Analysis Shows Hotels Are Not Losing Share to AirBNB

AirBNB has been regarded as the great disrupter in the hospitality sector, but a new study shows that – for all the hype – AirBNB is not taking marketshare away from hotels.

The study, compiled by Smith Travel Research using AirBNB source data, offers critical insights into the true market penetration for the room-sharing service.

Among the key findings:

  • AirBNB has 2.3 million listings, far more than the world's largest hotel company, Marriott (1.1 million). However, much of AirBNB's inventory is available only in peak-season, not year-round.

 

  • Airbnb has higher peak-season occupancy because its users skew more heavily to leisure. Hotels have much higher year-round occupancy due to the diverse nature of their business (leisure, business, and group).

 

  • The markets with the highest hotel occupancy also have AirBNB's top occupancies. A deeper analysis shows that AirBNB is capturing excess demand, not shifting share.

 

  • Even on highest compression nights (hotel occupancy >95%) hotels are growing compression ADR faster than ever – at 35% in 2015 – with ADRs far exceeding those of AirBNB.

 

Jan Freitag, senior VP of lodging insights for STR, said that hoteliers are not at significant risk to lose share to AirBNB.

“I think the overall message is that the U.S. hotels industry continues to break demand records,” said Freitag. “We are selling more rooms than ever before on an annualized basis. In 2014, we had a demand record. We had another demand record in 2015. We expect in 2016 we will also top the number of rooms sold. Room demand has been higher than it has ever been.”

The Travel Agency of Tomorrow

This week I spent time with the industry's top luxury travel agencies at Virtuoso TravelWeek in Las Vegas. Based on these interactions and the increased demand for travel agents, I've been giving some thought to what the travel agency of tomorrow may look like.

Years ago, the local travel agency was a brick-and-mortar office on Main Street with sunny and exotic destination posters adorning the walls.

As the age of online travel grew and travelers adopted a D-I-Y approach, travel agencies disappeared from Main Street in search of lower costs in high-rise buildings or work-from-home arrangements. What will the travel agency of tomorrow look like?

Instead of being simply a transactional office, retail travel agencies will return to Main Street as experiential spaces for luxury consumers.

Given the growing demand for curated travel experiences, I believe the travel agency of tomorrow will look much like the agency of yesteryear. Instead of being simply a transactional office, retail travel agencies will return to Main Street as experiential spaces for luxury consumers. Gone are the destination posters of yesteryear in favor of a refined, relaxed environment to enjoy coffee or wine with friends. Curated presentations – some travel related, some not – hosted at the agency become "nights out" for like-minded neighbors who view the agency as expert not just in travel, but in luxury experiences. The travel agency becomes a familiar hang-out for locals to learn, share stories, and laugh together.  In short, the travel agency of tomorrow is an experiential hybrid: part wine bar, part concierge lounge, and part expert showcase.

For travel agency owners, the upside to this new agency format may include new revenue streams such as wine sales and event space rental… not to mention increased foot traffic and travel sales. Besides, what goes better with travel stories than a great glass of wine?

The Five Profiles of Chinese International Travelers

Hotels.com has completed its fifth annual survey of Chinese travelers and – among other insights – developed the five profiles of Chinese who plan to travel internationally in the coming year. While the resutls show that 92% of Chinese travelers plan to increase or maintain their travel spending in the coming year, the survey also five profiles of Chinese international travelers:

Five Profiles of Chinese International Travelers Revealed

To help the industry cope with these more independent and diverse travelers, the Chinese International Travel Monitor 2016 reveals five travel personas that Chinese travelers fall into.

1. Detailed explorers (25%): Born in the 60s and 70s, they are innovative and optimistic, like to learn and explore and to plan their trips down to the last detail.

2. Cautious connectors (25%): Also born in the 60s and 70s. They come from lower-tier cities and responsible family people and travel to bond with loved ones. They prefer safe, family-friendly hotels.

3. Experience seekers (17%): Tend to be born in the 80s and 90s and be from top-tier cities. They like stylish hotels and professional advice on local cultural activities. They travel to enrich their experience, being independent and ambitious.

4. Indulgers (12%): Most likely born in the 80s, they travel to indulge themselves and to demonstrate their power. They tend to stay at higher-star hotels and go on adventurous local tours.

5. Basic pleasure seekers (21%): Millennials born in the 90s. Unlike other groups, more of them are women than men. They are aesthetically minded and travel for non-material enjoyment, seeking value-for-money accommodation.

 

Chinese millennials spent 27 percent of their income on travel, according to survey data – the highest proportion among all Chinese travellers. The hoteliers’ survey showed that the number of Chinese millennial guests (aged under 35) increased 12 percent, slightly more than the median increase of total Chinese guests (11 percent). This trend reflects the growing demand – and opportunity – for hospitality internationally.

