Airbnb VS Hotels : The Fight For the Modern Day Traveler

While Hotels have previously controlled the majority of the lodging industry’s market share, hoteliers should keep Airbnb on their radar.

This year 25% of leisure travelers and 23% of business travelers are expected to book a stay on Airbnb, a respective increase of 19% and 18% since last year. Even more, 50% of Airbnb users last year chose to replace traditional hotel stays with Airbnb stays. In March of this year, Airbnb reached 4% of the hotel industry’s demand and nearly 7% of it’s revenue.

With their success, Airbnb has begun building their first home-hotel hybrid. According to TechCrunch, the company is working with development firm Newgard Development Group to build a 324-unit building in Florida. Tenants will be able to rent their apartments (or individual rooms) on Airbnb and guests will have full access to hotel-style amenities, including laundry service, luggage storage, and concierges.

Hotels should not be discouraged however, since hotels across the country are continuing to experience record profits and occupancy levels despite the competition from Airbnb.

The Airbnb Model

As explained by Sangeet Paul Choudary, Airbnb does not follow a typical linear model like most traditional hotel chains. Instead, Airbnb has spearheaded the inclusion of ‘hospitality’ in the sharing economy. While hotels focus their strategy around owning resources (ie. rooms) and maximizing their occupancy rates, Airbnb focuses on managing the marketplace.


What Drives Travel Decisions?

New Experiences
Today’s traveler wants locally made and authentic experiences. They want to feel truly connected with the local community and fully experience the culture. Nearly 50% of global travelers have chosen their destination based of the country’s culture and people and 54% want to experience an adventure on their next vacation. The demand for this growing segment of travel has had far reaching effects, impacting almost every segment within the tourism and hospitality industry.

Travelers are price sensitive and more susceptible to deals/recommendations than loyalty programs. Budget is a key factor in the decision making process for 70% of leisure travelers and 60% of travelers overall.

Usability of App and Site
Travelers rely heavily on technology during all stages of the decision making process, including research and booking. A recent study found that 70% of travelers agree a hotel’s website, app and other digital tools impact their booking decision and 50% of google hotel ads come from smartphones— this number is growing 2.4x per year! With that in mind, only 31% of leisure travelers and 53% of business travelers have used their smartphone for booking. Moreover, 77% of leisure travelers believe the information provided on mobile sites does not match the information provided on desktop sites and 88% of travelers will switch apps if the one they’re using does not satisfy their needs.

Helix by MicroMetrics - problems quotes - solutions 3

Hotels vs Airbnb

Before outlining some improvements hotels should undergo to stay competitive, it is important to see how hotels and Airbnb compare:

Hotels Airbnb
Guest Experience
  • Standardized & consistent
  • Built to feel like “home”
  • Every room & property is unique to that specific area
  • Usually highly influenced by local culture
  • Inventory must be built or bought
  • Typically expensive & timely to add
  • Adding inventory is inexpensive & immediate
Guest Journey
  • Users do not complete all stages on one platform
  • Interdepartment communication typically disjointed
  • Users complete all stages on Airbnb (including research, booking, post review)
  • Highly regulated
  • Adheres to strict legal standards
  • Little regulation
  • Properties not subject to the same safety standards
  • Guests not guaranteed the same protection
Community Impact
  • Typically strong corporate responsibility
  • Tourism supports local businesses
  • Creates jobs
  • Less established corporate responsibility
  • Increases property prices & may contribute to gentrification
Guest Service
  • Unmatched guest service
  • Service is enriched by offering amenities
  • Service less consistent, mainly depends on host

What Hotels Should Do

Build Easy to Use Sites + Apps
To keep users from switching to competitor sites, hotels should optimize for mobile, emphasize user experience, and include videos for both mobile and desktop sites. Nearly 95% of leisure travelers with smartphones make their decision on mobile but move to another device to book. The reasons being: the current limitations of mobile booking sites & apps and the anxiety travelers feel when booking on mobile. As mentioned, one stress users face is the belief the information on mobile sites does not match the information provided on desktop sites — over 50% of users switch from mobile to desktop to double check hotel prices. Hotels should make their mobile users feel more assured by clearly displaying all important information and offering reassurances such as best price guarantees.

Considering 52% of travelers with smartphones switch sites or apps when they take too long to load and 45% switch when there are too many steps to book or get the desired information, hotels should prioritize user experience. This can be done through simple improvements, such as minimizing popups and implementing auto-fill forms.

