This Lodging Sector Needs Airbnb and Booking to Grow Its Business

This Lodging Sector Needs Airbnb and Booking to Grow Its Business

For one small but growing sector of the lodging industry, the need to work with online travel platforms like Airbnb and Booking.com has never been greater.

Serviced apartments, which usually cater to corporate travelers who have undertaken extended travel assignments or are in the process of relocating, make up a relatively small piece of the global accommodations market, but they also comprise a sector that is rapidly growing and evolving.

There are 826,759 serviced apartments worldwide, an increase of 10.5 percent in the past 18 months, according to the 2016/2017 Global Serviced Apartment Industry Report by The Apartment Service,

But perhaps the biggest obstacle to even more growth for these types of accommodations is  that few people even know what a serviced apartment is, or the fact that they offer additional amenities, such as concierge services and 24/7 guest support. Most consumers, however, have an awareness of Airbnb and Booking.com.

And as the battle between Booking.com and Airbnb heats up over who is the leader in private accommodations, both of those companies will find themselves having to play larger roles in not only growing this space, but marketing it to consumers.

AIRBNB PUTS A SPOTLIGHT ON SERVICED APARTMENTS

“I think Airbnb is great,” said Larry Korman, co-CEO of Korman Communities and president of AKA Hotel Residences, which specializes in furnished apartments, during the Serviced Apartment Summit Americas on April 10. “I want to work with them on Airbnb Plus. Hopefully it replaces those expensive OTAs [online travel agencies].”

Korman’s views on working with Airbnb as a distribution channel were echoed by others in the industry as well, many of whom see Airbnb’s newest product, Airbnb Plus, as a great way to gain even more visibility on the platform. Airbnb Plus listings are homes that have been verified by Airbnb to adhere to certain standards regarding design, amenities, customer support.

Airbnb’s commission structure is also different from other online travel platforms such as Booking and Expedia, which often charges hospitality providers a fee that ranges anywhere from 10 to 25 percent. With Airbnb, a host, in this case a serviced apartment provider or hotel, only pays Airbnb a commission of 3 to 5 percent, and Airbnb collects 5 to 15 percent from the guest.

Airbnb’s attractiveness as a distribution channel for serviced apartments, however, may be somewhat diminished if it decides to change its commission structure. As reported this week, the company is testing out a new commission model that would eliminate guest fees and instead implement a host fee of 12 percent — which is nearly identical to what its competitors, Booking and Expedia, currently charge.

AIRBNB’S DIRECT ROLE IN HELPING GROW THE SERVICED APARTMENT SECTOR

Where many serviced apartment providers see Airbnb and Airbnb Plus as ways to reach more consumers, some also see Airbnb as a direct partner in helping them develop residential buildings where tenants are encouraged to rent out their units on Airbnb when they’re not staying in them.

Landlords of these apartments, which are part of Airbnb’s Friendly Buildings program, can collect as much as 25 percent from whatever revenues a tenant makes when he/she rents out her unit on Airbnb. Airbnb collects its regular fees from any transactions.

But there are a number of challenges in this particular space. One such landlord, Miami-based Newgard Development’s Niido Powered by Airbnb apartments in Florida, for example, is currently having difficulty convincing some residents of one of its buildings that homesharing will be a positive for them.

One of Newgard’s primary investors in the Niido Powered by Airbnb brand, Brookfield Property Group, is still convinced that the Airbnb Friendly Buildings Program will help to grow the serviced apartment space, even if it’s been “unsuccessful for a number of reasons to date,” according to Jonathan Moore, managing director of Brookfield Property Group. In December, Brookfield announced it would invest in Niido to the tune of $200 million.

“Most landlords preclude you from homesharing; they don’t want that,” Moore said. “But we’ll see it happen. Someone is going to crack that code. We think [Airbnb] is worth $31 billion for a reason, and we’re going to play in it.”

WHAT ABOUT BOOKING AND BRIDGESTREET?

While Airbnb was mentioned in nearly every session held during the Serviced Apartment Summit Americas conference, the company didn’t have a physical presence. Its biggest competitor in the alternative accommodations space, Booking.com, did, however.

And while Booking is boasting it has more alternative accommodations listings on its platform than Airbnb, it’s also facing a bit of a perception problem of its own.

“When people book a serviced apartment on Booking.com, people tend to assume they are booking a hotel,” an audience member said at one point during a Q&A portion of the conference.

Another player, albeit smaller than Booking and Airbnb, is Bridgestreet Hospitality. Last year, the corporate housing provider reinvented its website to serve as its own online travel agency for serviced apartments and other forms of corporate housing. This portal was designed with corporate travel managers in mind, not the general public however, and the company said it has seen a lot of success since launching in February 2017.

Sean Worker, Bridgestreet Hospitality CEO, told Skift recently that the alternative accommodations space doesn’t have a product problem but it needs to confront its public perception and understanding.

If Booking and Airbnb both want to conquer the private accommodations space, it’s clear that they need to expand awareness of the sector beyond corporate travel and into the mainstream. Not only do they need to work with serviced apartment providers to convince them to use their platforms, but there’s a general need for the industry to educate consumers, and make it very clear to them what this type of accommodation experience delivers.

Already we’re seeing glimpses of that guest education at work: Booking allows users to filter for “apartments” on its platform, but hasn’t yet designated a category specifically for serviced apartments. Airbnb’s new Work collection of homes identifies business-travel-ready listings, many of which are for professional serviced apartments. Both are a start, but it’s clear there’s more for the sector to do.

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The Serviced Apartment Summit brings together all the industry leaders that we can learn, engage and improve the industry as a whole. It is an opportunity that everyone in the industry should be taking advantage of.

Mark Evans, ‎Business Development Manager at GuestRevu

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