327 | No Place Like Home: What hotels can learn from Airbnb’s pandemic-recovery plan

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SINGLE-UNIT OWNERS: Airbnb reports most of its hosts are everyday people who own and rent out one home on its booking platform. Home-sharing distribution networks are attracting record numbers of bookings as travelers mix business and leisure and seek longer stays in environments they feel they can control.

Home-sharing guests stay longer, vacation with family and value local connections, research shows

In an April survey of travel consumers, Makarand Mody, an associate professor at Boston University School of Hospitality Administration, and his fellow researchers learned that people planning a trip this year are less likely to stay in hotels and more likely to book alternative lodging such as private homes listed on Airbnb.

Mody’s day job is teaching about hospitality marketing and branding. On the side, he focuses his research on Airbnb and the sharing economy. In April 2020 and April 2021, Mody and his research colleagues studied how the coronavirus crisis has impacted the short-term-rental sector.

What they found should put the hotel industry on high alert.

Over the 12 months of the coronavirus pandemic, researchers discovered, more people grew comfortable with home sharing. “The percentage of people in our surveys who indicated that they would choose a hotel over an Airbnb actually halved between April 2020 and 2021 for both domestic and to some extent for international travel as well,” Mody said.

Meantime, “the percentage of people who indicated they would choose an Airbnb over staying at a hotel actually doubled over that one-year period.”

Mody and his team will spend the summer break writing the report that will include the hard numbers and empirical data. Anecdotally, people surveyed shared why they preferred renting a home over staying at a hotel. Their changing preferences are partially related to COVID-19 but there are other reasons as well, including longer lengths of stay.

Mody chalks that up to coronavirus shutdowns when people were forced to shelter in place and work from home. As communities and travel markets began to reopen, people who were cooped up preferred renting homes where they could blend work and leisure.

“Also what helped was many (home-sharing) hosts were actually reducing prices for long-term stays to incentivize people to actually stay,” Mody said. “When you’re staying for longer, something like a home and Airbnb becomes a more attractive option than perhaps staying in a hotel for a month. I know of people who’ve stayed for longer. They’ve rented homes for three months just to be able to sort of live and work out of a different space.”

NO PLACE LIKE HOME: Airbnb and other home-sharing distribution networks are attracting record numbers of bookings as travelers mix business and leisure and seek out longer stays in environments they feel they can control. Episode 327 of Lodging Leaders podcast explores why many people prefer houses over hotels and what the transient lodging sector can learn from the trend.

‘Changed Forever’

In May, Airbnb held its inaugural first-quarter earnings call. After undergoing an initial public offering in December, the quarterly report was an historical event. But what is perhaps even more newsworthy is the short-term-rental booking platform surpassed 2019 first-quarter revenue levels in the first three months of 2021.

The company reported $887 million in revenue in the first quarter of this year, a 5 percent increase over the first quarter of 2020.

Brian Chesky, CEO, noted the amount also exceeds what the company earned in the same period in 2019.

He shared an interesting observation in the call with analysts.

“Our business improved without the recovery of two of our strongest historical segments: urban travel and cross-border travel,” he said. “We expect the return of urban and cross-border travel to be significant tailwinds over the coming quarters.”

The coronavirus crisis led many hotel and lodging companies to rethink their strategies and to return to the fundamentals of operating a business. According to Chesky, Airbnb was no different.

He noted that the pandemic year 2020, was “when travel fundamentally changed forever. Airbnb changed as well. We sharpened our focus on our core business of hosting. And we got back to our roots, back to what is truly special by Airbnb: the everyday people who host their homes and offer experiences. And we emerged as a stronger and more efficient company. Our business rebounded faster than anyone expected.”

Although Airbnb’s Chesky says individual property owners or amateur hosts make up the bulk of its business, pre-pandemic, the platform was attracting more and more hospitality professionals investing in and managing the rental units for investors.

PRO-AM MANAGEMENT: The Information, a tech newsletter, published in report in January 2020 using AirDNA data that shows the growth in 2019 of the number of third-party managers of private homes on short-term-rental booking platforms such as Airbnb. During the pandemic year 2020, that trend shifted and Airbnb as well as AirDNA report the majority of home sharers are everyday owners.

The Information, a tech newsletter, reported in January 2020 that the number of professionals managing full-time short-term rental properties on Airbnb grew by 36 percent the year before.

