The Phoney War Between Airbnb and Hotels

 Why the great war with hotels is a myth

It’s an uneasy feeling knowing that you may have more in common with your adversary than you think. It’s even more unpalatable to consider that you may even need them. Rivalry and competition define us, yet the battle between the incumbent hotel industry and the rising star of Airbnb and short term rentals has been presented to us as a bitter fight to the death — each unable to exist if the other survives.

Airbnb War

Despite the aggression and bitterness represented by the media, the public rhetoric will often tell you that ther other sector is a “different industry entirely”, or “not a direct competitor”. Speaking in the New York Times, Kerry Ranson, chairman of the InterContinental Hotels Group Owners Association, said he:

Did not see Airbnb as a threat or as a competitor. It’s a short-term online rental

The truth is Airbnb and the hotel industry scrutinise each other in minute detail. Airbnb would present the battle as The San Fran start-up that hit the big time, versus the shady conglomerate of hotels. The hotel industry see it as unlicensed, unregulated residences undercutting them at every turn.

Inbetween media speculation and the public face put on the rivalry, there are numerous initiatives to not only out-market and out-sell the other, but to scuttle their ability to compete at a political level.

The American hotel and lodging association announced a country-wide US campaign to:

Highlight the bad, unfair and in some cases unlawful business practices employed by short-term online rental companies

The Center for Public Integrity  reported that

Executives, corporations and trade groups representing the hotel and lodging industry donated at least $11 million to candidates and national groups active in state-level elections in 2014.

And this is not a one-sided fight:

Airbnb, its executives and top venture capital funders donated at least $920,000 to candidates and outside groups for 2014 state-level elections, with at least $189,000 going to races in its home state, California.


Airbnb and its trade group, The Travel Technology Association, have lobbyists registered in at least 22 states.

Despite how it can be presented, and the level of media attention afforded to Airbnb’s impact on the lodging sector, this is not a duel between two giants. A bitter fight that will leave one standing and the other crumbled. The truth, as it so often is, is more nuanced. The competition between the two actually involves symbiosis, sharing and a chance to gain from the demand created by the other.

The data firm STR created a report of 13 global markets, comparing the performance of Airbnb compared to hotels. The report looked at market data from the 1st December, 2013 to 31st July, 2016.  It contains illuminating insights into the real facts surrounding the relationship between vacation rentals and the hotel industry.

We’ve dissected the data to bring you the key information

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Airbnb occupancy was highest in markets with high hotel occupancy

High occupancy for Airbnb did not seem to affect the occupancy levels for hotels. The number of nights in which occupancy exceeded 95% has increased steadily over the past 75 years, since the Great Depression. There has also been an increase of 1.6% in hotel supply, which whilst sounding small, actually represented an increase of 1,487,458 rooms to these markets, more than Airbnb’s entire viable inventory.

It’s also important to note that the average daily rate for nights with over 95% occupancy was 35% higher than nights with lower occupancy. This was a record rate.

Airbnb’s share of the market is under 4%

Touted as a contender to bring down the hotel industry in an epic business war, Airbnb represents a mouse fighting a mountain lion. It is simply not a fight.

In just 2 of the 13 markets studied, Paris and New Orleans, Airbnb saw increased demand where demand for hotels decreased. This could be attributed to Airbnb’s growth but other underlying causes such as the impact of acts of terrorism in Paris radial event relocation in New Orleans are also reported to have factored.

Airbnb has more available rooms than any hotel brand – or do they?

In November 2016, Airbnb reporting having 3 million available listings, more than 3 times the number of their closest hotel rival, Marriott. Yet, how many of these rooms are truly available? Airbnb rooms are not available night in, night out like hotels. How many of listings are temporary or even deactivated for all intents and purposes. Can you compare a room in a shared house to a hotel room?

If you account for true parity of offering, and factor for unavailable listings the STR report found that Airbnb’s rooms that could compare with hotel accomodation were closer to 1 million.

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Another important factor is that Airbnb’s occupancy level is around 50%. In the top 7 markets studied, hotels registered closer to 80%.

Airbnb’s growth rates are deceptive

Part of the reason Airbnb is the focal point for short term rentals and media attention is the rapid rise it charts. A 60% average growth in the markets analysed by these reports makes a powerful headline to upset the hotel industry. However, the baseline that Airbnb operates from is far lower than the hotel industry. This is an example of the exponential growth of a boom industry.

How this growth settles, and how much of the overlapping customer base they will claim remains to be seen. The report shows that rather than a brand that could topple an industry, Airbnb is becoming a major single player within the accommodation industry. A new face, in a rosta of many that is sending ripples, not waves to the bedrock of the industry.

Hotel guests and Airbnb guests are not separate groups

There are clues to each demographic. Yet what makes a person choose an Airbnb apartment over a hotel is not clear. People are starting to appreciate the differences in the two options. Every Airbnb and hotel represent the answer to a different need. What this difference is, though, is still hard to pinpoint.

In 2016, the average age of an Airbnb guest was 35 and 53% of all guests were female. According to the AH&LA’s “Lodging Industry Trends 2015” report, 50% of all hotel travelers were aged 35- 54, and males made up the clear majority at 63%. Airbnb’s share of business travel was substantially smaller than its share of leisure travel. Airbnb guests typically stay longer than the average hotel guest. Almost 50% of Airbnb room nights come from trips of seven days or longer.

These demographics are not conclusive which points to an overlap. Hotels could argue that this means that short term vacation rentals are occupying their customer base.


Airbnb, and more broadly, vacation rentals do not represent a war with hotels. They represent an answer to a different need. The initial boom in interest in Airbnb is now settling. People know know enough about each type of accommodation to make an informed, rational decision about whether to choose a hotel or a vacation rental. This report does not show exactly where this boundary lies. It shows that there is space for both in a growing market.

The rapid of rise of vacation rentals in the 13 markets studied has been widely reported but absorbed by the incremental growth of the industry. People are not finding permanent alternatives to hotels. They are starting to find accommodation that suits an increasingly customisable travel industry.

Vacation rental managers do not need to compete for hotel guests, but keep on offering a high quality alternative.

Guests have the power to tailor trips, accommodation and experiences to their specific needs. Travel brands need to be able to reflect this need with varied brands and products. Airbnb simply represents, a powerful, but single arm of this network.

To thrive in an industry which contains both vacation rentals and hotels, the solution seems to be to concentrate on the guests, rather than the type of accommodation you provide.

To stand out from the crowd of hotels, you need to provide great guest experience. Click here to get a free analysis of how your vacation rental business can excel in any environment.