By Nakul Sharma, founder of Hostmaker
The concept of staying in a stranger’s home instead of a hotel was once totally inconceivable.
Airbnb were fully aware of that and capitalised on it. As a matter of fact, they pioneered the sharing economy business model to such an extent that we’re on the verge of a travel revolution: homes are now replacing hotels.
In April last year, Accor, who are among the leading hotel operators in the world, declared the €148m acquisition of Onefinestay – an upmarket competitor to Airbnb that provides short-term lets.
Accor aims to develop the site from currently operating 2,600 properties in London to expanding to 40 more cities across the globe.
Onefinestay is not an isolated case. Over the next few years, I envisage increasing numbers of hoteliers moving to homes worldwide as the very essence of the hotel industry evolves.
The science behind the branded home
Why will homes become hotels? Simply put, it’s maths. There isn’t enough supply to fill demand when it comes to hotel rooms. According to PwC, over 2015 in Europe supply for hotel rooms increased by 0.8% whilst demand increased by 3.1%. This trend is predicted to continue, with cities like London, Berlin and Moscow worst affected. The problem has resulted in a spike in the price of hotel rooms and travellers seeking alternative options.
All of this begs the question: why not build more hotels? This appears to be the obvious solution to the problem, however the reality is not quite so simple. During the hospitality boom of the 1950’s and 60’s, the industry burgeoned because operators actually owned the land they built upon.
These days, hoteliers rely much more heavily on property developers. This makes building quickly from scratch much more tricky than before. Though travel demand has returned to pre-financial crisis levels, there aren’t enough rooms to cater for travellers. Developers run behind prevailing cycles, so building new hotels takes a great deal of time – so you can expect to wait eight to ten years for these new hotels to start appearing.
On the other hand, homes will expand to meet demand. Airbnb has demonstrated that consumers are happy to consider this as an alternative. Now the time has come to formalise and scale it up. This entails offering homes as well as hotels to consumers as a standard class of accommodation on trusted booking sites.
Back to the roots of accommodation
This isn’t as challenging as it sounds. Over the last few decades, hotels have expanded to launch sub-brands that cater to every class of travel experience, from budget to luxury. Hilton could easily develop a “Homes by Hilton” sub-brand as well as other big names such as Conrad, Canopy and the like.
This will, in many ways, make travelling what it once was. Before mass travel took off, the normal accommodation option for most was to stay with friends at the destination and perhaps a modest inn along the way (depending on distance).
We only truly saw the rise of the hotel as a mainstream accommodation option when commercial airlines went mainstream during the 1950’s. Hotel groups started because risk-averse travelers in hitherto-untraveled countries craved the normality and dependability of their own favourite foods and a consistent experience wherever they went. And the operational efficiencies from housing 500 people under one roof are great.
However, times have changed. In the globalised age, connected customers don’t crave a homogenised tourist experience, completely alien from the reality of their destination. They want to experience the culture around them. That’s the trend being tapped by Intercontinental’s Indigo brand – but it’s one that can be fully realised by domestic stays.
This has resulted in a dichotomy: despite this growing distaste for big-brand hotels who lack a personal touch, customers still trust reputable names. This is why the big chains will be in an even better position than the likes of Airbnb or Onefinestay, to make this happen.
Individuality meets reputation
Combining the uniqueness of an individual home with the reputation, standards and consistency of a brand is, of course, a challenge. But it is one that hotel chains will have ample experience to excel in.
To do so, they would be best advised to insert brand touches just like they have always done. For instance, Westin’s “Heavenly” bed, introduced in the 1990s and still sold – both as a room feature and as a separate retail item – is a perfect example.
W’s Bliss spa chain is another way the operator has given itself a non-room-related brand to leverage. Consistent signals that tell customers they can rely on big-brand reputation, despite staying outside the familiar threshold of a hotel will be essential for success.
There will certainly be a multitude of considerations. As opposed to selling identical rooms, hotel groups will have to conceptualise marketing for many individual home types. Should they classify them, brand them? Perhaps different homes should come with different ratings, just like hotel rooms.
Above all, scaling hotel services such as cleaning, dining and other vital services across the diverse properties that exist in any given city is a huge obstacle. However, establishing relationships with local on-demand businesses such as Deliveroo, Uber and Urban Massage can help create localised, personalised alternatives to room-service and cab-booking.
For the big players in the hospitality industry, the potential this idea boasts may soon be too appealing to resist. Put together, the big four hotel operators have over 2.5m hotel rooms worldwide – not many more than Airbnb has activated.
It won’t be long before branded homes are a reality, which poses the question: will your house become a hotel of the future?