According to Morningstar, Marriot, the largest hotel chain in the world was valued at 60b in 2019, compared to Airbnb’s enterprise value of 35b. Although there is quite significant difference in value, even greater is the time they’re around. Airbnb, a Silicon Valley start-up saw day-light in 2008, Marriot was founded in 1927. While Airbnb has been around for a little over a decade, Marriot and other major chains have only started to take Airbnb seriously in the last 4 to 5 years. This success is mostly thanks to the fundamentally different way Airbnb approaches the accommodation sector than selling only the product of rooms.
In the near past, hotel chains purported the Airbnb home sharing sector as a different product with different functionalities. ‘A family seeks comfort and safety and will therefore choose a hotel, over somebodies’ home’. Now, after choosing to ignore Airbnb for long, the big chains see there is absolutely no way around this ‘sharing economy’ phenomenon. The chains have seen the success of the digital platform and decided to put up with a fight. Hotel chains are increasingly deciding to differentiate by acquiring existing sharing platforms themselves.
Accor hotels is leading the way. In April 2016, Accor took significant leap into the sharing economy when it bought a luxury home-rental platform Onefinestay for EUR 148m. In another sign of Airbnb’s success, Marriot joined the race with the acquisition of UK-based home rental firm Hostmaker to launch tribute portfolio homes. The hostmaker portfolio offers more than 1,500 properties in nine cities across six countries including: Bangkok, Barcelona, Cannes, Florence, London, Madrid, Lisbon, Paris and Rome.
Airbnb is increasingly putting up with competition from hotel chains. Question rises who will be the winner in the industry? The right answer will probably have to do with who creates the most value in the booking experience, for both the supply and demand side.
References:
https://www.morningstar.com/stocks/xnas/mar/valuation
https://www.statista.com/statistics/339845/company-value-and-equity-funding-of-airbnb/
https://hospitalityinsights.ehl.edu/hotel-chains-airbnb
https://www.siteminder.com/r/trends-advice/hotel-guest-experience/guest-experience-hotels-customer-satisfaction/
Airbnb vs. HomeAway: Who is Winning the Race to the Top of the Vacation Rental Industry?
Was drawn to your post from the title, nice read, Noud Bouwhuis! I think this is a classic case of disruption; only now the hotels are fighting back, after Airbnb has been around for (too) long and are so big that fighting back becomes increasingly more difficult. As you said, hotel chains originally saw Airbnb as delivering a different product than their own, which in hindsight was a big mistake. I think if Airbnb chooses to go into real estate and move even more into the business model of traditional hotels, it will end up as the winner takes it all.
Hi Noud,
Interesting article you wrote on the increasing competition on Airbnb’s business model. From the ocnsumer point of view, I believe that this increasing competition is actually an advantage. Most probably, the prices of accommodation will decrease as the supply of ‘Airbnb like’ accomodation increases and the profit margins decrease. Consequently, the former hotel chains and Airbnb will put more effort in stealing each other customers, by lowering the prices even further or offering better services. This will all be advantageous for the consumers like us. I think that in the end, it will become more standardized and services will be less differentiated in terms of price or options, eventually leading to a saturation of the market and potentially no ‘real’ winners (besides the consumers). What do you think about this?
Best,
Cas