Lastly, 60% of travelers who watch online videos do so to narrow down brand choice, destination or activity. During the research phase of their decision process, videos can be highly influential. Hotels should implement videos on both mobile and desktop sites showcasing their property.

Use Technology to Improve Operations
To better compete against this new market-place with relatively no fixed costs, and travelers price sensitivity, hotels should use technology to improve their operations. For example, hotels could decrease their total operational costs by 6% just by focusing on upgrading their utilities. By replacing old thermometers with new occupancy sensors each hotel room can save an estimated 12-24% in heating and cooling energy. The same concept can be used for lighting as well, with LED lights using 75% less energy and lasting 25 times longer than incandescent bulbs.

Leverage Existing Amenities
We reached out to Matthew Boney, CEO & Co-Founder of Daycation, for his expert advice on how hotels can optimize their existing amenities to lessen the growing competition from Airbnb:

“Utilizing amenities creates a sustainable competitive advantage for hotels against Airbnb. By opening larger areas with higher fixed-costs to locals, such as the pool and spa amenities, the hotel becomes a social hub for the city. Hotels should take a ‘blue ocean’ approach to hospitality by widening the definition of ‘guest’. ‘Guest’ should be defined as someone experiencing the hotel for any length of time, not just those spending the night. With this approach, hotels would be able to target and attract the local customer, opening a massive, highly profitable opportunity: those seeking a quick and upscale getaway for the day.”

Unify the Guest Journey
Since Airbnb users complete their entire guest journey on their platform, Airbnb is able to gather important guest data that they can use to improve the guest experience and find opportunities for growth. By having fragmented communication across departments and a disjointed guest journey, hotels are missing out on a vast wealth of guest data. Through unifying the guest journey and interdepartmental communication, hotels can create more in-depth guest profiles and uncover areas of opportunity.

Foster New Experiences
Hotels have the ability to offer their guests the same level of culture and authenticity as Airbnb. To reach their potential, hotels should better integrate themselves into the fabric of the local community and showcase the local culture throughout every guest touchpoint.  

To start, hotels should update the design of their properties to include local influence and encourage social connectivity. Colour, furniture, fabric, and decorations can all be reflective of the local culture while the lobby can be reconfigured to become a space for the guests to mingle and interact with each other and locals. In fact, there has been an industry shift towards lifestyle inspired and design focused hotels. By the end of 2017 there is expected to be a 30% spike in bookings for these US hotel types. Moxy Hotels noticed this trend and decided to build a brand that was more reflective of the modern travelers wants. As Vicki Poulos, global brand director of Moxy Hotels, shares “it’s like a boutique hotel that has the social heart of a hostel. That’s why people stay at an Airbnb, so we built a brand that had the same communal spirit”.

Considering 65% of travelers want to end their trip having experienced something new and 69% would rather spend money on better activities than a nicer hotel room, hotels should promote and recommend authentic local experiences. As Elizabeth Lowrey, principal and director of interior architecture at Elkus Manfredi Architects, explains “people who choose Airbnb are seeking an intimate, non-manufactured experience. They want to be embedded in the fabric of the community where they can feel the uniqueness of place”. Hotels can deliver those types of experiences through updating their menu to feature local cuisine with locally sourced ingredients and through building relationships with local artists and businesses.

Interestingly, 85% of leisure travelers decide on activities only after having arrived at their destination. This can be a huge opportunity for hotels since 67% of travelers feel more loyal toward brands that share information during their trip that improves their travel experience. Hotels can offer this important information by having activity recommendations on their sites, locally aware staff, or emailing the guests during their stay with suggestions.

Lastly, hotels should replace their traditionally consistent room layouts with tailored and personalized room layouts. More than 50% of Airbnb users chose to book with Airbnb because of their unique accommodations, including the availability of kitchens. By offering guests a wide selection of room types with varying amenities, guests can not only choose a room that fits their specific needs, but also “live like a local”.

All in all, hotels should implement these changes regardless of Airbnb but stealing a slice of their market share may not be such a bad feeling!

View the full infographic:

Sources: Statista, U.S. news, eHotelier, Google Playbook For Travel

Find out how a Six Sigma Black Belt Leveraged Helix by MicroMetrics to Drive Memorable Guest Experiences for Starwood-Marriott in the Pacific Northwest!



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