How Airbnb Disrupted The Hotel Industry

Statistics show that the Airbnb industry has grown over the past few years. Since the company started in 2007, this company’s value has grown to approximately 113 billion U.S. dollars. What does the company offer? The company has a website that allows travelers or individuals to rent private apartments for a particular time.

With the industry becoming popular in the United States and across the globe, it has impacted the hotel industry. Most hotel industry stakeholders claim that Airbnb is one of the most disruptive innovations. The growth of the industry has significantly seen a reduction in hotel bookings and other services. How has Airbnb disrupted the hotel industry?

Read through this article to understand more about the industry and how Airbnb disrupted the hotel industry.

Table of Contents

What Is Airbnb

Inventors reveal that Airbnb represents Air, Bed, and Breakfast. Since 2007, Airbnb management has been offering an online platform through which you can rent an accommodation space from homeowners. When venturing into this business, you don’t need to own property. So how do you make money on Airbnb? You can work as a broker between the property owner and potential renter and receive a commission. Despite starting as a single listing, Airbnb’s business has risen tremendously. A certain study reveals that the market will grow to approximately 2.9 million hosts in 2022

How Profitable Is Airbnb

Airbnb is one of the most profitable ventures in this technologically advancing world. According to a certain study, Airbnb generated an average of $93 million from a total of $2.6 billion in revenue in 2017 The company recorded an increase to 4.7 billion in profits in 2019, before the Covid-19 pandemic effects reduced the profit to 3.6 billion by 2020. The business makes money by acting as a middleman between Airbnb guests and renters. Each time a guest books the property, the host will pay the Airbnb management a certain fee.

The amount of profit the business generates depends on the following:

Airbnb’s share or percentage of profit
Number of listings
The average number of customers or guests each year
Average rent per listing or guest

Why Has The Airbnb Industry Grown In The Past Years

It’s evident that there has been significant growth in the Airbnb industry. But what are the factors leading to the growth? Airbnb provides appropriate and comfortable accommodations different from hotel rooms. The accommodation attracts more customers looking for a room or environment exhibiting a home aesthetic. If you are a pet owner, you can now book an Airbnb unlike a hotel. In addition, the increasing number of rooms has led to a significant reduction in accommodation rates. Thus, it provides affordable and comfortable accommodation even during peak times.

How Has Airbnb Disrupted The Hotel Industry

The hotel industry has experienced the ravaging effects of the rise of Airbnb. Most statistics show that Airbnb has become more popular than hotels across the world. For instance, based on research in 2014, there was a 1.3% reduced number of hotel bookings in the United States, as Airbnb was taking a large share of the market. Let’s look at how Airbnb disrupted the hotel industry:

Embracing Digital Technology And Innovation

Besides adopting the traditional strategies that hotels use, the Airbnb market has included a technologically-driven system. The Airbnb management has leveraged the booking into a digital-based platform. With the digital-based platform, Airbnb has disrupted the hotel industry. How has digitization affected the hotel industry? Travelers now prefer staying in these creative rental stays. With most travelers prefer staying on Airbnb, it has significantly reduced the number of hotel bookings.

Studies show a significant reduction in the number of booking for hotel stays. Besides the effects of the Covid-19 pandemic, Statista reveals that Airbnb has a huge impact on growth. The hotel industry failed to reach the 950 billion mark in profits it had been looking for in 2021. With the continuous growth and innovation of Airbnb, it has become a threat to hotels across the world. Remember, Airbnb uses data on its platform to leverage and improve the guest and user experience.

Reduced Revenue And Profits

In the past years, the hotel industry has been one of the most profitable booming businesses worldwide. The hotel industry has been recording huge profits, as most individuals would spend their vacation and time in hotel rooms. Nevertheless, the birth of Airbnb has significantly seen a reduction in revenue collection and profit margin in the hotel industry. Experts attribute the reduced revenue in the hotels to travelers preferring the digital and creative way that Airbnb offers.

