Hotels VS AirBnb: The War has not Started, yet.



AirBnB / Phil Campbell (Flickr)
AirBnB / Phil Campbell (Flickr)

One million listings in 190 countries and almost five thousands are in Ireland. AirBnb has not ceased to grow since its foundation in 2008. Connecting those seeking short-term room with hosts, whose offers range from a budget-friendly mattress on a living room floor to a castle suite, it has become popular amongst homeowners looking to earn some extra money.

AirBnb’s expansion has started to worry the Irish hotel industry even if there is no evidence of a true competition yet. “It is not possible at this stage to determine the effect unregistered accommodation service providers are having on the hotels sector, although it would appear to be negligible. Ireland’s hotel sector is highly regulated”, said the Irish Hotels Federation. In 2014, average room occupancy rates for Dublin hotels stood at 73%, which was an increase on the 2013 figure of 70%. At the same time, AirBnb announced that Ireland was its new international headquarters, doubling its headcount from 100 to 200. The company also took on €350m in new funding to expand its services, valuing the firm at over €7bn.

AirBnb does not feel comfortable with the notion of unfair competition for the hotel Industry that it has been accused of. The word “hotel” never appears on the company’s “About Us” page. AirBnb describes itself has a “trusted community marketplace” and a platform that “connects people to unique travel experiences”. This description positions AirBnb quiet far from what hotels with three stars or more offer. The vice-president of The Ritz-Carlton group recently claimed on The Economist that she had not even heard of AirBnb. And AirBnb itself agrees, arguing that it does not displace existing lodging but is creating new demand. “I’m optimistic that there isn’t going to be a war” with hotels, said Brian Chesky, co-founder of AirBnb.

(Translation: Incredible story of this startup)

Cheap hotels are the one truly in competition with AirBnb. I have meet Kevin Delma, a young traveller and a former regular client in hostels. This year, the 23 years-old student has been traveling in Ireland and England and he only booked AirBnb’s apartment. “I liked the atmosphere in hostels but the price does not reflect the service. You share your room with ten people, the safety is not always very good, and the bathroom is dirty. For the same price on AirBnb I have my own room, my own kitchen, my own shower”, said Kevin. “I don’t think I will return in a hostel now”.

If the situation is not alarming yet, a study made in the United States of America is less optimistic for the hotel industry. Generally, they could not find a significant influence from AirBnb on business and luxury hotels. But in places where it has established a presence, it cut the revenues of budget hotels by 5% in the two years to December 2013. If AirBnb were to keep growing at its current rate (its listings are doubling every year) the study suggests that by 2016 the dent in budget hotels’ takings will be 10%.

“All accommodation services should be regulated and classified” – said the Irish Hotel Federation

For now, the war between the Irish hotel Industry and AirBnb remains quiet but some questions are starting to be raised. “If someone is letting out their room in this way, is there a fire escape?” “Are there fire alarms? Is there insurance cover?” asked Stephen McNally from the Irish Hotels Federation in the Irish Independent. “Ireland’s hotel sector is highly regulated. It has one of the highest standards of service and quality of hotel stock in Europe and indeed across the world. In this regard, the Irish Hotels Federation believes that quality assurance is paramount and that all accommodation services should be regulated and classified. Not only do unregulated accommodation providers pose a risk in terms of health and safety but they raise serious issues in terms of insurance cover and lack of adequate systems for redress for guests”, said the IHF. Questioned about these issues, AirBnb did not answer my emails.

France, Spain, Germany and even the United States of America where AirBnb was born, have introduced new regulation for short term-rent. In Barcelona, AirBnb has just been fined €30,000 for breaching local tourism laws. In Berlin, where AirBnb has been partly blamed for increasing rents, city officials have created a new housing law banning regular short-term letting of rooms without permission from the authorities. Since the 1st of March 2015, AirBnb vistor’s in Paris need to pay the same tax has they would pay for a hotel room. This measure will bring in €40 millions in one year to the country. Recently, the French hotels association Union des Metiers et des Industries de L’Hotellerie, sent a letter to the Prime Minister Manuel Valls, denouncing the unfair competition. They asked the government to forbid private short-term rent for less than 7 days.

Hotel taxes (Slate)
Hotel taxes (Slate)

But what are AirBnb user thinking about this competition between the hotel industry and the online platform? I asked Pascal Francis, a former hotel owner in Paris who is now renting his apartment of Porto-Vecchio (France) on AirBnb. “AirBnb’s situation is a difficult subject because in one hand, people are happy to earn a little bit of money by renting their good but on the other hand they don’t want to see the hotel industry disappear because it is often essential to their country economy and good health”, he said.

“For the near future, hotels will have a big problem with AirBnb. It is easy to use, cheaper and it answers to what young people really need when they go somewhere for the weekend or more: freedom”, explained Pascal Francis. As a former hotel owner, I cannot blame people who do not choose to go in a hotel”.

According to the Wall Street Journal, AirBnb’s benefice was €250millions dollars in 2013.

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