO of Generator Hostels, doesn’t necessarily view the sharing-economy site as competition with his company. Generator has more than 10 hostels open across Europe.
“Traditional hotels may feel threatened by Airbnb’s low pricing and lifestyle brand, but many hostels operate in a different corner of the market,” he says. “Generator focuses on a shared experience with many people, while Airbnb doesn’t really stress socialization, so in this respect we do not compete with each other.”
Korallus says Airbnb guests could be attracted to hostels if they are looking for shared and engaging experiences, however. He says Generator appeals to millennial and Generation Z travelers, with ages usually ranging between 18 and 34, with an average age of 24.
There’s no doubt that, like Airbnb, these hip hostels aim to appeal to the traveler looking for a local experience.
“Each Generator has its own unique personality, specific to its location and molded by its surrounding culture,” Korallus says. “Most of the buildings are historic city landmarks, and the design often incorporates the artwork of renowned local artists.”
Similarly, event spaces are unique and designed to cater to their respective settings. For example, the Generator Paris rooftop terrace boasts the view of Montmartre, reflecting the emerging popularity of rooftop bars in Paris.
“Each Generator epitomizes our brand ethos of inspired design, engaging social spaces, relaxed food, friendly service and a dynamic, high-energy experience, where society can meet, engage, share and have fun,” Korallus says.