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Will today's Airbnb guests want to stay in chain hotels instead after COVID-19?


Many states have paused non-essential businesses and placed a stay-at-home order, where restaurants can only offer curbside pick-up or delivery service. Nobody goes out.

Recently, the U.S. State Department issued a “Level 4” travel advisory for all international travel. As of April 5, seven of the 48 contiguous states, including Maine, Vermont, Massachusetts, Rhode Island, Delaware, and Nevada, plus Alaska and Hawaii, require almost all incoming travelers to self-quarantine for 14 days. Nobody travels.


Hotels recorded the unprecedented-low performance

The travel and hospitality industry got hit the hardest, with massy layoffs and record-low KPIs (key performance indicators). According to STR’s lodging report for the week ended on March 28, the industry’s KPIs hit “unprecedented low.” STR is the leading data analytics provider for the lodging industry. For the week of March 22 to March 28, the industry recorded:

·      Occupancy: 22.6%, a minus 67.5 percent change from the same period of last year (March 24 to March 30, 2019)
·      Average daily rate (ADR): $79.92, a minus 39.4 percent change
·      Revenue per available room (RevPAR): $18.05, a minus 80.3 percent change
·      The industry is expected to see the worst occupancy in 2020 on record

Hotels chains are closing en masse. The top 25 markets in the U.S., where usually have many Airbnb listings, reported even lower KPIs than the national average:

·      Occupancy: 19.6%, a minus 74.6 percent change
·      ADR: $89.71, a minus 43.9 percent change

·      RevPAR: $17.60, a minus 85.7 percent change.




Airbnb too is not doing well

Airbnb just lowered its internal valuation to $26 billion in April, down from $31 billion in the company’s previous valuation. According to AirDNA.com, a tech firm that collects and provides short-term residential rental data, 

·      The global Airbnb supply remained relatively little change.
·      The weekly Airbnb revenue for New York City dropped from $12.5 million in the week of January 5 to $6 million in the week of March 15, a minus 52 percent change.
·      The weekly revenue for San Francisco dropped from $4.4 million in the week of January 5 to $1.8 million in the week of March 15, a minus 59 percent change.

Keep in mind that on March 15, neither San Francisco nor New York City has placed the stay-at-home order yet.

Comparing to the AirDNA.com data for Beijing, a place with a sticker lockdown order earlier, bookings dropped from 40,508 in the week of January 5 to 1,655 in the week of March 1. That was a minus 96 percent change.

Looking at the yearly trend (March 2020 vs. March 2019), another AirDNA.com report reveals some new trends:

·      Rural areas reported the most significant yearly gains in the month at $1320 million, a $280 increase from the previous year  
·      Suburban areas saw growth from $294 million to $345 million
·      On the contrary, the revenue in urban markets dropped from $706 million to $631 million

It is important to note that such a yearly trend was released on March 23, 2020. It is likely that the coronavirus outbreak has stronger negative impacts on urban markets, in which more confirmed infected cases were reported in large metropolitan areas. It is also plausible that people might choose to stay outside of the urban areas before the stay-at-home order takes effect.

Will today’s Airbnb guests want to stay in chain hotels instead when the pandemic is over? 

It will probably take a long time before the industry bounce back to the 2019 peak even after the pandemic is over. When people start traveling again, however, will chain hotels win some Airbnb guests back?

Referring to the pros and cons of staying in a hotel vs. an Airbnb facility, hotels appear to be a winner. For example,

·      Hygiene and cleanliness will become even more important to travelers. Chain hotels can provide consistent service determined by the brand standards.
·      Social distancing may have a prolonged effect on people. That will lower some travelers’ desire to interact with the local hosts, which is a unique feature offered by Airbnb.
·      With lower ADR, hotels become more appealing to those Airbnb travelers who are looking for cheaper options.
·      It is not as easy to change or cancel an Airbnb booking as a hotel reservation. 
·      It is easier to solve a service failure issue in hotels than Airbnb.
·      In case of accidents (e.g., feeling ill) or damage, it is easier to claim a loss from an insurance company if the case is taken place in a hotel.
·      Some Airbnb hosts, especially the multi-unit hosts, might find it difficult to make the mortgage payments for more than one rental unit during the global economic downturn.
·      Airbnb did a poor job in handling the cancelation fees between hosts and travelers; It might take a long time for Airbnb to fix its relationship with the hosts.

Let’s hope the pandemic will end soon. Then, everything will go back to normal.

When people begin traveling again, will chain hotels become a more attractive option for the travelers who usually stay at Airbnb?

