CBRE Hotels creates index to measure Airbnb threat

According to a new study by CBRE Hotels' Americas Research, travellers spent $2.4bn on Airbnb accommodation from October 2014 to September 2015; while that is only 1.7% of the $141bn generated by hotels, it's a significant increase from the same time period the previous year. CBRE Hotels (an advisory group providing research and consulting services to the hotel industry) used data from hundreds of US markets to build what it calls an “Airbnb Competition Index” which 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. According to the Index, New York is the American city where hotels are most at risk from Airbnb, scoring an Airbnb Competition Index of 81.4 out of 100.

Nancy Trejos

USA TODAY

LOS ANGELES--Airbnb's influence is growing, and leaders of the world's largest hotel companies are starting to address the competitive threat.

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.

More than 55% of that $2.4 billion was spent in five U.S. cities: New York, Los Angeles, San Francisco, Miami, and Boston.

Using data from hundreds of U.S. markets, CBRE Hotels, an advisory group that provides research and consulting services to the hotel industry, has developed an Airbnb Competition Index. That 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.

New York was identified as the number one domestic market at risk for hotels, with an Airbnb Competition Index of 81.4 out of 100. That was followed by San Francisco, Miami, Oakland, and Oahu.

R. Mark Woodworth, senior managing director of CBRE hotels, says 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, he says.

"The fluid nature of Airbnb's supply suggests that traditional hotel's historic price premiums realized during peak demand periods will be mitigated," he says.

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That threat was acknowledged by hotel executives at the Americas Lodging Investment Summit in Los Angeles last week.

“I take my hat off to them. They saw an opportunity the rest of us missed,” Choice Hotels CEO Steve Joyce said during a speech at the conference.

The American Hotel and Lodging Association has waged an intense battle against Airbnb, lobbying for greater government regulation of the peer-to-peer lodging company, which launched in 2008. The hotel industry lobbying group argues that Airbnb should have to pay the same taxes and follow the same health and safety standards that hotels do.

The group released a study last month showing that 30% of Airbnb’s revenue from September 2014 to September 2015 in 12 markets, including New York and San Francisco, came from full-time operators who rented their properties for 360 days a year rather than individuals looking to make some extra cash every once in a while.

Individuals renting out two or more properties via Airbnb accounted for 17% of hosts, according to the study by Penn State University’s School of Hospitality Management.

AH&LA President and Chief Executive Officer Katherine Lugar says much of Airbnb’s inventory is made up of “illegal hotels.”

“This is not about ‘home sharing,’ a practice that has existed for decades as a way for individuals to make a little extra cash by renting out the occasional room or home,” she said. “But this data tells a very different story.”

In an email, Airbnb spokesman Nick Papas said: "To date, more than 70 million guests have spent the night in listings spread across more than 34,000 cities and there will be more people home sharing tomorrow than there are today. Airbnb is succeeding because our people-to-people platform provides transformative experiences by bringing people together to share their lives by allowing every day people to supplement their incomes by sharing their homes."

While Joyce says Airbnb will likely not go away, he believes they eventually will “be living by the same rules we do – paying taxes, abiding by safety and zoning laws.”

“They have no inventory. We do,” he said. “You cannot pick up our product and move it. It’s time for the brand companies to show some leadership and take back control of our distribution and our destiny”

During USA TODAY’s annual hotel CEO panel at the ALIS conference, Hilton Worldwide CEO Christopher Nassetta acknowledged Airbnb as a “real business venture that’s taking a business that’s been around for thousands of years and it’s creating a much more efficient way to sell it."

But he called Airbnb a "fundamentally a different business."

"We all are in the business of hospitality," he said of hotels. "We are in the business of people serving people. We are not – in my humble opinion – in the business of lodging. I think AirBNB is more in the business of lodging.”