This article takes a deep dive into New York City by comparing and contrasting STR hotel data with publicly available Airbnb data.
HENDERSONVILLE, Tennessee—As Airbnb continues to sign up hosts to become the largest provider of lodging rooms in the world (1 million and counting, as reported by Airbnb), hoteliers continue to assess the threat and the potential opportunity this new competitor poses.
This article takes a deep dive into New York City by comparing and contrasting STR hotel data with publicly available Airbnb data. (STR is the parent company of Hotel News Now.)
The website InsideAirbnb.com has continued to harvest Airbnb listings and shows on detailed maps the locations and requested rates of units in the larger New York City area. We have used this data to gain a better understanding of the potential implications of this new inventory on the hotel marketplace. (Please note that we have not independently verified the InsideAirbnb.com data.)
Airbnb only shows unit listings and does not make data available for actual rooms sold, occupancy or revenue per available room. It is fair to assume, however, that the requested rate is pretty close to the achieved rate (what we normally refer to as average daily rate) because the room rate is not subject to impacts of corporate, government or AAA discounts. That is not to say that these discounts will not be available in the future, but for now it seems that for room rates on Airbnb “what you see is what you get.”
The data is available only for specific points in time, and because owners can easily add or take down listings the actual monthly supply of Airbnb units fluctuates. That said, a percentage of the Airbnb inventory is offered by rental companies that offer multiple listings, so it is likely that they show their rooms online only when they are available.
Based on this, we assert that the inventory is, if not a perfect representation, at least “directionally indicative” of supply competition and prevailing rates.
For this article we used the May 2015 hotel ADR and Airbnb data gathered on 1 May for the month.
In May, there were more than 27,000 Airbnb units available in New York City. The listing types were distributed as follows:
The traditional Airbnb model of sharing rooms or apartments makes up less than 50% of the available inventory. A larger majority of the supply is now the entire unit, and these rentals are squarely aimed at competing with hotel rooms.
To understand the impact of these rooms on New York neighborhoods, we overlaid the available Airbnb data with our hotel performance metrics by borough. STR’s and Airbnb’s market definition of New York includes some locations outside the five boroughs, but for the purpose of this analysis we excluded all properties that were not in the five boroughs.
We further only used Airbnb listings competitive with traditional hotel rooms, excluding tree houses, boats and the like. Units also had to offer a real bed (not a couch or air mattress). Listings were only counted if they were available at least five days over the next three months and had received a user review in 2015. We also excluded units that had a stay minimum of more than three nights. Lastly, shared rooms and private rooms were excluded, so the analysis focuses on entire homes/apartments.
For May, there were some 105,000 hotel rooms and more than 8,600 Airbnb listings available.
Chart 2 shows the share of the total number of rooms available by borough and by property type, hotel rooms versus Airbnb listing. For the majority of boroughs, room supply is very much skewed toward hotel rooms, and Airbnb inventory fluctuates between 4% and 6% of all units available.
Brooklyn is the noticeable exception, where the supply of all lodging rooms is made up of 38% Airbnb units.
On the outset the increases in non-traditional inventory seems to be manageable, given that the hotel industry is constructing 13,000 rooms as well, and obviously those rooms were supported by feasibility studies attesting to their respective need in the submarket.
The amount of inventory in Brooklyn might point at an under-supply of hotel rooms in that borough. In other words, Airbnb hosts, acting in their own self-interest, probably feel their units can be rented; the sum of all those rentals, around 2,600 units, could be used by a developer as an indicator for the need for more hotel rooms.
Time will tell if Airbnb rooms can be used as a “canary in the coalmine” for future hotel room development (zoning permitting).
Pricing comparisons by borough
Hotel operators now have to watch Airbnb units to understand what price points are offered in a building next door or down the street and how this affects their own pricing and room demand.
Chart 3 shows the May 2015 ADR for hotels by borough and the corresponding average Airbnb rate that was charged during May. On average across all boroughs, the hotel room rate was $289 and the Airbnb room rate was $256, but this charge obviously varies widely by submarket.
In three out of the four boroughs where comparative data is available, the average Airbnb unit rate is higher than the hotel ADR. Because we only receive hotel-level ADR and do not know what was charged for each individual hotel room, it is probably fair to assume that some hotel rooms, on some nights, are priced on par or higher than the offered Airbnb inventory.
It will be interesting to observe if yield management techniques and online-travel-agency price comparison websites will be used in the future for single Airbnb units with the potential outcome that Airbnb units will be priced consistently at or below the prevailing market rates of hotel rooms.
In Brooklyn and Queens, the Airbnb room rate is slightly higher than the hotel ADR. Notably, in Staten Island the average Airbnb rate is $213 higher than the prevailing hotel ADR. This is caused by a few high-end units with nightly rates of more than $1,000.
In general, a higher Airbnb unit price could point to either a superior room product listed on Airbnb, mispriced hotel inventory or the need for more high-end hotels in this submarket—or a combination of all three factors.
Competition by price point
As with hotel rooms, Airbnb inventory is offered across multiple price points. We slotted the ADR and listing rate into pricing silos to gain insights where the most competition is taking place.
Of the roughly 8,600 Airbnb units, more than 6,900 (or 80%) are listed at a price of less than $300. Airbnb units dominate the lower price points. In fact, no hotels are available at an ADR of less than $50, but there are six rental units available. Some 51,000 hotel rooms, or 48%, are offered in hotels that fit into the price range of $200 to $300, while 36,000 hotel rooms fall into the pricing categories of $300 and more.
Airbnb inventory is available at all price points. Some 560 Airbnb units compete with the roughly 5,000 rooms in hotels in the $500-and-over pricing silo. The majority of these units, 477 to be exact, are located in Manhattan. But even Brooklyn (75 units), Staten Island (five units) and Queens (six units) compete at the upper end of the lodging market with rates of more than $500.
There are no hotels with ADRs of more than $400 available in these boroughs. If Airbnb units are indeed an indicator of market demand, Brooklyn might be ripe for a high-end development.
Airbnb is here to stay (regulations and zoning permitting). New York hoteliers have to be aware of the ubiquity of the offering across all geographic areas and price points.
The widespread availability of this inventory makes it clear that rental-by-owner units are a formidable competitor for all traditional lodging choices and need to be considered when discussing hotel pricing strategies and new hotel development. It is true that not all listing types compete head on, but it is short sighted to dismiss the whole RBO inventory out of hand.
Guests will vote with their wallets, and a potential Airbnb market valuation of around $25 billion implies that investors see Airbnb as a viable disruptor to the global lodging environment.
We will continue to assess the available data and comment on the potential impact of RBO companies, and Airbnb specifically, on the United States and global hotel industry.
This article is just the beginning as we start to quantify these competitors.