But that was before the pandemic hit and travel consumers’ behavior changed. In response to the crisis, Chesky said, Airbnb sharpened its focus on recruiting more amateur hosts through a new marketing campaign. It also launched a flexible booking program for prospective guests as uncertainty continues to be a factor in travel planning.

Chesky said travel will rebound and Airbnb wants to be prepared.

Two weeks after the earnings call, Airbnb announced a rollout of 100 upgrades to its booking platform that will make it easier for travelers to shop and book and for hosts to join.

According to one home-sharing analyst, the short-term-rental business is already in a rebound.

Jamie Lane is vice president of research at AirDNA, a data and analytics firm that tracks the short-term rental sector.

“We track demand in two different ways. One is when the booking is made and the other is when the stay happens,” he said. “January through March, we saw unbelievable booking activities. People making reservations for stays throughout the spring and summer. That led to April being the first month where demand based on stays was fully recovered back to 2019 levels.

“We’re calling April the recovery month for the short-term rental industry in the U.S. and now it’s beginning the next expansionary period,” Lane said. “This summer is going to be a blockbuster summer for the short-term rental industry.”

BUSINESS IS BACK: Short-term-rental booking platforms such as Airbnb saw April business performance recovery to April 2019 levels, reports AirDNA, which tracks the short-term-rental or home-sharing sector.

Lane’s research reflects what’s going on in the lodging industry as a whole – leisure travel is driving the demand for overnight accommodations. Markets in resorts, beaches and mountain getaways are hot. Small towns are also attracting new visitors as travelers stay away from big cities and dense metro markets for now. Short-term rental bookings are down 50 percent in cities and down 25 percent in suburban markets.

Lane shared April’s short-term-rental business performance in a blog he published on May 12th:

  • S. short-term-rental demand has recovered to 2019 levels of demand.
  • In April demand increased by 66.4 percent over 2020 levels and 5.4 percent over 2019 levels.
  • April marks the first month since March 2020 where demand for short term rentals exceeded 2019 performance.
  • When looking at the other largest countries, the U.S. is an anomaly with global demand still 31 percent lower than in 2019 in April.

As Chesky observed, Lane noted many of the hosts on Airbnb and Vrbo, a short-term rental platform owned by Expedia, are single-unit owners.

“The big difference between the hotel industry and the short-term rental industry is in hotels you have owners, operators, investors and the brands,” Lane said. “A lot of the short-term-rental industry is just the 4 million hosts. It’s people renting out their homes. The vast majority of units are managed by people with just one unit.”

Lane said the short-term-rental industry is seeing more professional managers emerging, but “of the 5.6 million units globally active on Airbnb almost half of those – 3 million something – are just one person managing one unit and those connections happen every day.”

HOMEBASE: “Airbnb Report on Travel & Living,” published in May, reveals shifts in travelers’ behavior. Among the most noticeable trend is families vacationing together in rented homes. Though the practice is far from new, Airbnb’s data shows more families are vacationing that way. “Family travel on Airbnb for the summer is at an all-time high, with the majority of our summer bookings being at listings large enough for five or more guests,” the report reads. “Families are leading the redistribution of travel from all the same places to everywhere by seeking out more out-of-the-way places. And they are using homes for longer stays to live anywhere, together. About 95 percent of travel on Airbnb for this summer is booked at entire homes, compared to about 80 percent in summer 2019.”

Hotels that have been open throughout the pandemic and are catering to leisure and essential travelers have seen guests stay longer than before the crisis. The short-term-rental sector is no different.

“It’s a combination of both the digital nomad culture of people wanting to stay in different areas and book Airbnbs, and Vrbos to do that,” Lane said, noting length of stays have gotten longer in large cities and urban areas. “Traditionally, maybe you would have stayed for two or three days, and now you’re going to make a week out of it, stay the weekend. If you’re going to make that trip you might as well make the most out of it.”

As such, Lane said, longer-staying guests want more than a bedroom and a living area and kitchen are valued amenities.

Having a full option of a bedroom, living space and kitchen is why business at extended-stay hotels has done so well throughout the coronavirus pandemic.

RATE INCREASES: The Highland Group report on extended-stay business for April shows, for the fifth consecutive month, economy extended-stay hotels posted positive change in ADR. ‘The 10.9 percent increase was the strongest monthly gain since the segment’s ADR started increasing in December 2020,’ reads the report. ‘The mid-price segment reported the largest gain in ADR, partly because it had posted the steepest monthly fall in ADR one year ago.’

