First it was online travel agencies like Travelocity and Priceline doing the distribution disrupting. Now newer brands loaded with owner-offered sleep options at sites like Airbnb, HomeAway and VRBO have the hospitality and meetings industry on guard if not a bit nervous.
As part of the “sharing economy,” the latest sleep space distribution brands own no real estate but instead offer their inventory online, from single beds for one or two guests to whole luxury houses owned by celebrities.
Like a lot of other Internet innovators, today’s disruptors weren’t taken very seriously until recently, when their increasing success impacted tax revenues in major cities and caused hoteliers and meeting planners to take notice of their effect on room blocks.
Hyatt Hotels Corporation’s recent investment in a luxury private homes brand, London-based onefinestay, has industry watchers speculating about why a major international hotel company would step into this unconventional distribution territory. Some believe it may signal a game change on the industry’s horizon.
Disruptor Evolution
Once the domain of young leisure travelers on a quest for cheap sleeps like someone’s couch, the home rental brands are now attracting a more diverse universe of customers, including high-paying leisure and business travelers.
Why not reserve a three-bedroom condo in the city center near your meeting site for less money than you can book a single room in the hotel block? While you may sacrifice amenities such as room and daily maid service, security and gym access, you may enjoy most of or more than the comforts of home, plus proximity to the meetings and city action.
Planner Challenges
The home rental brands’ effects on future room blocks are already under consideration.
Some speculate familiar formulas for negotiating costs for event sleep and meeting space may be falling into the same oblivion occupied by buggy whips and typewriters. Room blocks may in fact become obsolete.
“I think we have challenges in this we have never faced before,” says MaryAnne Bobrow, president of Bobrow Associates. “We used to worry just about attendees booking outside the block, but now a whole new formula seems to be emerging.
“How do we factor in the effect of these new brands that are competing for lodging business?” she continues. “Where do we put F&B, networking events and so on? We’ve been contracting costs with the ratios of sleep rooms and F&B to meeting space, but how do I negotiate for an event five years or more from now? Do I commit to filling up 85 percent of 900 room nights in a host hotel, or something else? Maybe we will reach the point when we will simply pay for meeting space and forget sleep room blocks.”
Industry attorney Jonathan Howe, president & CEO of Howe & Hutton, says it’s difficult to know how home rental brands will affect contracts for the future, but new paradigms are likely to emerge.
“U.S. and Canadian hotels have been somewhat unique in that they have said they would throw in the meeting space for free if the contracting organization would spend so much on sleeping rooms and F&B,” he says. “Now we have multiple demographics in groups, who all have different lodging preferences.”
Howe and Bobrow both pointed to the ASAE’s annual convention in Detroit this month as an indicator of what the industry might be doing in the future. There is no host hotel, Howe says, but 10 hotels in a block. “Please feel free to stay at the hotel of your choice,” reads ASAE’s website, which offers options ranging from boutique-style rooms to major brands.
As planners and suppliers look for ways to live with the new distribution disrupters, Howe says one answer might be to offer discounted registration fees to those who book inside the room block.
Answering to Airbnb
The rise of home-stay alternatives have some planners wondering whether they should offer them among accommodations choices in their meetings marketing materials.
Industry attorney Joshua Grimes advised recently in a Meetings Focus blog to take a “hands off” approach for now. Home stays present myriad legal risks to host organizations, he contends, and there is the issue of protecting the group’s rebate from hotels where room blocks are located.
Meanwhile, Hyatt Hotels’ investment in London-based onefinestay has attracted speculation about the company’s strategy for wading into the home rental waters.
“The Hyatt investment is a very interesting play because it’s the first time that one of the big seven parent companies has acknowledged the fact that rentals by owners is a force to be reckoned with in the hotel marketplace,” says Jan Freitag, senior vice president of hotel industry consultancy Smith Travel Research. “By doing this, Hyatt will get a better sense of who the customer is.
“Maybe people burn their Hyatt loyalty points on that site?”
While the new brands stand for freewheeling and adventure sleep choices, a new middle ground might emerge between them and traditional hotel brands, Freitag speculates. Perhaps the situation will evolve so that the hotel company brand’s housekeepers clean the houses and customers who stay in them have access to the hotel’s gym. In this sense, the new brand disrupters get disrupted by the established brands, he maintains.
