Amid growing threats from short-term rental giants like Airbnb, a new initiative from the world’s largest hotel chain is looking to change the homesharing game.
Following years of mostly dismissing the impact of homesharing, Marriott introduced a pilot earlier this year to experiment with the concept, marking a shift in the company’s strategy towards the short-term rental market. As disruptors move further into types of travel that have traditionally been its turf, the homesharing phenomenon has grown into something the company cannot ignore.
The pilot launched in London in April, and has since expanded to Rome, Paris and Lisbon. It now spans 340 properties across those cities, at a price point of between $280 and $350 per night.
“The company is realizing this isn’t going to go away,” said Chris Muller, a hospitality studies professor at Boston University, of the homesharing impact. “Once it started to cross over into business travelers, the high end, where their steady business is, it became more of a clear threat.”
“So we’ve gone past denial, we’ve just about finished with the attack cycle, and we’re just starting with participation,” he said.
The company’s pilot comes into the market at a point where the lines between short-term rentals and hotels are blurring. While homesharing platforms have traditionally been focused on lower-end leisure travel, recent brands launched by Airbnb — Airbnb Work and Airbnb Plus — represent a foray into the higher-end corporate market that has long been the core business of Marriott and other major hotel chains.
To be sure, the scale of the pilot is miniscule when compared to the number of properties under Marriott’s purview, which total over 5,000 properties and over a million rooms. And homesharing is not causing the company immediate financial strain, nor is homesharing expected to come close to dominating high-end, corporate travel anytime soon. And, apart from some rockiness from the ongoing Starwood merger, such as the recent data breach, and some weakness in Marriott’s stock, down 21 percent since January, analysts agree the company is in solid financial shape. Marriott earned $1.5 billion in the first three quarters of 2018, up 11 percent from the previous year.
But Marriott still feels there is opportunity for a new model in the homesharing space.
“As some of these platforms have grown into millions and millions of units, there is an almost paralyzing array of choices and a lack of branding,” CEO Arne Sorenson said on an earnings call earlier this year. “The lack of real attributes of quality around service and product, makes this an area where we think we can bring our brands, we can bring our service and product focus, and deliver something which is simply a better product and much out there.”
The pilot — a partnership with European property management company Hostmaker — capitalizes on the company’s brand and the strength of its loyalty program, which now has 110 million members. It’s also making a point of ensuring that guests booking spaces through the program have the same amenities and the same curated experience they would have access to at a traditional Marriott stay–something that is not always a guarantee when booking an Airbnb. These amenities include a 24-hour concierge, hotel-style toiletries and room service.
The hotel sector previously doubled down on local legislative efforts meant to rein in home-sharing platforms. Now, those efforts have resulted in new regulations, legalizing versions home-sharing for the first time in a number of cities. Marriott says those changes have created new avenues for it to explore in the home-sharing arena.
“We have now figured out that we can run this business in a way that does fully comply with law,” Sorenson said.
Despite the company’s financial strength, and its insistence that it’s getting into homesharing simply because of new opportunities in the sector, the pilot also indicates an acknowledgement by Marriott of the homesharing impact, and represents a different route than the ones certain competitors have taken.
Hilton CEO Christopher Nassetta said on an earnings call earlier this year, “We believe it’s enough of a different business that it is not something that we need to or should focus on, that delivering for our customers the core experience of a very high-quality consistent differentiated product with amenities associated with it and with very high-quality consistent service delivery is what they come to us for.”
Airbnb, which is aiming go public potentially in 2019, is currently valued at $31 billion and has over four million listings worldwide.
According to a recent Boston University study, for every 1 percent growth in Airbnb supply in 10 major U.S. hotel markets between 2008 and 2017, the hotel sector’s revPAR — a hotel industry metric for revenue per available room — in those areas fell by 0.2 percent. Considering Airbnb’s supply grew over 100 percent year-over-year during that period, that growth has amounted to a 2 percent RevPAR drop for the hotel sector, the study said.
But moving into the homesharing area no doubt brings up its own challenges for Marriott, which the company will have to weigh should it choose to expand the pilot further.
“In the case of Airbnb model, the economics are just so different—it’s very high volume with a low value per transaction, and that’s just not the model these hotel companies have had,” said hotel industry consultant Bjorn Hanson. “It’s very difficult in that kind of economic model to have a relationship with guests.”
But he says the company is in a good position to take on the challenge, and the proactive nature of the pilot should bode well for the future.