The Highland Group reported that in April, the extended-stay sector neared the same level of business it did in April 2019.

In extended-stay, however, the pandemic comeback is a bottom-up recovery.

Economy-tiered hotels’ performance metrics this past April surpassed those recorded in April 2019.

At the same time, upscale extended-stay properties reported the largest increase in RevPAR but had yet to recover 2019 revenue levels.

The resiliency of the extended-stay hotels sector has attracted new competitors.

Besides Airbnb and Vrbo are companies that contract short-term rental agreements with apartment developers and landlords. WhyHotel and Sonder are examples of that trend, which analysts expect will strengthen once Sonder launches its IPO this year.

Also entering the long-term-stay arena is a re-imagined extended-stay brand called StayAPT.

During the Hunter Hotel Investment Conference in May, Lodging Leaders interviewed StayAPT CEO Gary DeLapp about the new product launch and what he predicts for the extended-stay sector.

DeLapp’s hospitality career has been entrenched in the extended-stay sector. He’s held leadership roles at Homestead, Extended Stay America and Woodspring Suites.

RESIDENTIAL FEEL: StayAPT is a newly launched extended-stay-hotel brand that is designed to operate more like an apartment. Suites are at least 500 square feet in size with a bedroom that’s separate from the living and kitchen areas.

DeLapp said he expects the model to appeal to leisure and business guests looking for longer-stay options. Currently, StayAPT lengths of stay mirror its competitors, an average of 18 nights. But DeLapp believes as more StayAPT accommodations open across the country, the brand will attract corporate travelers on long-term assignments.

“With what’s happened with the pandemic is people are looking for a safe, secure environment, very much like home,” DeLapp said. “Our product lends itself to do that in terms of apartment feel to it. The business world is not opened up yet; so I think only good things are going to come from this.

“As you look back the last three downturns, the extended-stay segment is outperformed the rest of the industry each time. So I think it’s becoming more and more mainstream and it’s evident from what happened with during the pandemic.”

To give StayAPT an even more multi-family feel, the property’s manager lives on site. DeLapp said the labor model harkens back to the time when he oversaw the former Homestead brand.

“To get that residential feel very much like multifamily or corporate lodging, having a manager on site to be there for the needs of the guests is very important. Back when we incubated Homestead Suites, the managers lived on site. That’s going back to 1996, ’97, ’98. Things have come full circle.”

DeLapp said the pandemic has only strengthened the extended-stay sector and further empowered the business model’s disruptors.

As the sector evolves, DeLapp believes long-term lodging will become more mainstream. “It will continue to attract new customers, people who’ve never stayed in an extended-stay hotel before.”

StayAPT has five properties open and occupancy is near 80 percent and demand was high during the pandemic shutdowns because many people continued to work. DeLapp refers to the traveling workers as “gray collar.” These are employees in technology, health care, construction. They’re the supervisors, the engineers and project managers. “A lot of them never stopped working and they’re really driving the business now,” he said. “So I think when the business world really opens up, it’s just going to create more demand for our product and for extended stay in general.”

Like hotels, Airbnb hosts now offer strong Wi-Fi to attract guests who plan to blend business and leisure.

Mody with Boston University said his team has spotted another traveler trend that hotels in particular might want to pay attention to.

His research reveals travelers who book on Airbnb are drawn to property sites in which the host is profiled.

“There’s these very overt descriptions of hosts that you’ll find with every Airbnb listing,” he said. “So we added a similar description for the hotel employees saying, ‘Hey, this hotel has fun and friendly employees or it has professional employees waiting to cater to your every need.” The additional information increased the hotel’s value in the guest’s mind “and moved the needle a little bit towards making them want to choose a hotel over an Airbnb.”

Mody’s research team also added information on hotel websites about nearby services and attractions available to visitors. “We found that when you tell people things like the hotel is located in the trendiest neighborhood with the coolest restaurants and bars around, we actually found that people were more inclined to choosing that hotel,” he said.

“These are some things that we thought hotels can actually borrow from. The people and the neighborhood can bring that hotel alive.

“Sure people want to check out photos of your rooms. They want to look at the services and amenities that you offer. Those are all great, but what’s going to provide you with that advantage that makes you people choose you over someone else? Those are the things that we think when you add them, something that you borrow from Airbnb’s playbook that really can move the needle your way.”

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