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Instant Analysis: Survey Says Once You Try Airbnb, You Don't Go Back to Hotels

By Jeremy Bowman - Feb 21, 2016 at 8:14AM

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According to one recent poll, Airbnb is making serious headway against hotels.

What happened? 
Goldman Sachs survey released last week presented some scary news for the hotel industry. The research found that Airbnb, the peer-to-peer home-sharing site worth $25 billion, is replacing hotels as a choice for many travelers.

Home-sharing sites including Airbnb, FlipKey, and Expedia (EXPE 1.63%) -owned HomeAway are getting greater name recognition and, with it, more repeat visitors. The survey said the percent of consumers who have heard of these brands grew from 24% to 35% over the last year, and the percent of people who have used such a site grew from 11% to 16%.

Finally, it said that after travelers try Airbnb or one of its peers, their preference for hotels is halved. Of those who have stayed at a peer-to-peer rental, the preference for home-sharing is about equal to traditional hotels. 

Does it matter? 
Airbnb has become the bogeyman of the hotel and travel industry. The company now controls more rooms than any hotel chain, and is seen not only as a threat to the major hoteliers but also online travel agents like Expedia and Priceline (BKNG 0.55%), which get the majority of their revenue from hotel bookings. 

Nights booked on Airbnb were expected to double to 80 million last year, presenting what seems to be a clear threat to the hotel industry.  In a survey by Atmosphere magazine, 70% of hotel groups said they believed Airbnb would pose a significant threat to their business in the next three years.

Financial results in the hotel and travel industry have nonetheless remained strong. Priceline just reported a 24% increase in currency-adjusted gross bookings, and analysts expect modest growth from hotel-chain management companies as well. Nationwide, occupancy rates are at multiyear highs.

According to some evidence, room rates have come down in competitive markets, but Airbnb is not a perfect replacement for hotels. A certain subset of travelers will prefer the controlled environment of a hotel no matter how appealing a home-sharing rental might seem. Airbnb has also faced red tape from local governments and efforts to restrict it or impose taxes that could curtail its growth. The start-up also presents a way to grow the travel industry as a whole since the ability to rent out your home on a short-term basis provides an incentive to travel or a way to fund vacations. 

Still, hoteliers would be remiss to dismiss the threat from Airbnb. As Airbnb grows, hotels may be forced to make adjustments to be more competitive by lowering prices or adding amenities like kitchenettes. With Airbnb projected to earn $10 billion in revenue by 2020, the two segments appear to be on a collision course. 

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Priceline Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Booking Holdings Stock Quote
Booking Holdings
$2,141.41 (0.55%) $11.64
Expedia, Inc. Stock Quote
Expedia, Inc.
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