Airbnb and the Hospitality Industry Are ‘One in the Same’

The Airbnb economy is evolving to be more like the hospitality industry, and as demand increases for vacation rentals, hospitality mainstays are adopting the Airbnb model. While the alternative rental industry has evolved substantially over the last decade, the market will continue to evolve for the next five years with an increase in institutional ownership, asset class creation, and hospitality. This year, the revenue is expected to reach $30 billion.

“They’re becoming one and the same,” Alex Allison, an investor in D. Alexander, a new hospitality brand, tells GlobeSt.com. “This evolution is being driven by a greater degree of accessibility to travelers, high-quality property management for owners/operators, and a competitive yet unique value proposition. Traditional forms of lodging and alternative forms of lodging are displayed side by side on the OTA’s, providing more optionality to consumers. Vacation homes are now available through Marriott, Google Hotel Search, Kayak, and other OTAs alongside traditional forms of lodging.”

New hospitality brands are also popping up to respond to the change in consumer expectations and needs. “This was a big driver behind our vision at D. Alexander,” says Allison. “We’re creating a new real estate asset class through institutional ownership and a pioneering vacation home hospitality brand that delivers what today’s traveler expects—unprecedented quality standards and consistency from home to home, in every stay.”

Hotels are also looking to capture this new marketshare by launching short-term and vacation rental platforms. Marriott’s Home and Villas by Marriott is one example. “Hyatt made a majority investment in tech-enabled property management company Oasis in the third quarter of 2017 which was later acquired by Vacasa and other upstarts are introducing new hybrid models,” adds Allison. “It’s an exciting time and I expect new innovative vacation home business models to follow.”

Single-family REITs are also finding ways to capitalize on this new business by defining short-term rentals as a new hospitality asset class. “It presents an opportunity for institutional investor and operators of single-family real estate to capitalize on a new segment of the market and define a new asset class through standardization and systems along with predictable and stabilized returns,” says Allison. “The single-family rental category is still highly fragmented and dislocated but it’s changing at a rapid pace. Those that know how to buy right, manage short-term rentals efficiently, market those properties and deliver great guest service at scale have a unique opportunity.”

The new short-term rental asset class that is emerging has a lot of benefits, and it is surprising investors across the capital stack are eyeing the opportunity. “Predictable returns, scalable systems, and operating models along with data-driven valuations of the homes will lead to defining a new asset class,” says Allison. “As these become more proven, an entirely new category will be created. Anytime a new category is opened, investors will have new and unique opportunities. We’re excited to be on the forefront of this with D. Alexander. It’s just the beginning.”