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: ‘The industry has been in denial’: As hotels recover from the pandemic, they’re planning how to compete with another threat — Airbnb

With the number of COVID-19 cases receding as vaccination drives continue and the Delta variants ebbs, the travel industry could be poised for a resurgence. Whether hotels from that boom could depend on what happens to Airbnb.

During an interview with Axios, Airbnb
ABNB,
+0.35%

CEO Brian Chesky forecast a “new golden age of travel” as people look to finally cash in the vacation days they’ve accrued throughout the pandemic. The timing is favorable for operators in all corners of the travel ecosystem.

“‘They’re coming for our children.’”


— Ian Schrager, who pioneered such Studio 54 and the boutique hotel model, on the Airbnb threat

“As far as the hospitality industry and where it is right now — it hasn’t fully recovered yet, but we are coming back,” Davonne Reaves, a hotel owner and consultant, told MarketWatch during a video panel as part of the Mansion Global Real Estate Conference.

“Typically the hospitality industry is the first to go down during an economic downturn, but is the strongest to come back,” Reaves, who is CEO of consulting firm The Vonne Group, said.

Experts on the panel suggested that the pandemic likely won’t have a lasting impact on the hotel industry. While it did help to speed along the adoption of technologies like automatic check-in, they argued that hotels will likely return to pre-pandemic norms eventually.

View the panel discussion below:

A look at how the hospitality industry in major cities adapts to the constantly changing needs of tourists as travel opens up again, from vacation rentals to hotel chains.

It’s a different story, however, when it comes to another threat facing the hotel sector: Vacation rentals.

Ian Schrager, an industry veteran who pioneered such concepts as Studio 54 and the boutique hotel model, was blunt when he characterized the threat platforms like Airbnb pose to the industry. “They’re coming for our children,” he said.

“The industry has been in denial about it for, since the very inception,” he added. “If we don’t react to it and respond to it, we’re going to be in trouble.”

One key indication of Airbnb’s and other vacation-rental platforms’ impact is in hotel compression — times where hotel occupancy is so high within a destination that hoteliers can increase the nightly rates they charge. Vacation rentals can absorb some of that excess demand, especially if local residents choose to add their properties to the platform to make some extra cash. As a result, hotel rates may not increase as much as expected.

This dynamic was in force during the pandemic. Many hotels closed sections of their property when travel slowed during the outbreak, which could have pushed prices up. Instead, Airbnbs and other vacation rentals filled the void.

“‘Typically they’re picking it because it has a kitchen.’”


— Davonne Reaves, a hotel owner and consultant

To compete, the experts suggested that hotels need to consider why people are choosing to stay in Airbnbs. “Typically they’re picking it because it has a kitchen,” Reaves argued, adding that high-end travelers could bring in a private chef to have a more luxurious experience.

“People are willing to pay for experiences,” she added.

Hotels, Schrager suggested, could mimic that experience by creating communal spaces on their properties, such as shared kitchens. “You’re giving them the same Airbnb experience, but giving it with all the amenities and services that a hotel can offer.”

Schrager further argued that the hotel industry should rethink the role hotels play in cities — essentially harkening back to a time where places like The Plaza were hubs for entertainment in their cities.

“It was an anchor of the city,” he said. “That is something Airbnb cannot do.”

Shares of major hotel operator including Marriott
MAR,
-0.31%
,
Hyatt
H,
+0.14%

and Hilton
HLT,
-0.12%

are up anywhere from 15% to 30% year-to-date, in line with or exceeding the Dow Jones Industrial Average
DJIA,
-0.38%

and the S&P 500
SPX,
-0.09%

over that time frame. Airbnb’s stock is up roughly 15% year-to-date.

Also see: Where’s housekeeping? Hotels cutting back on daily cleaning after pandemic

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