The taxicab industry is locked in a contentious legal and public relations battle with ride-sharing services like Uber and Lyft. Sites like Priceline and Expedia have all but eliminated the travel agent business . And the newspaper industry has no love lost for Craig’s List, which has almost single-handedly destroyed the value of their once-lucrative classified ad sections. The disruption of these so-called “sharing” apps, websites and services draws constant scorn and legal threats from the entrenched, established industries whom they disrupt.
Except for the hotel industry and room-rental service Airbnb. The hotel industry does not seem to mind the existence of Airbnb, which has ostensibly robbed them of millions of customers. Marriott CEO Arne Sorenson told a group of investors last year that “What [CEO] Brian Chesky has done with Airbnb is fabulous.” According to the Economist, a vice president at the Ritz-Carlton said last year the she hadn’t even heard of Airbnb. The Four Seasons, Hilton and Marriott executives have all claimed on record that they do not even consider Airbnb as competition.
“I was just in Davos and met with a couple of CEOs of large hotel chains,” Airbnb CEO Brian Chesly told dezeen magazine. “They were actually really friendly and one of them said, ‘We don’t know what to think about you yet, how should we think about you?’ and another said ‘We don’t actually think of ourselves as competitors with you.'”
Airbnb certainly has enemies, but they’re mostly local governments upset at being shortchanged on hotel tax revenue. New York has sued Airbnb for violating zoning laws with prohibited rental arrangements. San Francisco recently charged Airbnb “tens of millions” in back taxes to comply with the city’s 14 percent hotel tax. But the hotel industry has not levied any lawsuits against Airbnb.
What gives? Why are the hotels chains not upset at Airbnb? The short answer is that Airbnb is only taking away the budget travelers, and not wealthier travelers or business travelers.
Boston University just released an academic study called The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry. “We find only a small negative effect, not statistically significant, for the Upscale and Luxury [hotel] segment,” write authors Georgios Zervas, Davide Proserpio and John Byers. While they found that Airbnb is hurting independent hotels and budget chains like Motel 6, it is not affecting the higher-end luxury hotels. And it is not being used widely by business travelers, whose endless company expense accounts are the lifeblood of the hotel industry.
“With most business travel traditionally arranged through employers, an Airbnb stay may be more difficult to substitute for these type of stays,” the authors note. “Moreover, business travelers make greater use of those business-related hotel amenities not typically provided by Airbnb properties.”
So Airbnb has a model that does not cut into hotels’ bigger-spending customers and basically weeds out the higher-maintenance, lower-paying customers who are more attracted to Airbnb. Airbnb’s magic is in providing disruption at the budget level while not upsetting the apple cart for its more powerful luxury competitors.
You would think that landlords and property owners would also be joining the fight against Airbnb. They’re not, either. Because they’re too busy renting out their properties on Airbnb, which is far more profitable than renting units out to permanent tenants.