As Airbnb Grows, Hotels Give Home-Sharing a Try - NBC10 Boston

As Airbnb Grows, Hotels Give Home-Sharing a Try

"Depending on what kind of trip it is, sometimes a home feels better than a hotel," says one Marriott executive

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    NEWSLETTERS

    As Airbnb Grows, Hotels Give Home-Sharing a Try
    Kirsty Wigglesworth/AP
    This Friday, Sept. 28, 2018, photo shows the bedroom of a flat that will be available for short term rent in London. Hotel companies are getting into the business of home-sharing. Marriott has been testing this in London in partnership with a home-sharing company called Hostmaker.

    What to Know

    • It's not yet clear how far hotels are willing to expand into home-sharing, which challenges their traditional business models

    • Marriott began testing home rentals in London in the spring and is expanding the program to Paris, Rome and Lisbon

    • But Hyatt invested $22 million in luxury home-sharing company Oasis in 2017 but is pulling out of the experiment

    Travelers sometimes want a cookie-cutter room in a downtown hotel, and they sometimes want a cozy Tuscan farmhouse to share with friends.

    Hotels have always been good at providing the first one. Now, they're trying to figure out how to provide the second — and blunt the growth of competitors like Airbnb. But they're having mixed success.

    Marriott said Tuesday it's expanding its six-month-old home-sharing pilot in London to three additional European cities. On the same day, Hyatt announced it was pulling out of a money-losing collaboration with luxury home-sharing company Oasis.

    Analysts say hotels are wise to experiment. Airbnb now has 5 million listings on its site, up 25 percent from a year ago. By comparison, Marriott grew 5 percent last year to 1.3 million rooms. In some markets, like New York and Miami, studies indicate that home-sharing is already eroding hotel profits.

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    But it's not yet clear how far hotels are willing to expand into home-sharing, which challenges their traditional business models. It costs more to clean homes scattered in various neighborhoods than rooms at a central location, for example.

    The barriers are so great that at least one major hotel company — Hilton — is giving home-sharing a pass for now. The company's CEO, Chris Nassetta, says the quality, consistency and amenities that Hilton customers expect are best provided in hotels.

    Other hotel companies, like Marriott, say they can bring order and standards to the chaotic home-sharing market. Hotels promise perks they say Airbnb can't match: fully vetted properties, fluffy white towels and popular loyalty programs that let members use points to book homes.

    "The lines are beginning to blur, and depending on what kind of trip it is, sometimes a home feels better than a hotel," said Jennifer Hsieh, Marriott's vice president of customer experience.

    Marriott began testing home rentals in London in the spring. This week, it's expanding that pilot program — called Tribute Portfolio Homes — to Paris, Rome and Lisbon. Marriott says the program will now include 340 homes.

    Hotels aren't necessarily luring different customers with their home-sharing options. Instead, they're finding that existing customers want more options, says Steve Caron, vice president and head of vacation rentals for Comfort Inn parent Choice Hotels, which has partnered with RedAwning, a company that oversees 20,000 rental properties.

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    Take Craig Sowerby, an author and freelance travel writer based in Barcelona, Spain. He's a Hyatt loyalty member and usually stays in hotels, but he decided to try an Oasis apartment for a one-month trip to Buenos Aires earlier this summer.

    There were some hiccups. He had to pay upfront, months in advance, for the full $1,745 cost of his stay. He got fresh towels and sheets weekly, but there was no other cleaning. The WiFi didn't work.

    On the plus side, he said, he earned credits toward his elite Hyatt status as well as points for future stays. The apartment was also far nicer than the Airbnb he subsequently rented in another part of Argentina. But he thinks it will be a challenge for hotel chains to deliver the same standard of service in shared homes.

    "If the hotel chains end up simply offering a 'more expensive Airbnb,' then their potential market will be limited to those of us who are points or elite status obsessed," Sowerby said.

    For its part, Hyatt invested $22 million in Oasis in 2017 but in the second quarter of this year, it wrote off its investment as a loss, saying regulatory hurdles in some cities were limiting Oasis's growth.

    On Tuesday, vacation rental management company Vacasa bought Oasis and Hyatt ceased its affiliation, although Vacasa is honoring reservations that Hyatt members already made. In a statement, Hyatt said it recognizes that customer demand for alternative accommodations remains strong, and it may discuss a future tie-up with Vacasa.

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    Onefinestay — a luxury home rental company bought by AccorHotels in 2016 — offers properties like a three-bedroom villa on Maui for $975 per night.

    But AccorHotels took a similar $285 million charge in the second quarter, primarily due to losses at Onefinestay. AccorHotels also said it believes home-sharing needs to be part of its portfolio, but the business hasn't grown as planned.

    Maggie Rauch, senior director of research at the travel consulting firm Phocuswright, says making home-sharing profitable will be a challenge for hotels.

    "Does it make sense for Marriott to build a new Marriott around this flexible shared space? Is a hotel company going to buy a brownstone in Brooklyn?" she said.

    For now, Marriott's exposure is limited. It partnered with Hostmaker — a U.K.-based home-sharing management company — which scouts homes and makes sure they meet Marriott's standards. Marriott only takes a cut for homes that are rented through the Tribute site.

    But Hsieh said home-sharing does have some financial advantages. For example, Marriott has found that home-sharing customers are generally leisure travelers who stay twice as long as typical hotel customers.

    Hotels can also charge more for entire homes. Tribute offers a three-bedroom home with a full kitchen, three bathrooms and a balcony in London's Kensington neighborhood for $956 per night plus a $129 cleaning fee. It's around the corner from the London Marriott Kensington, where a guest room with a bathroom and two queen beds costs $330 per night.

    Nearby, Airbnb lists a three-bedroom apartment with a basement-level entrance for $782 per night plus a $169 cleaning fee and a $234 service fee.

    As hotels continue to experiment, the pressure from home-sharing sites isn't going away. In fact, Airbnb is making hotel-like moves of its own.

    In late September, it added rooms from 50 boutique hotels in Thailand to its platform through a partnership with a Thai hotel association. Last year, it bought Luxury Retreats, a high-end home-sharing site. And it's trying to standardize what guests can expect with a new designation called Airbnb Plus for properties that pass a quality inspection.

    Chris Lehane, Airbnb's policy director, says Airbnb considers online travel agents like Expedia its main rivals, not big hotel companies. The need for accommodations is so vast that Airbnb and hotels will continue to coexist, he says, but Airbnb will do better at providing unique places.

    But hotels aren't giving up yet. Daniel Mount, an associate professor of hospitality at Pennsylvania State University, says they should continue to dabble in home-sharing even if it doesn't promise big profits.

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    "I don't think five years from now, hotels want to look back and say, 'Wow, we should have done that five years ago,'" Mount said.