NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) today released a research report - “Hotels Are Not Taking Airbnb Lying Down.”
Airbnb, an online community marketplace for room accommodations, continues its rapid growth and popularity with millennial travelers. This sought-after cohort currently makes up over one-third of the world’s hotel guests and according to the Cornell Center of Hospitality Research could represent 50% of all travelers by 2025.
Airbnb’s Average Daily Rate (ADR) appears to be very competitive with hotels’ rates, especially on weekends, when there is stronger competition for leisure travelers. According to a recent STR study, the U.S. hotel ADR on weekends has a negligible 2%-8% price premium over Airbnb. On weekdays however, its 14%-23% reflecting more demand, higher occupancies, and less price sensitivity from corporate travelers. As millennials move into the corporate world and are in positions that oversee travel accommodations, an increase in Airbnb’s corporate clients could narrow the weekday price spread. Airbnb estimates that 10% of its bookings are for business travel.
The lodging industry continues to respond to the growth in home rental sites and online travel agents. With Expedia’s acquisition of HomeAway, Orbitz, and Travelocity, merger and acquisition (M&A) activity in the lodging sector has picked up. Hotel consolidations have been occurring as chains look to increase scale, improve operating efficiencies, and maintain a larger marketing budget for national campaigns. Hotel M&A activity typically follows economic cycles. However, in our view, the secular online threat will persist.
To view the report, please click here.
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