28 Oct Connecting The Dots

In October, I attended two industry conferences.  The first being the hotel industry Lodging Conference and the second was the software development LiveRez Conference for the vacation rental industry.  At the Lodging Conference, there were several presentations by hotel experts highlighting industry economic trends.  At the vacation rental conference, Airbnb made a strategic announcement which I believe will impact the hotel industry, like Uber affected the taxi companies.

At the Lodging Conference, four hotel industry experts (STR, HVS, PKF Hospitality Research and Lodging Econometrics) presented their views of the future.  By all measures the industry continued to grow in 2015.  The important revenue per available room (RevPAR) statistic for 2015 grew by 6.8%.  This was better than 2014’s 6.4%.  What was interesting was the consensus that 2016 growth would be at a lower growth rate in the 6.0% range.  This is consistent with our belief that the industry is at or nearing the top of the hotel development cycle.  It is our view, that the industry, and the economy in general, will experience a downturn in 2018/19 with a robust recovery in the 20’s.

At the Lodging Conference, there was a great deal of talk about the impact of Airbnb during the Pope’s visit to Philadelphia.  Hotels had geared up for a high demand period.  With Airbnb adding more than 2,000 rooms to the inventory, the expected peak demand was not realized.

LiveRez is a reservation and property management software company used by the Vacation Rental industry.  Currently there are over a 1,000 partners (subscribers) using the system and is seen as the fastest growing software solution for the Vacation Rental Industry.

At the vacation rental conference, Airbnb and LiveRez announced a partnership providing Airbnb access to over 30,000 properties located in urban and destination resort areas.  This partnership could move the needle for Airbnb.  Their current system is mostly tied to the rental of an extra room or individual homes.  Connecting with professionally managed property organizations provides Airbnb with greater product consistency.  For the property managers this expands their global reach for rentals.

A hotel’s reservation system is often a key decision point when selecting a hotel brand.  Based on the selected brand, the guest is able to depend on a level of quality.  Airbnb’s weakness was the inconsistency of the product offered.  This alliance between the vacation rental industry and Airbnb narrows the standardization gap, plus an offering of unique properties at resort and urban destinations.  Like Travelocity and Expedia, this will be something that could erode hotel revenue and by placing guests in vacation rentals instead of hotels… this is something the hotel industry must address in the future.

Marriott Newport Coast Villas, Newport Coast, California