Sometimes when a marketplace changes we have to change the language that we use to talk about and categorize the marketplace.
In case of rentals we’re familiar with the historical market („Vacation Rentals“ in the U.S., „Holiday Homes“ in Europe).
But there has been a lot of change in that landscape over the past decade. We’ve seen the explosion of urban rentals and we’ve also seen the rise of shared space (renting out a room in someone’s home or sleeping on their couch).
We use a term called „Private Accomodation“ now to encompass this expanding universe of accomdation that includes all of these different categories, basically any type of privately owned home or space within a home, rented out to travelers.
Until about 2008 we saw an incredibly fragmented kind of market (U.S.) in terms of accomodation, literally hundreds of thousands individual suppliers with almost no technology.
But we also saw the beginning of some change. Marketplaces (and technology) stepped in to make this content accessible and discoverable. We also saw property managers who changed their product so that it was looking a little bit more hotel-like.
Private accomodation use among U.S. travelers has surged (from 1 in 10 travelers in 2011 to nearly one in three as of 2015). In Europe the percentage of travelers who stay in some type of private accomodation is even higher (upwards of one in two in some market).
It’s quite clear now, this is no longer alternative accomodation, it is part of the general consideration set.
There are a few things that have driven this transformation.
- Marketplace Aggregation. The development of marketplaces that have brought demand and supply together. One of the earliest and most important ones was HomeAway. The content is now discoverable and shoppable in a way that it never was before. So we’re starting to get a little bit more hotel-like.
- Booking. Rentals got bookable just like hotels. This was initially pushed by Airbnb and we’re seeing this now with other marketplaces as well. Booking increasingly is becoming the price of entry within these marketplaces.
- Supply Transformation (basic shift from the traditional rental product to basically anyone anywhere with a home or a space within their home that they could rent out to travelers).
- Traveler Transformation (extraordinary shifts in who these travelers are who are renting, how they’re thinking about the rental process and how they’re shopping, discovering and booking these properties). More and more hotel shoppers are coming into the rental fold (rentals are increasingly included in the consideration set). Even people who don’t rent are considering rentals (especially younger millennial travelers).
Rentals are no longer alternative, they are part of the general consideration set for accomodation.
While Airbnb is the company that seems to get the vast majority of the press attention in this sector, Booking.com is quite interesting as well (you could see a Marriott, a Hilton and Joe’s condo or apartment in one search result).
Airbnb has created an incredible brand and there are a couple of very clear associations („travel like a local“ and „peer-to-peer“). It’s all about the experience connecting with locals in a specific destination. But is this really what is driving the extraordinary growth of this company? Phocuswright found, that it’s clearly a significant driver for some Airbnb bookers, but only for about 10 % of them. So, what were the more important drivers? The answer: location and price. There is another travel category that is also driven by price and location and that is hotels. The Airbnb traveler is looking more and more like the typical general traveler population.
The most important question for this industry (and any company that’s involved in selling rentals)? Why don’t non-renters rent? Half of the travellers in Europe don’t rent, they simply prefer hotels (they prefer hotel services and amenities). An interesting question for the future of the rental marketplace: How are they going to introduce more hotel-like services or how are they going to convince those non rental travelers to consider the rental experience?
(Source: via @Phocuswright – Get full details at https://youtu.be/UweHz6gNSXw )