Hotel brands cracking the home rentals market

Marriott International, the latest major hotel chain to enter the London market, has launched a six-month project in partnership with the home rental management firm Hostmaker to offer over 200 homes that have been vetted.

Choice Hotels, which has run a Vacation Rental Program since 2016, expanded its offerings significantly just days earlier to include 20,000 more properties in the U.S.

Some operators have chosen a different route to establish links with the market for home rentals. Hyatt entered the home-sharing market by allowing its members to earn loyalty points through Oasis. Oasis offers serviced accommodations in more than 20 destinations around the world. In 2017, Accor Hotels purchased three home-sharing platforms and consolidated them under the Onefinestay brand.

Marriott, on the other hand, is using a different approach. They are starting with one trial location in a gateway city and extending their existing hotel brand, Tribute, into this space.

Reacting to disruption

All of these actions have something in common: a concerted effort on the part of the hotel industry to adapt to the disruption caused by the rise in home-sharing platforms that offer alternative accommodation in different locations, often at a lower cost.

Lauro Ferroni is the Head of Hotels & Hospitality Group Research at JLL. She says that “new accommodation models have created much new travel demand. For example, people are now taking trips who previously would not because of high costs or lack of availability of areas where they wish to stay.”

Homesharing is a growing trend in the hospitality industry. The focus on personal experiences and immersive travel is a significant shift. William Duffey is JLL’s Executive vice president, Hotels & Hospitality. He says that millennials are looking for lifestyle-focused and flexible hotel offerings.

There’s also a financial incentive to investigate ways to offer home-sharing services to hotels, as new players in the market are threatening to reduce their revenues and market share. In the ten most famous cities in the U.S., there was a reduction of 1.3 percent in hotel bookings and a loss of 1.5 percent in hotel revenue.

Leveraging Hotels’ Advantages

Hotels have an edge when it comes to home-sharing. This can be in many areas, from brand recognition and customer loyalty to local knowledge. Ferroni says that hotel companies have a wealth of information about their customers. They know when, where, and how much people travel. They also own several global brands that are extremely valuable.

Safety and standardization are other significant benefits. “Big brands bring consistency,” says Duffey. Home-sharing providers offer a more fragmented inventory, less consistent than what hotels provide.

This shift could result in a better experience for guests by combining flexibility and authenticity with the consistency and loyalty of hotels. Ferroni says, “It is a way for travelers familiar with the hotel brand to interact in a new way.”

Cost and Scale as a Basis for Competition

Hotels still face some challenges at this early stage. It is expensive to vet properties and ensure consistency and high standards. And with price being a primary motivator for home share bookings, many consumers are reluctant to pay more than they would on platforms that offer similar properties. Duffey says that big brands are more expensive to run, and while they can compete on price, it’s still about the profit margin.

According to Ferroni, there is a risk that hotels may transfer their existing customers to the new home-sharing product instead of reaching out to a new market and expanding their customer base. He says that the program’s success will be determined by the number of guests staying overnight and the inventory increase.

The ability to expand quickly and efficiently is another obstacle that hotels face. Duffey says, “Scalability and the speed at which it can be achieved are essential to get something started today.” “Buying companies or groups with that scale level is often a good option.”

Opportunities beckon

The hotel industry adapts dynamically to the challenges it faces. Operators must experiment to find the differentiators to appeal to their brand values and target audience.

Duffey says that operators are working on getting the best accommodation for the lowest price and finding new business lines to create value during their stay.

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