Unlike in most hotels, Airbnb hosts make you feel at home even before you step a foot in the room. Airbnbs offer a tailored experienced to non-experienced and experienced travelers to any part of the world. The tailored experience makes Airbnb outshine the hotels, making it a large mainstream market. More so, when using Airbnb, you’ll experience the best lodging services and other arrays of places, including creative trailers, houseboats, and treehouses with spectacular views.

Offer Customer Satisfaction

While hotels focus on customer satisfaction and care, they can’t beat Airbnb. The industry offers reliable and affordable accommodation that makes all the guests feel comfortable and at home. These benefits have made more individuals shift from using hotel accommodations to booking accommodations on Airbnb. A Clever Real estate survey revealed that 60% of 1000 Americans who participated in the survey preferred using Airbnb to hotels. Most individuals attributed the switch to the services they get when using Airbnb.

The Airbnb management ensures that all the units have the convenient amenities the guest world requires. For example, the units have the right kitchen equipment and washing machines. With the units having these amenities, it saves the guests from the expenses they’d incur when using a hotel room. Depending on the duration the traveler chooses to stay, the additional amenities usually make a huge difference. Lastly, the flexibility of the alternative offer is key to offering customer satisfaction.

Pushing The Hotel Industry To Adjust The Millennial-focused Appeal

Not only does this population offer a travel-centric generation, Airbnb also caters to authenticity, creativity, and a love for adventure. Airbnb has focused on making a constant connection to the outside world and making social connections. With its comfort and affordability, Airbnb has created stronger competition in the hotel industry. Studies show that hotels are struggling to create or design scene accommodations for millennial social interaction.

As most consumers or guests embrace the advantages that Airbnb offers, most hotels require to up their game. These hotels should work to provide adequate rooms in the high-peak season. Failure to adjust, the Airbnb management comes in with the best rooms and affordable rates to satisfy their customers. Thus, Airbnb will continually pose a big challenge to hotels. The price-to-value ratio continues to drive the new industry to greater heights.

Affects The Lower-end Groups

While Airbnb has caused an overall disruption of services, the most pinch goes to the lower-end hotels. Experts reveal that Airbnb offers the best services at an affordable rate. The lower rate has significant effects on the prosperity of the low-end results. A certain survey shows that in 2014, the rise of Airbnb reduced the profit margin in low-end hotels by 3.7%. Airbnb in that year generated approximately $41 % of the surplus per listing. With these statistics, the Airbnb market realized a $317 million dollar welfare gain.

Experts reveal that Airbnb can cannibalize the revenue of low-end hotel rooms. Why can Airbnb cannibalize revenue? The industry can cannibalize the demands when hotel accommodation is seasonal. It includes the locations or places with lower hotel prices. Even in competitive markets, most guests or consumers will prioritize Airbnb over hotel accommodations. Thus, it poses a great threat to the lower-end hotels in the industry.

Airbnb Has A Good Reward Program

Studies show that when using Airbnb, you’re likely to get a proper reward system. The reward program has resulted in jitters in the hotel industry. Airbnb management provides the guests with a proper reward program that gives them a better competitive edge over the hotels. The reward attracts more customers to use the Airbnb services than the hotels without any reward program. With this program, the host rewards guests for recommending the given listing to their friends or other individuals.

Most stakeholders are finding it challenging to deal with or adapt the reward program on their premises. While some individuals may argue about the effects of this reward program, it’s clear that it has hurt hotel sales. Thus, some hotels have to incur losses by reducing the cost of using their services.

Besides the programs, Airbnb has beaten all odds to dominate social media advertising. The industry has expanded its accommodation services to offer other programs like business travel-ready listings. With the quality and affordable services, most businesses have switched to listings.

Wrapping Up

Studies show that Airbnb has a positive effect on hosts and consideration. With these individuals being major stakeholders in the hotel industry, the rise of Airbnb has disrupted the hotel industry. Without the rise of Airbnb, hotels could be generating approximately 1.5% higher revenue, as most consumers currently prefer Airbnb. Thus, Airbnb has disrupted the booking, revenue collection, profit margin and technological shift of the hotel industry. So by now, you already know how Airbnb disrupted the hotel industry.