How hotel brands are cracking the home rental market

With homesharing apps now a firm fixture on the smartphones of many travelers, big name hotel brands are increasingly looking to build their own presence in the home rental market – and are doing it in their own way.

May 24, 2018

Marriott International is the latest major hotel group to enter the market, launching a six-month pilot project in partnership with home rental management company Hostmaker, to offer a selection of over 200 vetted homes in London.

Just days before, Choice Hotels, which has been running a Vacation Rental program since 2016, significantly expanded its offerings to cover 20,000 additional properties across the U.S.

Other operators are taking a different path to forge links with the home rental market. Take Hyatt, which shifted into the homesharing space by letting members accrue loyalty points with serviced accommodation provider Oasis, which offers vetted homes in over 20 global destinations. And in 2017, Accor Hotels acquired three homesharing platforms, consolidating them all under the Onefinestay banner.

Marriott is taking a slightly different approach, however, by starting with a single trial destination in a global gateway city, and using an existing hotel brand, Tribute, to extend into the space.

Responding to disruption

All these moves have one thing in common: A concerted effort by the hotel industry to adapt to the disruption wrought by the growth of homesharing platforms, which offer alternative accommodation options in diverse locations—often at a lower price point.

“New accommodation models have created a lot of new travel demand, for example, from people who would not have previously taken a trip because of high cost or lack of availability in areas they want to stay,” says Lauro Ferroni, JLL’s Head of Hotels & Hospitality Group Research

The rapid rise of homesharing platforms is also indicative of sweeping changes across the hospitality industry where the focus is on more personal, experiential and immersive travel. “Millennials in particular want lifestyle-focused, flexible offerings— and hotel companies continue to make a play for that market,” says William Duffey, JLL’s Executive Vice President, Hotels & Hospitality.

Furthermore, there’s a financial incentive for hotels to explore ways to offer homesharing platforms make themselves as new entrants to the space make a dent into hotels’ revenues and market share. Recent research from the U.S. shows that in the 10 cities where Airbnb is most active, hotels saw a 1.3 percent reduction in hotel nights booked and a 1.5 percent loss in revenue.

Leveraging hotels' advantages

When it comes to breaking into homesharing, hotels have a competitive edge in some areas, ranging from brand identity and customer loyalty to local knowledge. “Hotel companies are sitting on troves of data points about their consumers,” says Ferroni. “They know who travels, how much, when and where to. Plus, they own tremendously valuable and well-known global brands.”

Standardization and safety are also major advantages. “Big brands bring consistency,” says Duffey. “Home sharing providers are more piecemeal and their inventory is mixed compared to what hotels offer.” Hotels also bring increased levels of security, through staff, surveillance and local stature.

For guests, this shift potentially can equate to an improved experience, combining the flexibility and authenticity of homesharing with the consistency and loyalty benefits of hotels. “It’s a positive way for travelers to engage in a different way with a hotel brand they already know well,” says Ferroni.

Competing on cost and scale

At this early stage, however, there are still some significant challenges for hotels. Vetting properties to ensure high standards and consistency is a costly process – and with price a key motivator in homeshare bookings, many consumers would be reluctant to pay significantly more than for similar properties on home rental platforms. “Big brands have higher infrastructure costs, so while there’s no reason hotels can’t compete in terms of cost, there is still a question about profit margin,” says Duffey.

An associated risk, according to Ferroni, is that hotels will simply move existing guests over to their new homesharing products, rather than reaching a new audience and growing their customer base. “Increasing inventory and ultimately the net number of overnight guests is what’s going to define the success of these programs overall,” he says.

Another obstacle for hotels is the ability to grow quickly and efficiently. “Scalability and speed of scalability are absolutely key to getting something off the ground today,” says Duffey. “Buying businesses or groups that already have that scale is often the best option.”

Opportunity beckons

Despite the challenges, the hotel industry is adapting dynamically – and experimentation is a necessary process for operators to find differentiators that both fit with their brand values and appeal to their target audience.

“At this stage, it’s about operators working out not only how they can get the right type of accommodation at the right price but also how to add business lines that will create additional value to that stay,” says Duffey.

Ferroni, too, is optimistic for how disruption is shaping the hotel industry. “The sharing economy is having a huge influence not only on the way we travel but also on the ways we live and work,” he concludes. “The homesharing market has plenty of potential to develop with innovation driven as much by the global hotel brands as by start-ups. The only question is how quickly it will do so.”