5 reasons why hotels need to invest into Vacation rental space

Yes admit that, Vacation Rental’s are flourishing and the world’s largest hotel companies have already bounced to address this competitive threat. Vacation Rentals are no longer the small guy in the room and they have started to eat up a large portion of hotel revenues as well. As the global vacation rental market is expected to reach $169.7 billion, here are five reasons by which proves that hotels must invest in vacation rental space.

1. Big players are already into the industry


According to media reports, Hyatt Hotels has invested into home rental space. The company has backed Onefinestay, which lets people rent upscale properties in London, New York, Los Angeles and Paris. Hyatt Hotels was part of $40 million funding raised by Onefinestay in late 2014. It appears to be a smart move by the company as the U.S. vacation rental industry is seeing steady growth with annual revenues of over $24 billion. The hotel industry face a high disruption from the vacation rental industry with multiple brands of operators such as Hyatt, Hilton, Intercontinental, Starwood, Marriott and Four Seasons among others.

2. Expanded Market Space and Revenues


Vacation Rentals  has become a viable alternative to more mainstream lodging options. The vacation rental market now accounts for close to 15% of the lodging industry revenues with strong outlook , improved service quality, ease of booking and lower homeownership rates.

New York was identified as the number one domestic market at risk for hotels, with an ‘Airbnb Competition Index'(this measurement compares Airbnb’s average daily room rate to that of hotels, the scale of active Airbnb inventory vs. the supply of traditional hotels, and the overall growth of Airbnb supply) of 81.4 out of 100. That was followed by San Francisco, Miami, Oakland, and Oahu. According to a new study by CBRE Hotels’ Americas Research, travelers spent $2.4 billion on Airbnb lodging from October 2014 to September 2015. While that is just 1.7% of the $141 billion generated by hotels, it’s a significant jump from the same time period the previous year. The continued success of Airbnb could keep average daily hotel rates from rising as fast as they have. It could also slow down new hotel construction. The rise of vacation rentals is also a concern for hotel operators as the rental business eyes the same set of customers while the regulations and taxation is much different for both the industries.

3. Pricing and Availability


Price, ability to accommodate an entire travel party and the ability to cook are the important reasons leisure travelers choose a short term rental.




Today’s travelers have wide array of hospitality products to choose before leaving for their dream destination. Because of connectivity, internet and mobility they are able to have information in realtime and seamlessly; whether it is a hotel, a serviced apartment or a bed&breakfast.

A comparison of Airbnb Vs Hotels cost-saving-airbnb-hotel

4. Airbnb as a competitor


More than 30 million consumers have used Airbnb to find a temporary resting spot, whether it for a one-night stay or an extended month-long rental. And as Airbnb makes it easier for guests and hosts alike, it is upending all levels of the hotel industry for both business travel as well as vacations. According to a recent report from Boston University, a 10% increase in Airbnb supply results in a 0.35% decrease in hotel room revenue, which translates into a 13% impact on revenue in Austin, Texas, which is home to the highest Airbnb supply. Lower-priced hotels and hotels that don’t cater to business travel are the most affected by Airbnb. As a result of these impacts, the researchers found, hotels are reducing prices in an effort to stay competitive.

It’s unlikely that Airbnb will ever completely take over the hospitality industry, but arguably the industry should be taking it seriously. Airbnb’s threat is really about speed. If a hotel chain wants to open a new hotel, it would likely require three to four years to complete the project. Airbnb, on the other hand, is utilizing space that already exists and can therefore expand its supply very quickly. Airbnb has created a market structure which allows an individual to select a vacation property or lodging and connect with an individual who provides that.

5. Changing global Market Share


Hoteliers needs to be redefined the concept of convenience . Some assumptions about what makes things convenient for travelers are outdated because travelers can find better, cheaper, or faster alternatives elsewhere. Because of pricing, some travelers divide a hotel’s value into two distinct components: accommodation versus service.

The hotel industry is a global network but their share of accommodation is now being diluted by the rental industry. Hotels are still struggling to grasp the concept that the vacation rental industry is not the enemy. The hotel industry’s failure to understand its customer and its failure to innovate with changing demands is what will ultimately ruin the industry. With companies like Hyatt Hotels and Booking.com already expanding into the vacation rental space, it’s clear that the hotels that adapt will be the ones to survive.

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A blog from vafion – A preferred vacation rental technology partner

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