Marriott International is the biggest hotel company in the world when it comes to size and scale, and has also been the biggest loser in the stock market compared to rivals Hilton and Intercontinental.
Recently, Marriott’s stock price has been beaten down by industry disrupters, including home-sharing services Airbnb and VRBO. Their single room and entire home listings offer competitive alternatives to pricey hotels, particularly in urban markets like San Francisco and New York City, where rents are high and lodging is expensive. Airbnb and VRBO are eating into Marriott’s, and other hotel chains’ market share.
Thanks to the regular addition of new supply to the market — as individuals rent out rooms in their homes at rates far lower than hotels charge — analysts expect supply to outstrip demand in the near future.
“Supply growth bottomed in 2012 at +0.4% and has only accelerated to +2.0% in 2016, but there are no signs of it slowing down, and the direction matters,” said Jared Shojaian, a Wolfe Research analyst.
Marriott’s stock price has consistently trailed beneath the S&P 500 over a one-year period beginning September 2015, and few signs point toward a revival. It has dropped even further since the company’s recent acquisition of Starwood. Analysts are leery of the success of the deal; they say the merger will cause Marriott to own many duplicate brands and hotels in the same geographical markets. Disruptive technology won’t help its stock price, either. “We don’t see demand for Airbnb or other short-term rental competitors slowing down despite legislative efforts to limit listings,” said Shojaian.
The “Airbnb effect” is akin to Amazon’s impact on brick and mortar retail, which is causing hoteliers and investors to act with real caution.
Airbnb is not just adding to the supply of rooms, it’s taking away a money-making tactic that many hotels rely upon – price hikes during periods of peak occupancy, when there is a concert of sporting event in town, for example. Analysts suspect that travelers who face rate hikes will instead turn to Airbnb to avoid what they consider to be a price-gouging scheme.