Airbnb and London's competitive landscape
Airbnb and London's competitive landscape
04 NOVEMBER 2015 7:44 AM

Airbnb listings continue to penetrate the London market—often at price points above that of average hotel units. 

LONDON—Global travel demand is ever increasing, with international arrivals growing between 3% and 4% year on year—and with it, growth in the hotel supply and alternative-accommodation options. 
Across Europe, alternative accommodations are not a new phenomenon; pensions, pub accommodation, hostels and family stays have long existed. What has changed is the distribution platform providing an accommodation owner the means to easily and seamlessly list and let their property(ies) and connect to guests. Airbnb is one of the most recognizable of these “peer-to-peer” or “rental-by-owner” companies, and its inventory continues to increase across the globe. 
This article looks at the existing inventory of hotel rooms and Airbnb units in London, home of HNN sister company STR Global. We gathered Airbnb inventory from third-party but were unable to independently verify its data. The hotel performance data shown is from STR Global’s supply database and includes 1,355 hotels, representing approximately 134,000 rooms in the London boroughs.
(STR, HNN’s parent company, conducted a similar analysis of New York City. Read “Digging to the core of Airbnb’s Big Apple data.”) 
The website has continued to harvest Airbnb listings and shows on detailed maps the locations and requested rates of units in the London 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 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 from 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 hotel performance data for the 12 months ending 31 August 2015 and Airbnb data gathered on 3 September 2015. 
Inventory impact
As of 3 September, there were 25,361 Airbnb units available in London. The listing types were distributed as follows: 

If we combine the 25,361 Airbnb units with hotel rooms, there are some 159,000 total units available (16% are Airbnb units and 84% are hotel units). 
It is worth noting that the original Airbnb business model, which centered on sharing accommodations, seems to have given way to a model where the majority of units are entire standing homes and apartments. It is probably not a stretch to assume that a business or family leisure traveler likely would not choose a shared or private room but would opt for an entire unit on Airbnb. 
To understand the impact of these rooms on London neighborhoods, we overlaid the available Airbnb data with our hotel performance metrics by borough. STR’s and Airbnb’s market definition of London includes some locations outside the boroughs listed below, but for the purpose of this analysis we excluded all properties that were not in the 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). Shared rooms and private rooms also were excluded, so the analysis focuses on entire homes/apartments with fewer than four bedrooms. We also attempted to remove inactive listings from our analysis. 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. The host response rate also had to be greater than 50% with the calendar updated within the past six months. 
That left 11,000 Airbnb listings we believe to be competitive with hotels. 
The total universe of accommodations (hotel rooms plus Airbnb listings) then decreases to 145,000 units (8% are Airbnb units and 92% are hotel units.) However, this is assuming that all Airbnb listings and hotel rooms are available the same number of nights, which is far from true. 
Chart 1 shows the number of hotel rooms and Airbnb listings by London borough. Most are in Westminster, which holds 27% of all London hotel rooms and 17% of all Airbnb listings. 
Westminster plus the second two largest boroughs, Camden and Kensington and Chelsea, has 51% of London’s hotel supply and 38% of Airbnb’s listings. Notably, 11% of Airbnb’s London listings are in Hackney, while only 1% of hotels are in this borough. 

Lewisham has the largest share of Airbnb listings (49% of all units) of any borough, followed by Hackney (42%). In 20 of the 33 London boroughs, the ratio of Airbnb units to hotel rooms is around or less than 5%. 
Under the Greater London Council (General Powers) Act 1973, the use of residential premises for temporary sleeping accommodation for less than 90 consecutive nights in London is a change of use, for which planning permission is required. London residents faced a possible fine of up to £20,000 ($30,850) for each offense. 
This 30-year legislation was overturned this year with legislation to relax the restrictions through Clause 33 of the Deregulation bill that allows short-term letting of residential accommodation in London. In May, the Queen signed the legislation to allow London residents to rent out or share their homes for up to 90 days a year without permissions or registration.  Since the deregulation bill passed, Airbnb listings in London have increased 38% in five months.

