How is Airbnb beating the hotel industry?
The world of hotels is growing day by day and the number of hotels in different parts of the world is also growing day by day. Investing in a hotel has always been considered profitable because the tourism industry is constantly growing and the love for traveling is also growing in peoples’ hearts. This means that people will naturally require a place to live in that also provides different services such as restaurant and entertainment areas. Because of this constantly growing demand, people are showing interest in investing in hotels and this industry is growing day by day. However, since 2008, there has been a massive threat to hotels all over the world. That threat is Airbnb. Saving money always seems a good idea and people are always up for saving some extra bucks, keeping this in mind, Airbnb has successfully captured a big chunk of the revenues and profits that were once earned by the hotels. Because of this, hotels have had to suffer a lot.
A study conducted showed that with the hotel bookings decreasing because of Airbnb, Airbnb captured 1.3 percent of the market share that once belonged to the hotels which resulted in the hotels suffering a massive chunk, 1.5 percent, of their revenues. These numbers have not remained the same ever since the data was evaluated but have increased dramatically over the last five years. The majority of the market, approximately 10 to 12 percent according to one study, that has been captured by Airbnb is in New York City, London, and Paris. This data is only constricted to The United States of America. If we consider the data from different hotels globally, then the numbers are even larger. Losses in revenues and profits are the main reason why Airbnb is considered to be the biggest enemy of the hotel industry.
The average price of the services offered through Airbnb is a lot lower and economical as compared to the services that are being offered at a regular hotel. Earning money through fair means in today's world is extremely hard and difficult so people are always looking for different ways through which they can save some bucks that can be later on used somewhere else. One of the main attractions for travelers for using Airbnb is that they will be saving a lot of money if they choose Airbnb over a hotel. Another main reason for choosing Airbnb over hotels is that traveling in itself is extremely costly and expensive. There are several factors that you need to consider before planning a trip which includes spending money on food, outings, the money spend to purchase the flight tickets and fees of the travel agent. Amongst all these big expenses, saving up some money always seems a good idea. Moreover, the core services being offered by hotels and Airbnb and pretty much the same so another reason why people end up choosing Airbnb over regular hotels is that they only consider the core services that are being offered to them and completely ignore the supplementary services that come with the core services in a hotel. For example, services such as the access to the pool or the gymnasium are not offered in Airbnb, however, they are offered at different hotels.
With the increase in demand for the services being provided by Airbnb, customers automatically end up expecting that the quality of the services that they are about to pay for will also be good. The quality of the services being provided through Airbnb is increasing as compared to that of the hotels, this has resulted in the customer not even considering staying in a hotel. The reason for that is that is has become a lot easier for the potential customers to draw a comparison between the two and make their final decision which is, majority of the time, in favor of Airbnb. The rates of Airbnb are also increasing between they are still substantially lower than that of the hotels so when the customers draw a comparison between Airbnb and the hotel they were thinking of choosing, they do not even consider the rise in prices of the services being provided through Airbnb since they are still lower than that of the good hotels of that particular area.
Since Airbnb has constantly been capturing the market shares of the hotels in different parts of the world, it has become harder for the hotels to earn revenues which have automatically resulted in a decrease in the profitability of the overall hotel industry. Because of this, the profit margins of the hotels have been decreased and it has become even harder for these hotels to cover up their costs. So, to avoid any financial losses and to cover up their costs in an effective way, the prices and rate of the services being provided at the hotels have increased which are expected to be borne by the final consumer. As a result, the difference between the prices of hotels and services provided through Airbnb has increased even more which has resulted in more and more people being attracted to and considering Airbnb over hotels.