Top Travel Trends for 2016

This week, TripAdvisor released their annual list of top travel trends for 2016 (PDF). Hidden in the results are a few very interesting details that not only apply to 2016, but hint at travel trends that may have a longer tail for both hotels, airlines, and OTAs.
2016 Travel Trends

Top Travel Trends for 2016

Trend #1 – Seeking new experiences

Globally, 69% of travelers plan to try something new in 2016, including cruises (20%) and adventure travel (15%). A key travel trend in the data is that 17% will try solo travel for the first time in 2016. It will be key for hoteliers to anticipate the unique needs of solo travelers and catering to this emerging trend.

Trend #2 – Spending more because it’s “worth it”

One in three travelers plan to spend more in 2016 than they did in 2015, with nearly half (49%) of respondents doing so “because I or my family deserve it.” To capture these increased revenues, hotels must differentiate themselves with travel packages that focus on unique experiences, such as the "romantic kidnapping" and picnic at Namale Resort.

Trend #3 – Choosing destinations based on culture, special offers

Travel trends continue to point to the importance of targeted online marketing to focus buyers on your destination, with 21% choosing a destination because a hotel had a special offer or package. One in five global travelers have picked a destination because they saw it featured on television. In 2016, turn your marketing and social media team loose to create visibility for those key items that make your market a "must see."

Trend #4 – Staying cool and connected

While free wi-fi continues to be a critical buy factor for most travelers (46%), many travelers relate that they require "super-fast" wireless internet access (26%); 11% are willing to pay a premium to get the speed they need to stream movies and connect in high-definition.

Trend #5 – Rising room rates (and optimism)

Industry analysts and hoteliers are confident that 2016 will bring higher rates, with 47% of global hoteliers initiating rate increases. This travel trend should lead to capital improvements and enhancements for many in the industry. Despite these reinvestments, 65% of hoteliers expect profits to increase next year, as 2016 should give the industry a new baseline for both ADR and profitability.

Trend #6 – Managing reputations online

Given that TripAdvisor initiated the survey, it's not surprising to see reviews carrying a focus in 2016. I was surprised, however, to see only 59% of hoteliers planning to invest more in online reputation management in 2016. I anticipated this number to be much higher and see this as a travel trend that will go higher in future years. There is simply too much at stake for service providers to not actively manage these channels.

Hospitality Hot Reads: iPhone 6, Net RevPAR and ProPAR

Here's what I'm reading this week to stay aware of emerging trends and opportunities:

Travel Weekly Consumer Trends 2014: Explosion in Mobile Bookings
With the launch of the new iPhone 6 by Apple this week, larger phones and "phablets" will continue to gain mobile share. The larger interface is a great canvas for hospitality sites and apps, which rely on rich media and large photos. Phablets have just 6% of the market share but 11% of the app usage, meaning owners of these devices are heavily device dependent and actively engaged.

Measuring Acquisition Cost alongside RevPAR
As focus shifts from gross revenue to net profit, acquisition cost per room night has come under more scrutiny. Is it acceptable to measure total RevPAR, or should hoteliers focus more closely on net RevPAR and ProPAR (Profit per available room)? This is a very intriguing topic and one conversation that most revenue managers are not fully prepared to have with their ownership.

Sea Change
A detailed discussion of new benchmarks for hoteliers, including ProPAR, ProPOR (profit per occupied room), Net RevPAR, Net RevPOR, and COA (cost of acquisition). This article, along with the previous piece, represent a strategic shift in revenue management. Great read.

How Guest Targeting is shifting the OTA landscape

For years, Expedia, Orbitz, and Travelocity have been entrenched OTA players in a static hospitality landscape. With back-end connectivity to the GDS, these OTA giants represented a simple, at-home entry point for many travelers. Over time, aggressive marketing and rate parity have established OTAs as a reliable retail outlet for hotels, airlines, and rental cars.

But in the past 18 months, a seismic shift has begun to change the landscape for the online travel agencies. Foreshadowed by Google's 2010 acquisition of ITA Software, the rise of "big-data" represents the greatest challenge to OTAs in more than a decade Click to Tweet and is beginning to change the landscape for many of the largest online travel agencies.

Armed with data on preferences, interests and even search histories, big-data providers like Facebook and Google have built platforms by which hoteliers can offer highly targeted packages and promotions to small groups of retail travelers. The result looks to net higher conversions at a lower cost of sale for hoteliers, all while delivering a more satisfying retail experience for guests.

This shifting landscape could bring the eventual downfall of the parity-based model for OTAs. Just this week, Expedia CEO Dara Khosrowshahi confirmed to CNBC's "Squawk Box" show that Expedia is looking for ways to shift its offering to hoteliers away from parity towards a guest-targeting model. (Note: Khosrowshahi's comments about Expedia's future model begin at 2:20 into the video.)

In my opinion, the biggest challenge OTAs face in delivering a targeted guest model is the access to a larger guest dataset. While Expedia, Travelocity, and Orbitz capture travel search data, the legacy OTAs lack access to broader preferences that are game-changers for the big-data companies. OTAs will likely need to purchase guest data directly from their new competitors, Facebook and Google, Click to Tweet which will drive down profit and make the challenge even more pressing.