Pricing comparison by borough
Airbnb units are offered at a wide variety of price points, as shown in the table below. In 22 of the 25 boroughs with sufficient rate information, the average Airbnb rate is actually higher than the prevailing hotel ADR, which is likely due to the fact that a guest is renting a whole home or flat rather than a single hotel room. 
Conversely, the hotel ADR in Westminster is £42 ($64.78) higher than the Airbnb average rate. Hackney and Lambeth, the other two boroughs with higher hotels rates, show hotel ADRs of £16 ($24.68) more than Airbnb’s average listing price. 

Borough Hotel ADR (£) Airbnb Avg. (£) Price Difference (£)
Barking and Dagenham 58 140 81
Barnet 66 98 32
Bexley n/a n/a n/a
Brent 74 99 25
Bromley n/a 95 n/a
Camden 131 153 22
City of London 153 165 12
Croydon 57 97 40
Ealing 78 105 27
Enfield n/a 131 n/a
Greenwich 83 114 31
Hackney 133 117 -16
Hammersmith and Fulham 87 127 40
Haringey n/a 90 n/a
Harrow n/a 72 n/a
Havering n/a n/a n/a
Hillingdon 71 90 19
Hounslow 67 149 81
Islington 99 124 25
Kensington and Chelsea 148 170 22
Kingston upon Thames 71 90 20
Lambeth 134 118 -16
Lewisham n/a 98 n/a
Merton 76 121 45
Newham 89 99 10
Redbridge 65 101 36
Richmond upon Thames 90 150 60
Southwark 131 138 7
Sutton n/a 48 n/a
Tower Hamlets 117 123 6
Waltham Forest 55 87 32
Wandsworth 89 122 33
Westminster 211 169 -42
Total London Boroughs £135 £139 £4
Competition by price point
The distribution of hotel rooms and Airbnb listings by price follows a similar bell curve pattern with the bulk of the listings around the low- to mid-priced options. The majority of hotel rooms (45,000 rooms, or 46% of all supply) and Airbnb listings (5,800 listings, or 52% of all supply) fall in the £100-199 ($154-$307) price point. 
Airbnb’s largest share of total accommodations falls in the £300-399 ($463-$615) price range with 12% of all listings/rooms. Airbnb’s share of total accommodations is reduced to 3% for the under £50 ($77) and £500-plus ($771-plus) price points.

While the new law restricts rentals to 90 days a year or fewer, Airbnb units (and others) in the Capital are here to stay. The competitive landscape is no longer just the hotel down the road; it also might be the flat next door. 
Hoteliers in markets around the globe have sought ways to work with Airbnb hosts, from providing cleaning services to reserving for overbooking and more. They also should understand the prevailing rates on Airbnb in their respective boroughs or neighborhoods. This will paint a more detailed picture of the room supply and price points in their market area and will supplement strategic discussions as budgets are discussed for next year. 
We will continue to monitor the available data of rental-by-owner companies and report further as more data becomes available.


  • Jason Grist November 4, 2015 10:43 AM

    It's always interesting to see this comparison of the accommodation 'Establishment' versus sharing economy and it will surely become regularly big news in the coming months and years. The reality is however that the proof is on the pudding - any meaningful analysis will be in conversion of customers and revenue generation. Even the pricing comparison here may well also be distorted as reality bites as it is not clear the wider market is willing to pay the often fanciful prices listed by homeowners on a larger scale and that's before (the cost of) any regulation is imposed on owners. What I also miss is in the wider 'landscape' is London's thriving serviced apartment sector which is conspicuous by its absence. Almost 40% of's inventory in London is classified as an apartment and is growing well. By virtue of their similarity to the bulk of AirBnB-type accommodations, they arguably stand to be the biggest winners or losers in a battle with AirBnB, especially in the battleground of business travel.

  • Aline Hay November 11, 2015 5:29 AM

    How is the 90 days per year cap monitored and regulated if at all? My concern is that the revenue from much of this everincreasing market goes untaxed which will lead to a position of unfairness to regulated and operating hoteliers and registered Band B's. There are also health and safety aspects with fire regulations, HMO licensing etc : premises licensed to receive paying guests not related to each other are closely monitored and complying with the relevant legislation is very expensive annually : are Councils and the Revenue going to inspect each Airbnb destination ? That is what should happen, but I doubt it

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