Analysis: is Airbnb a threat to hotels?

When Airbnb first burst onto the tourism scene in 2008, offering people the chance to find cheaper-than-hotel accommodation in a number of cities, the millennials snapped it up. The firm reportedly has its fingers in the pies of more than 35,000 cities and 192 countries across the world — it’s growing, and how. Airbnb is expected to post revenues of US $900 million in 2015, and the company is valued at more than $25 billion — which is more than the market value of many hotel chains.

In the Middle East, luxury accommodation is very much the norm — even though mid-market is rearing its head —and the lure of paying less for rooms is attractive for tourists. Although, it could be argued that Airbnb is more a competitor of hotel apartments rather than hotels. However, France’s hoteliers didn’t think so. They raised objections to Airbnb, and in December 2015, Airbnb’s deal with Voyages-SNCF.com, a unit of France’s national rail monopoly, was cancelled amidst pressure from hospitality trade unions.

The Hotel Association of New York City (HANYC) also conducted a year-to-date study from September 2014 for 12 months, which revealed that the service had a direct negative impact to the hotel industry of New York City —US $451 million worth. However, Airbnb has carried out its own studies in the past to show that it is not harming, rather it is helping the economies of cities it has offerings in.

However, in the UAE for example, subletting without the consent of the landlord as well as a licence to operate what is considered a “holiday home” is illegal.

At the time the holiday homes law was introduced, Khaled Bin Touq, executive director, licensing & classification sector at Dubai Tourism, commented: “We have made great progress in setting up regulations for holiday homes. These are designed to benefit both home owners and guests, by ensuring the holiday homes market is aligned with the rest of Dubai’s tourism industry and maintains the high standards for which the emirate is known.”

While regulations are slowly being implemented in the UAE, Airbnb has expanded further across the African continent and is showing its interest in the MEA region. From July 2014-July 2015, Airbnb has more than doubled in size in Africa. In that time, the number of people staying in Airbnb listings in the region has increased by 145%, with the number of Africans using Airbnb to travel has increased by 139%.

To help spur additional growth, Airbnb has also appointed Nicola D’Elia as general manager for Middle East & Africa.

However, the Middle East is not feeling the pressure. Hoteliers in Dubai have shared their support of Airbnb’s presence in the region, provided accommodation offerings are placed under the same regulations as hotels.

Speaking during a conference in Dubai, Jumeirah Group president and CEO Gerald Lawless noted: “I don’t see Airbnb as a threat so much as a new dimension to our industry. It is something that we have to make sure within the hotel business, we know how to embrace.”

Though he added that the same fire and health & safety regulations needed to be met along with municipality fees.Hotel revenues in Dubai alone are at $6.5bn at 95,000 keys, with 160,000 keys in 2020, according to Lawless. “That doesn’t even include Airbnb! In a way, we might even say that if that gets us up to our 160,000 keys, how many more hotels will actually be built? So it doesn’t necessarily mean a bad thing for us, but it’s something within the hotel business we’ve certainly got to cope with — but we can do that by embracing and understanding it, rather than keeping it at arm’s length, when we know it is definitely going to happen anyway.”

Waldorf Astoria Dubai Palm Jumeirah general manager David Wilson added: “It is a different product. Having looked at the offerings, it is a different experience. The hotels are really making our mark by adding all the extra facilities and services, spas and pools, recreation and so on…

“No doubt it is growing and is definitely a competitor to the hotel industry, as Uber is in the transport business and I am sure it is going to continue to grow.”

Rotana president and CEO Omer Kaddouri addressed concerns being discussed by other hoteliers in an interview with Hotelier Middle East: “It’s a little bit like people talking about OTAs and how disruptive they are to hotels and how hotels don’t like paying the commissions. I don’t feel Airbnb is disruptive to us.”

Kaddouri stressed the clientele for Airbnb isn’t necessarily a hotel guest, and says the service can help the economy by driving people to the city. “Those people that talk too much about how disruptive Airbnb is, should forget about Airbnb and focus on their own business further,” he added.

Kaddouri continued: “There’s no similarity between the costs they [Airbnb] have, and the costs we have. The rules, regulations, standards, licensing that we have to have as a hotel, they don’t have.

“You walk into a hotel and be sure that if it’s a good chain hotel, you can be sure that the safety security and hygiene are all taken care of. You can go into an Airbnb apartment in Paris and you might not have that. You’re not really talking about the same thing.”