I believe that the pressure to build a more profitable, guest-targeted model may drive OTA consolidation. It's also quite possible that we will see the larger OTAs pursue big-data through acquisition of social media properties such as Pinterest or Gogobot.

Does this mean that Expedia, Travelocity, and Orbitz are about to fold up shop? Not at all. Although consolidation within OTAs is possible, the likely path for OTAs will be less emphasis on non-targeted results through the GDS and more focus on generating guest-targeted offerings at a higher margin.

Five Fresh Hospitality Reads for the Week

This week, as many begin to focus on budget planning and creating strategic plans, I'm reading more about how the hospitality industry continues to evolve in the social media era. Here are five fresh hospitality reads:

The Future of Travel: Eight Things You Need to Know | Marketing Magazine
Great piece on the critical importance of innovation in the hospitality industry.

STUDY: 44% of Luxury Guests Choose Hotels through Word of Mouth
You know it. I know it. And yet… it continues to be overlooked. For all that you are doing through sales, marketing and PR, the most critical component of hospitality remains guest service.

How Luxury Hotels Mine Social Data in the name of Comfort
Great reminder that (a) there is so much information available online about each of us and (b) some hoteliers are using that public data about their guests. I think there's a lesson in this piece about the importance of balancing hospitality/privacy.

Airlines testing new ways to Board Planes
All aboard (faster!) Also… 100 times YES!

How TripAdvisor wants to own the Travel Cycle
TripAdvisor has evolved from a review site to an efficient booking engine. Now the TripAdvisor teams wants to be the provider of choice for local area information and concierge service. I will be interested to see if crowdsourced hospitality data can ever truly scale.

Another clear indicator of how important it is to know your audience and to continue to refine your message to each guest.

For more hospitality trendspotting, follow me on Twitter.

Three Luxury Hospitality Reads for the Week

Here are three short, compelling reads regarding luxury sales and marketing in the hospitality segment. I found each of these very poignant for guest service and hotel sales in our industry:

 

Twenty percent of Virtuoso's customers drive 71% percent of sales
This statistic speaks to the old adage of how important it is to take care of your best customers, especially in the luxury hospitality segment.

Biggest risk to luxury brand dilution? Partner Offers
A new study finds that luxury brand cross-marketing is a dangerous tightrope, bringing in new customers when done well but risking market share for both brands when poorly executed.

Four Seasons Hotels are active on 393 social media channels
Is there an effective limit to the "be where your customers are" mantra that has driven CMO and social marketing? Also, is there a limit to the effectiveness of "be where your customers are" in the luxury segment?

 

Interested in seeing more about luxury hospitality sales and marketing? Follow me on Twitter

Insights: Why Multigenerational Travel is THE Emerging Trend

A recent presentation by Peter Yesawich, vice chairman of MMGY Global, highlighted a number of trends and insights for the hospitality market in the near term. While there was definitely a lot of beneficial information presented, one key insight may emerge as the number on trend in hospitality: multigenerational travel.

"Multigenerational travel" or "mutligen travel" most commonly refers to grandparents traveling with grandchildren, but can reflect any number of generations traveling together.

According to MMGY Global, more than 20% of travelers are grandparents. Of those, 40% have taken a trip with a grandchild during the past year. And eight out of 10 times that a grandchild comes along, so does a parent.

As you can see, the market is already well developed. As more affluent baby-boomers retire and begin traveling alongside children and grandchildren, this market will will just continue to mature (pardon the pun!)

Several elements are key to capturing this target market, but most important among them is a well-developed recreation program that meets the needs of these guests collectively. Broadly inclusive cooking classes, walking tours, and lower-impact activities that can be enjoyed by all age groups are key.

For the hospitality market, multigenerational travel represents one of the few demographics that shows extensive growth potential domestically. Beyond just welcoming family guests, multigen represents a new gateway for luxury hoteliers. Traveling alongside affluent parents and grandparents, economically stretched GenX and GenY consumers are discovering brands that can serve them for decades to come as their affluence grows, making this a significant play for the luxury market.

Who writes hotel reviews?

Travelers today are innundated with resources to assist in planning trips. Among the tools are first-hand "unbiased" published on the major booking sites, including TripAdvisor, Booking.com, Expedia and others. 

But, have you ever wondered, "Who writes these reviews, anyway?"

Olery, a reputation management company, has taken a stab at answering that question and the answers are pretty interesting. 

Generally speaking, Olery found that hotels receive about 300+ reviews per year on average and that 46% of travelers post hotel reviews. Reviewer demographics skew slightly towards female guests, with a plurality of reviews being written by 35-49 year-old guests.

Interestingly, guests on vacation and leisure travel – those who are spending their own money – write the majority of hotel reviews.