Note: This post is also available on MultiBriefs.com; The picture was downloaded from BusinessInsider.com

Comments

  1. Meri Krier HRT 3020 Section #2:

    I found this blog post very interesting and relevant to my life currently.
    To start, my parents own and operate two Airbnb's on our property in a small rural county in Northern California. The Corona Virus has effected my families business in some very strange ways. On one hand, business has been slow and there has been a significant drop in occupancy for each of our unique cabins. On the other hand, there are customers that want to stay in a small remote town to remove themselves from the risk of staying in a populated, urban city. A line from this blog states that "Rural areas reported the most significant yearly gains in the month at $1320 million, a $280 increase from the previous year " and "It is also plausible that people might choose to stay outside of the urban areas before the stay-at-home order takes effect."
    I think these are the reasons why we have not lost ALL of our business due to COVID-19, unlike most of the hospitality industry, and we are definatly grateful for it.

    Thank you for such and interesting blog Dr. Kwok, I cant wait to read more.

    ReplyDelete
  2. Delance Simpson HRT 3020 Sec 2

    I think your blog post had some key points that were very distinct from the news I have been seeing on this topic. For one some media doesn't refer to AirBnB as a hospitality sector in any capacity. So when they talk about how service is one of the number one career paths being affected by covid-19 they do not mean AirBnB. And adding in the numbers of gains for each year added a sense of realism and fact to your post. Such as how people may or may not choose to stay in a rural or urban area before the stay at home order had taken action. Thank you for the time it took to write this.

    Informative Post!

    ReplyDelete
  3. Jonathan Tierrablanca HRT 3020 Sec #01

    I found this blog very interesting and learning how much this pandemic has really affected our industry in just a short amount of time is daunting. I believe that this pandemic will cause more damage for Airbnb than the established hotel brands because people feel that hotels have better cleaning procedures than at an Airbnb. Cleaning procedures is something you mentioned on your blog post and it is something that I have thought of when I’ve stayed in an Airbnb vs. a hotel because many Airbnb’s use a third party to clean their houses and I do not know how reliable that can be. I believe that Airbnb guests will stay at hotel brands after Covid-19 until Airbnb can establish a universal cleaning standard throughout all lodgings.

    ReplyDelete
  4. Heather Kingsbury HRT 3020 Section 01

    This is one of the most interesting articles that I have read. It also interesting to see the impact that Airbnb is having with everything that is going on. I believe that Airbnb is going to have a long road to recovery after the pandemic is over. While hotels can guarantee cleaning procedures for their guest, Airbnb does not have that available for their guest. While this is super interesting it’s been nice to see how the world is doing compared to the current hotel that I am working at. We have taken a massive decline in occupancy. I personally do not see Airbnb recovering anytime soon after the pandemic is over, hotels on the other hand will recover faster. Thank you for writing this article.

    ReplyDelete
  5. I think after all this is over hotels will see an increase in people staying with them. Going off the points made in the article the 2 more sustainable ones for me were the cleanliness an the drop in rates. Since hotels have a housekeeping department it is obvious they are much more equip to offer better sanitation and upkeep of their rooms. Along with more booking because of the drop in price and room rates that most hotels with have to take part in because of lost income over the pandemic. However, I think something that will draw people back to air bnb is the idea of privacy and distancing. Easing back into the norm with take sometime and at a hotel you are more likely to run into strangers and people in the lobbies and public areas. Then if you were staying at an air bnb that you rented for just you and the people traveling with you.
    HRT 3020 section 1, Diana Pesqueda

    ReplyDelete
  6. Tiancheng Zhou HRT 3020 section 3April 12, 2020 at 7:03 PM

    It is a very interesting article to read. I like the prediction about the how airbnb goes after the pandemic. The COVID-19 is a very tricky virsus people to deal. It will likely for people to live with this virus for a long time. So at this point, When people have to travel for no matter what reason, they will try to find the safest and most clean place. So far, airbnb did not great job on cleaness, so this will be their chanllage. I also like the point you mention about the service and insurance problem. That the problem they always have. Last but not
    the least, not only airbnb, but other hotels need to do some changes about how they against the virus so that people feel safe in their hotel.

    ReplyDelete
  7. Janelle Rae Salem HRT 3020 Section 3April 13, 2020 at 11:13 AM

    When people begin traveling again, chain hotels may become a more attractive option for the travelers who usually stay at AirBnb, especially after the COVID-19 pandemic. The negative impact of the Coronavirus has affected not only many industries, such as hospitality and tourism, but the lifestyles of every individual. Many people are no longer out and about as often due to the easy transmission of COVID-19 through droplets. Many have been taking precautions to do their best to stay healthy, by consistently washing their hands, and sanitizing every item they come into contact with. Travelers may be more attracted to staying at chain hotels, as they may trust the cleaning and sanitizing practices of the housekeeping departments at these properties.

    ReplyDelete
  8. This comment has been removed by a blog administrator.

    ReplyDelete

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