Airbnb Is A Serious Threat

PHOENIX—“You're destroying entrepreneurship,” quipped Joel Ross, the president of Citadel Realty Advisors, on the Hotel Owners, Lenders and Investors Forum on the last day of the Lodging Conference in Phoenix, to an audience member suggesting that Airbnb should be paying room tax. The closing panel of the conference had erupted into a heated discussion about Airbnb, a sharing economy site that allows everyday people to monetize spare space—whether an extra room, couch or entire apartment—through short-term rentals. While there are few statistics about the site's encroachment on the hotel industry's profits, it was clear that everyone in the room felt the pressure.

“Airbnb is a serious threat,” said Ross. “People rationalize the issue by saying it creates new demand, but this is where [the industry] is going.” Michael Desiato, the panel moderator and the VP and group publisher of the ALM Real Estate Media Group, GlobeSt.com's publisher, asked how many in the people audience had used the site. About a dozen hands rose, and one attendee spoke about the quality of the site and unique experiences it offers, like an oceanfront cottage in New Zealand for $90 a night. He pointed out the “reliable” review process and the site's vetting process of both hosts and guests for protection. “Does that remove some of the creepiness,” said Bernard Siegel, president of KSL Capital Partners.

Most of the audience comments were about the lack of a regulatory environment for users of the site, who don't have to comply with taxes or ADA guidelines that hotel owners take time and money to obtain. “It is an unfair playing field,” said one audience member. But, Ross rebutted, “So what,” while Siegel wondered what terrible event would need to occur—“a fire, a robbery?”—to push people away from Airbnb.

While some people focused on the regulatory inconsistencies and the misuse of Airbnb, for example, the site is not set up for multifamily owners to convert whole buildings into Airbnb short-stay apartments, although it does happen; Colin Carroll, VP of investments at Ashford, didn't think it was as much of a threat as some of his fellow panelists. “I would question how much is true new inventory on the market, because in a lot of instances this is used as vacation home,” he said, quoting a report that showed a typical Airbnb stay has more than three guests for an average of five days.

Still, Ross wanted to talk about how the industry is evolving, predicting that Airbnb is going to be professionalized soon while also noting that very small boutique hotels advertise on Airbnb because they get a better rate than the OTAs.

In the end, everyone agreed, before moving on to economic forecasts, that Airbnb is driving brand changes. “We have already seen a proliferation of new soft brands,” said Siegel. “Without a doubt they are disrupting our business.”