Future of Air BNB and Hospitality Industry

by Dr. Rastogi · 12/12/2020

On 12/11/2020, Air BNB launched its IPO on the NYSE. On 12/10/2020 its IPO was priced around $68 but it opened on the secondary market at $146. The total market capitalization was greater than Marriott and Hilton Hotels combined or more than OTA EXPEDIA or BOOKING HOLDINGS.

Marriott recently made a deal to purchase apartments/condominium’s in the most desirable and expensive area of Manhattan in the city of New York. The choice hotel group is starting a new brand based on the concept of renting an apartment type of hotel room. In my view, the apartment type of concept is just an extension of hotel suites. Hotel groups are getting ready to compete with Air BNB. On the other side, Air BNB is including Boutique hotels in their listings. The third group of OTA (online travel agencies such as Expedia, Booking Holdings, etc.) competes with both Hotels and Air BNB. In a way, OTA’s work together with hotel groups but also directly compete with their businesses. In my view for any business especially related to hospitality should be tested on six points out of these four are extremely important. These points are:

Able – ability to bring rental rooms and houses

Available – are rooms for rental available everywhere?

Accessible – can they make the rental rooms easily accessible from anywhere?

Affordable – can the customers make rental rooms affordable for everyone?

Attractive – can they make rooms attractive to everyone?

Aversion – to danger or guarantee of safety?

hotel groups can make their rental rooms attractive by giving incentives like reservations by loyalty points or stay two nights and get one night free or marketing incentives. Air BNB may not be able to do this.

Air BNB is mostly in private residential areas and many times may not have any 24 hours surveillance of their rental facilities for the safety of guests staying in the private apartments or houses. This is especially important for female customers.

Air BNB as they are supplying alternatives for the room rentals for short or long periods is directly competing with both OTA and hotel groups.

It will be interesting to compare all three groups considering the above six points side by side:

Point	Air BNB	Hotel Group	OTAs
Able	Good booking platform, No physical location. Customers just can’t walk into the rental facilities without appointments	Booking platform and physical location. Customers can walk-in and check the facility	Only booking platform for hotel rooms but have a physical presence of the hotels
Available	Yes, they can bring the rooms to the customers on the large scale with unlimited inventory. This number is increasing day by day as home and apartment owners are realizing that they can have extra revenues from their properties when they are not using them. No need to build any new rooms. Maintenance availability may be limited.	Each hotel group cannot bring their hotel rooms to the customers. Limitation of the hotels present in a specific geographic area. May have limited room inventory in a specific area due to a special event in the area. Maintenance is always available.	OTA’s can also bring a large inventory of rooms with a different types of hotels at one place. However, they also have limitations because of hotel availability in a specific geographic area. Same as hotels.
Accessible	Online booking services are available from anywhere especially these days from the phone. Houses can be shared by groups or a family traveling together without separating into separate rooms.	Online booking service and walking into the hotels.	Online booking service.
Affordable	Unlimited price variation. Customers usually have a large selection of price ranges.	Each brand has a limitation of price.	Follow the price structure of hotels. So has a limitation.
Attractive	The only point they have is that they are easily available everywhere. Dependent upon listings of property owners.	Can give incentives to points booking or stay two nights and get a third night free.	Same as hotels but only on a limited basis.
Aversion	They have to be dependent upon the listing owner’s safety measures implemented at their property for the customers.	They usually enforce good measures for the safety of customers.	Same as hotels as OTAs sell rooms of the hotels only.