Who will win in the battle of brand convergence: hotels or short-term rentals?

3 Sloane Gardens - UnderTheDoorma
3 Sloane Gardens. (UnderTheDoormat)

Insight Comment
Hotel companies now offer short-term rentals and the likes of Airbnb sell hotels. There’s plenty of crossover between the two sides. It’s hardto predict a winner, but it’s difficult to go against the big, established hotel companies providing they learn from (or invest in) the younger, tech-savvy and consumer-centric start-ups. 

The cycle in business and commerce is usually the same. Old companies get disrupted by new entrants, usually in the form of better branding and technology, the two groups dance around each other with the more established names sometimes buying the upstarts but the slowly the ecosystem settles and each side starts behaving more like the other.

We’ve seen it with short-term rentals. The new entrants like Airbnb and HomeAway, showed there was an appetite for this type of accommodation, and quickly grew. Although there has always been a debate about how much cannibalisation this created in the hotel industry, big names like Marriott and Accor came to the conclusion that they needed to offer something similar or they would be missing out.

What’s interesting is that we’re now seeing the original start-ups expanding their repertoire to include hotel-like accommodation as well. Since the mid 2010s, Airbnb has been quietly growing its hotel offering and in 2019 it bought booking platform HotelTonight. A much smaller example in the UK came in 2020 when luxury accommodation business UnderTheDoormat’s partnered with property manager, developer and investor Cadogan to market and manage 3 Sloane Gardens, a new boutique aparthotel that aimed to “combine the independent spirit of homestays with the luxury service of a hotel.”

“I think what were seeing is that operators who started in our space have been increasingly moving into the more established areas,” said Merilee Kerr, CEO of UnderTheDoormat on a panel discussion at the Short Stay Summit held in London last month.

“A lot of companies that started as innovative companies in the short-term rental space [are] increasingly moving up the asset value chain into things like aparthotels, serviced apartments and so forth. And I think what we’re seeing is that innovation driving really efficient business models but also consumer-centric brands and distribution technology which helps to really maximise the value of that asset.”

At the other end of the spectrum are the hotel giants. Accor has made perhaps the biggest transformation of its business, buying and creating new brands to expand its reach within travel and beyond. Marriott has also grown its reach. Launching Marriott Homes and Villas about three and a half years ago, firstly as a pilot scheme with now defunct brand Hostmaker, and then on its own. It has gone from 2,000 units to 35,000 in this space of time.

“We obviously did a lot thinking before we moved in to make sure that home rentals were going to give a net benefit to our business and it was going to help us increase share of wallet overall and drive frequency to our overall portfolio,” said Chris Stephenson, vice president international markets, Homes and Villas by Marriott International, at the same event.

Stephenson said all this had been achieved.

The big plus for Marriott, Accor and the other big hotel companies is that short-term rentals and other similar products are big draws when it comes to loyalty and membership schemes. The recent pull back from online travel agencies towards more direct bookings has meant sweetening the deal for those customers and led to big improvements in the likes of Marriott’s Bonvoy and Accor Live Limitless. Something that is very difficult for newer and smaller players to replicate.