Undercutting Airbnb

It’s been a few years since Airbnb first emerged into the public eye – and seemingly immediately into controversy.

There have been legal threats against the website around the world, most famously in New York.

Authorities have expressed concern about home-owners undermining established legal requirements for the hospitality industry. Hoteliers are worried about being undercut and losing business.

It’s a fascinating case study of reality vs perception, because as a hotel manager I haven’t seen any impact from Airbnb and I’m not really that worried about it.

I used Airbnb for the first time last year. I was in Paris with a few friends and we needed a place to base ourselves and work from.

It was a good experience and we appreciated the extra space and reduced costs compared to staying in a hotel.

But I’ve also been on a dozen other trips in the least few years where I wouldn’t have even considered Airbnb.

Hotels remain the best option for short trips and work out just as cost-effective and convenient as a private apartment.

London, like New York, would seem to be one of the cities most vulnerable to Airbnb – the hotels room rates here are steep and it’s the kind of space where you would probably want to spend more than a few days.

But as I pore over my hotel’s budget and spreadsheets, I can’t see any Airbnb effect whatsoever. I’m sure we’ve lost the the odd piece of business to private rentals, but nothing to be concerned about.

The occasional loss of a customer to Airbnb is just a drop in the ocean when compared to the real gravy of hotel profits – that’s pinching regulars from other hotels or securing lucrative agreements with local businesses who we can offer lower rates and preferential treatment in exchange for a guaranteed amount of room nights per year.

The other core business that keeps hotels ticking along is groups – be it coach parties, children’s school exchanges or one-off corporate events.

Any group that guarantees 30-40 rooms on a single night is vital to base business.

The one thing all these profiles have in common is that they will never be tempted by Airbnb – business people use hotels for a reason.

They’re easy and hassle-free. You book in seconds. Guests can check in and be up in their room in a couple of minutes. We’ve got Wifi, room service and loyalty points. I would estimate 97% of our guests would never use Airbnb

Over the weekend we focus our strategies on filling up with leisure travellers and our rates set according to what’s happening locally.

If there’s a big local event, we’ll push the rates up. If it’s quiet, we’ll offer some pretty heavy discounts.

But the core of our weekend business is selling rooms that can accommodate families and these are always booked out over the weekend. We turn people away.

Luckily, this also fits the profile of people who would be interested in using Airbnb. It makes sense to rent an apartment for four people for the same price as cramming into a small hotel room. So we might lose a little bit of business to tech-savvy consumers, but that’s easily replaced.

This isn’t to say that some hotels aren’t threatened by Airbnb.

I can think of a few examples of hoteliers who should be worried: boutique hotels that emphasise the local experience, long-stay hotels with serviced apartments, small independents and B&Bs that trade on their local hospitality, and hotels in small markets and near tourist attractions. These are all places with less turnover than a 100+ room hotel and have less margin for error.

They also duplicate the same experience as Airbnb.

The truth is that in London and in New York and in most large urban areas, the number of available hotel beds falls well short of demand so there is always a cushion for hoteliers in the event of an economic downturn.

Small markets don’t have that luxury, especially as they’re fighting over a much small pool of customers.

So maybe there have been travellers who planned to stay at our hotel while visiting London for a week and decided to use Airbnb instead and I get that.

There’s not much we can really do about it. It’s a completely different product and there’s no sense in trying to compete with it when I can get much better results by trying to undercut and one-up the hotel across the road.