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Build to Last

June 2016

The hospitality industry must rise to the challenge of disruptive technology to remain competitive

Almost every industry is witnessing a technology-driven transformation, and the hospitality industry is no different. There are a number of offerings that have emerged over the last few years with technology at the helm, redefining the competitive landscape of the sector. The emergence of vacation rental sites, of the likes of Airbnb, homeaway, vrbo amongst others is an evidence to the same.

Referred to as peer-to-peer (P2P) accommodation rentals, this is part of the overall collaborative consumption or sharing economy, global dynamics are triggering. Simply put, it involves a platform connecting the ‘hosts’ (providers of rooms / accommodations) and ‘guests’ (travelers), charging a service fee in its role as the middleman. A report, ‘Airbnb and Impacts on the New York City Lodging Market and Economy’, HVS, concluded a near USD 450 million revenue loss to the local hotel industry (September 2014 – August 2015) on account of the existence, availability and resultant bookings (total of 479,651 reservations recorded) via Airbnb. This translated to a near 7.81% of the New York market share, 2.9 mn occupied room nights of the total demand of 36.8 mn.

What is aiding this phenomenal growth by players in this space? Firstly, the platforms have a near zero marginal cost with the incremental room added at a near zero cost, thus aiding the scale of growth. Secondly, the options available transcend ease and comfort and allow a customization, enabling one to blend interests and preferences, thus making the whole stay a lot more personal. This has been a major reason for the ‘millennial traveler’ evincing particular interest in these platforms. Supply and demand dynamics have compelled the traditional hotels, vying to maintain their authority in this space, to lower their prices. The growing influence of these platforms in the travelers mind is bound to increase in the years to come – whether it gets acknowledged as a threat or complement to traditional strongholds within the overall hospitality segment will be defined by the end user.

‘We are excited about our cooperation with Dubai Tourism’

Nicola D’Elia, General Manager – Middle East and Africa, Airbnb, shares his  market objectives and strategies with Wealth Monitor

Nicola D'Elia_Airbnb

How is Airbnb positioning itself to disrupt the global hospitality industry?
I am actually not a fan of the term ‘disruption‘ – it sounds as if we are breaking something up which couldn’t be further from the truth. I would much rather say that Airbnb is an innovation in the hospitality industry – we are the first to offer something on a global scale that has always been around. Home stays have a long tradition in many parts of the world. And thanks to the internet we now make it possible to rent someone’s home, no matter where, with ease and security. Through the Airbnb platform, people don’t just visit a destination when they travel, instead they can truly live there, even if it’s just for a night.

Could Airbnb be referred to as a competition to hotels or a complement?
Airbnb makes the travel pie bigger – which is good news for everyone. Our Economic Impact Studies show that people who travel on Airbnb stay longer wherever they go and sometimes wouldn’t even have taken that trip. We offer something very different from hotels. And the numbers suggest that hotel occupancy over the last few years has also developed really positively – so I’d say it’s a complementary offer and all of the hospitality industry benefits from more and more people traveling.

Dubai is considered by many as the hub of luxury in the Middle East. How does Airbnb as an offering fit in here?
Airbnb has amazing luxury properties to rent. With an offering spanning over 2 million homes to rent all over the world – there really is something for everyone. So travelers to Dubai that are looking for luxury will defintely find that on Airbnb, as well as those that are looking for a more affordable stay.

Dubai Tourism has recently tied up with Airbnb. Can you spell out some details?
The goal of the partnership with Dubai Tourism is to raise awareness for Airbnb as a great option both for travelers coming from Dubai as well as for hosts in Dubai that want to rent out their home to tourists. We are looking forward to this partnership evolving to promote innovative and diverse forms of tourism together. The Emirate is looking to attract 20 million guests by 2020 – and Airbnb can (and should) be part of that strategy.

Does Airbnb offer any services which cater to Halal tourism?
Our Airbnb homes are as diverse as their hosts – which means that even though we don’t currently offer a filter to search for Halal properties, there is always the possibility to discuss one’s expectations with the hosts before a stay.

Which of the regional markets are expected to remain focus areas?
We are excited about our cooperation with Dubai Tourism and are focusing on that right now. We are always looking to partner with local authorities to promote home sharing and authentic travel but at this point Dubai remains our focus.

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