Why the merger of hotels and short-term rentals is a…

Earlier this summer, I attended the Skift Future of Lodging Forum in New York. The basis for the summit was the growing trend of convergence between hotels and short-term rentals dubbed by Skift founder and CEO Rafat Ali the “great merger”. This mixing of these two hosting classes has been happening for a while but is now accelerating due to a number of factors.

Two related changes occur. First – hotels are increasingly offering accommodation which is not only the standard hotel room. From the Full-On Marriott’s Homes & Villas platform to beautiful high-end properties in leisure and city locations to low-end struggling hotels and motels adding kitchens to their units and then everything in between. Hotel chains and independents offer more unit diversity to meet customer preferences.

Second – property managers in short-term rentals are learning from traditional hotel brands and increasingly offering a full brand experience, from booking platforms to guest apps and consistent amenities. Some, like ALTIDO, which manages rentals in the UK and Europe, now offer “pop-up hotels” during peak seasons in hub cities.

A key fact is that consumers now differentiate less between the two types of properties and hold little loyalty to What Whether they reserve (whether it is a hotel room or a short -term rental apartment, for example). Most travelers want a nice, comfortable place to stay, in a good location, with an easy booking experience, a positive ownership experience, and a sense that they’re getting value (what creates value differs for all of us) for money.

Some guests are more invested in buying a brand or want a greater “lifestyle” experience. Some much less. Many OTAs (online travel agencies) now display hotel rooms and short-term rentals side-by-side, so the lines are blurred in the eyes of the consumer from the outset.

Another factor is that during the pandemic, due to the perceived safety of self-contained accommodations, the short-term rental industry has gained market share over hotels and resorts. Add to that the changing patterns of our working lives, with increased flexibility for many to work remotely, and it’s clear why rentals are benefiting from increased demand and hotels are keen to adapt.

In fact, Europe’s short-term rental segment is on track for steady growth, with gross bookings for 2022 predicted to reach 37.5 billion euros, and a full market recovery to pre-previous levels. -pandemics are expected to occur in 2023.

Both accommodation sectors are highly fragmented, with 85% of short-term rentals being run by sole proprietors or micro-enterprises. With easy on-demand access through OTAs, low capital expenditure, few regulations, and minimal industry standards – anyone can set themselves up as a short-term rentals “property manager” . However, greater professionalization, increased adoption of technology, and the sometimes brutal self-regulation of reviews mean that standards keep rising.

It is generally agreed that around 35% to 40% of hotels are held independently and managed. Again, a very fragmented market with great scope for entrepreneurial activity and diversity.

Interestingly, there’s yet to be a great amalgamation of the technology solutions that power both short-term rentals and hotels with little crossover between them – despite the clear pain point parallels for managers. Vendors always seem to stay in “their lane” and offer solutions to one or the other hosting industry – rarely both. Skift Research recently published a report on the challenges of this convergence, why the transition is slow and what we can expect to see in the future.

For property developers investing in hospitality, whether it’s traditional hotel rooms or units with space and unit facilities, it’s still a good bet, despite the looming recession. and financial instability. Yields are higher, the work brigade from anywhere still needs housing, travel is booming, and there is still money. Some of the biggest names in private equity firms, hedge funds and alternative asset management are currently considering short-term rentals and vacation rentals.

Change happens in its time, but for anyone interested in the hotel real estate markets, this convergence of short-term rentals and hotels is a trend to watch as it will inevitably affect the nature of future investments.

*Jessica Gillingham is Founder and Managing Director of Abode PR

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