The effects of maturing short-term rentals on US hotels
The effects of maturing short-term rentals on US hotels
10 SEPTEMBER 2019 8:21 AM

Industry and data experts during three sessions at the 2019 Hotel Data Conference shared their research and thoughts on alternative accommodations and how they affect the hotel industry.

NASHVILLE, Tennessee—When alternative-accommodation companies started popping up, many hoteliers wondered whether consumers would really rather stay in a stranger’s home than a nice, clean hotel room.

Now that it’s abundantly clear these short-term rental platforms aren’t going away, hoteliers are doing everything they can to better understand how they work and what makes them an attractive alternative to what hotels offer. In three sessions at the 2019 Hotel Data Conference, industry and data experts shared their research and perspectives on short-term rentals and how they affect the hotel industry.

A maturing industry
During the “Alternative accommodations: Dissecting an evolving hospitality landscape” session, panelists from the alternative-accommodations space spoke about some of the changes short-term rentals have undergone over the years.

Similar to how hotels started out being mostly independents and then consolidation led to branding, there’s a similar development in short-term rentals, said Dan Peled, founder and CEO of Dormigo. Home sharing has always existed, but units were harder to find, he said. Now technology allows people to book these rentals much easier.

“Technology combined with the home-sharing economy caused this whole thing to happen,” he said.

The home-sharing space is seeing professionalism increase, said Juan Miguel Rivera, director of revenue management at Domio. Fifty percent of the feedback Airbnb receives is complaints, and that’s why third-party companies come in to provide amenities, services and 24-hour guest support, he said.

Alternative-accommodation platforms can offer a superior experience for some travelers and small groups, Rivera said. A group of six to eight people can have a difficult time trying to book a hotel, especially given the price, while going through Airbnb makes the price per head more affordable. Having full kitchens, living rooms, big TVs makes it easier to host business travelers for a conference, he said.

“Sometimes the washer and dryer becomes a deciding factor for me,” he said.

Professionalism in this space is moving quickly now that companies like Airbnb have been around for about 10 years, Rivera said.

“It’s definitely in the early age,” he said. “It’s a long game. We’re seeing how people are shifting. Loyalty plays a big part, especially with the business travelers who want points to travel with their families. That will change.”

Most people working in this field come from some kind of tech background, said Tiffany Baker, head of revenue management at Lyric. That means they don’t have to deal with the frustrating legacy systems that large hotel companies cope with.

“We started with the technology and moved into the hospitality space, so it becomes really seamless and thoughtful about the experience of using the technology,” she said. “I think that’s how it’s changing and evolving, as well. The type of people we hire internally, we don’t necessarily require a hospitality background, and it’s bringing a lot of other industries into this hospitality and technology sector.”

Her company started as a data company and technology pricing system, she said. Vacation rentals started using her company’s revenue management system to price on Airbnb before Lyric entered the hospitality sector. That advanced the company to price and scale differently, allowing it to look and act differently than hotels.

Short-term rental companies use tech to be present, Peled said. There’s no lobby for guests to come and ask questions, so the companies need to solve a lot of friction with tech.

J.D. Power adds alternative accommodations to satisfaction study
For the first time in 2019, J.D. Power added questions about alternative lodgings to its annual Hotel Guest Satisfaction Study. Results showed traditional hotels can avoid losing customers to alternative lodgings as long as they show them they can meet their specific needs.

For this year’s study, analysts collected data from travelers who use only alternative lodgings, those who use only hotels, and those who said they use both. The objectives, according to J.D. Power Senior Manager of Consumer Insights Jennifer Corwin during her presentation, “Can disruption lead to guest satisfaction,” were to determine how alternative lodging experiences affect hotel guest experiences, why disruption has an impact on guest experiences and how hoteliers can capitalize on that disruption.

She shared some of the results—largely focused on the group of guests who reported using both alternative lodgings and hotels—at the Hotel Data Conference.

“You can have guests who use alternative lodgings who are just as loyal to your hotel brand or property, if you do the right things,” Corwin said.

While those who use both types of lodgings and those who use only hotels reported price and location as the top deciding factors when choosing a place to stay, alternative-accommodations users also ranked space, uniqueness of the property and authentic, local experiences highly.

Corwin said when hotels capitalize on those elements—unique space and authentic experiences—“satisfaction and loyalty increase substantially.”

Also, the better hotels are at communicating the services and amenities they offer, the more guests will use them—and pay for them, she said.

“When alternative-lodging users stay in hotels, they spend less time in the guestroom; they’re more likely to experience things, like using the internet, the pool, the fitness center, laundry services and the spa,” she said. “When people do the things your hotel has to offer, they’re more satisfied. They see the value in it. The more you can get people out of their guestroom, the more satisfied they are.”

Her takeaway for traditional hoteliers is to promote amenities and services better.

“Many guests are having alternative-lodging experiences; this isn’t new,” she said. “But when they do stay at your hotel, they can be more satisfied and are just as loyal. Once you get them there, all you have to do is satisfy them. Guests choose because of different travel needs and if you have something … that helps meet those needs, market to it. Alternative-lodging users tend to be more informed guests, and more informed means more satisfied.”

Short-term rental top 10 US market overview
During a Data Dash titled “Short-term rentals: How urban rentals are changing the accommodations landscape,” Lyse Perrigo, senior business development associate, hotels at STR, and Kelsey Fenerty, research analyst at STR, examined short-term rental and hotel trends in 10 of the highest-growth cities in the U.S. (STR is the parent company of HNN.)

The top 10 cities highlighted in this data are Atlanta; Chicago; Houston; Los Angeles; Miami; Nashville, Tennessee; New York; Orlando, Florida; San Francisco and Washington, D.C.

Out of the top 10, Perrigo said short-term rentals make up less than 30% of the total supply. Miami, Los Angeles and Orlando have the highest concentration of listings. Orlando is interesting, she said, because “they probably had a lot of vacation rentals prior to Airbnb because of being where Disney is located.”

Looking at only short-term rental listings—specifically studios and single bedrooms—that are comparable to hotels, the sample makes up less than 25% of total listings. Perrigo called out Orlando’s location again, noting that two-plus bedrooms are more accommodating for families. LA, Miami, San Francisco and Washington, D.C., have the most hotel listings comparable short-term listings, though it’s still under 25%, she said.

Supply growth of hotel-comparable short-term rentals in high-population cities is decelerating, Perrigo said. However, Atlanta had almost 140% year-over-year growth in February 2019 due to hosting the Super Bowl.

Cities with stricter alternative-accommodation regulations, such as New York, San Francisco and Washington D.C., have recorded low to negative year-over-year supply change, she said.

On 1 July 2018, Orlando enacted new regulations stating that short-term rentals cannot be rented without a host present and hosts can only rent up to 50% of their homes at a time, Fenerty said. An important thing to note is that there was an amnesty period from July to October to help short-term renters to transition.

Data shows studio and one-bedroom supply growth steadily decelerated during that grace period. But two-plus bedrooms had a huge growth spike in the spring after a “winter dip,” which is common.

“These regulations are emphasizing the importance of larger short-term rentals in Orlando because the smaller studio and one-bedroom, they’re … almost illegal, depending on your zoning,” Fenerty said.

When looking at occupancy comparisons between studio and one-bedroom short-term rentals and hotels, Fenerty said hotels have higher occupancy than short-term rentals in all of the top 10 cities. She said that is also true of many of the other markets they studied.

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