Has Airbnb hurt Arizona’s hospitality industry?
Sunday, Jan. 3, 2016
Kim Vu could smell the salty sea breeze from the San Diego loft just above a local coffee shop.When she arrived, the Phoenix native was thrilled when she noticed a small gift – a birthday card with a bag of goodies.
Her hosts were neither family nor friends – they were strangers.
Similar scenes – nearly unheard of a decade ago – play out in houses, apartments, condos and lofts around the world every day. Airbnb, the fast growing peer-to-peer accommodation site and product of the sharing economy, has created a spark in the hospitality industry.
Yellow: $30 per night – $644.2
Green $644.2 – $1,258.4
Pink $1,258.4 – $1,872.6
Red $1,872.6 – $2,486.8
Blue $2,486.8 – $3,101.0
However, experts said Arizona has remained largely unaffected by this new competitor because of the state’s unique position in the industry.
Arizona has built a reputation on its multi-billion dollar travel industry with its sprawling resorts and luxury offerings for tourists. But experts acknowledge that demographics and preferences change, and it’s unclear whether Airbnb’s presence will grow in the future.
There’s one group in particular who rave about the service: Millennials like Vu.
“It’s unlike any other experience,” said Vu, a 20 year-old student at Arizona State University and a regular user of the site. “It provides a way for someone to feel like a real local, instead of being a tourist. I also like how it’s usually much cheaper than booking a hotel.”
She, like thousands of others in her age demographic, searched, selected and paid for her room entirely on her smartphone. It’s exactly this kind of innovation that has catapulted the company into an international phenomenon.
While Airbnb has received praise for offering an alternative form of travel, it also faces criticism from city officials and affordable housing advocates who claim its business model damages communities by providing unsafe, unregulated hotels. In cities like San Francisco and New York, the company faces legal hurdles and threats of additional taxation.
A dominant force?
“Airbnb is an interesting entity that is growing at a rapid rate,” said Galen Collins, a hospitality technology expert and professor at Northern Arizona University. “Who knows, at the current growth trajectory, it could be the largest chain in the world.”
The numbers show it’s on its way.
Founded in 2008 in San Francisco, Airbnb exploded into an international network that now serves 15 million guests. The company is valued at $25.5 billion, and users can access spots in more than 190 countries, according to the company’s website.
But the company has made clear that it doesn’t exist just to provide lodging. It is instead selling a concept that is bigger than a hotel experience – the belonging of humankind.
Airbnb explains its vision on its website this way: “What makes this global community so special is that for the very first time, you can belong anywhere. That is the idea at the core of our company: belonging.(Y)ou’re tapping into the universal human yearning.”
To align with its mission, Airbnb introduced business travel packages, and is testing a concept called group dinners, where hosts are encouraged to make and sell three-course dinners for guests in the area.
The website boasts two million listings worldwide, and the company has even sealed a deal with the Olympics organizing committee as the official “alternative accommodation services supplier” – that is, providing more affordable spots for tourists, volunteers and staff – for the 2016 games in Rio de Janeiro, Brazil.
While its ambition may be grandiose, Airbnb’s design is straightforward: Users can list their home, apartment, condo (even castle) on the site, with pictures, availability and price. In return, guests can book on the website and pay through Airbnb.
To combat any safety concerns, hosts can decline a guest, and both sides can view ratings of past experiences.
While Airbnb did not respond to requests for comment, its website stresses safety repeatedly, including the fact that both hosts and guests must verify their identification, and the company insures its hosts up to $1 million.
“I never felt like it was unsafe in any way,” said Vu, who has used the service in New York and San Diego. “You can see the photos of the places, chat with the hosts and see a map of the area.”
Like Vu, fans of the site find Airbnb convenient and valuable – providing a new way to see a city. In addition to treats, hosts have left itineraries and restaurant suggestions.
“In Portugal, we had wine and cookies waiting for us when we arrived,” said Tucson resident Belle Morse, who used the site during her trip to Europe. “We even got free drinks at the hosts’ bar across the street.”
Not yet hitting Arizona
Airbnb representatives have repeatedly mentioned to other media publications that it doesn’t release the total numbers of properties registered in a city, citing its business and privacy interests.
A Cronkite News analysis of Phoenix listings scraped from the website on Sept. 10 showed 729 available options for the weekend of Sept. 18-20.
With homes, apartments, condos and casitas, the average price to book a place in the greater Phoenix area was $334 per night. The median price was $200, with the highest being a luxury home for $3,100 and the lowest at $30 to rent a room in Tempe near Southern and Mill avenues.
If travelers booked all of the open Airbnb rooms in Phoenix that weekend (and paid the asking price), the gross revenue would have been $243,424 with the ability to accommodate 4,299 people.
Yet local hospitality representatives said the company hasn’t yet made a huge splash in the state’s tourism industry.
Mario Long, a general manager for The Victory Inn in Tolleson, said he believes the digital competitor has not generally affected his business. Operating as an affordable motel, Victory Inn charges about $50 to $60 per night, he said.
“While I myself have been interested in Airbnb and want to try it out, I don’t think it would be a service I’m competing for customers with,” Long said. “The majority of my customers are locally based. They can stay two to three weeks a time while in transition with housing issues.”
About 40.7 million overnight visitors came to Arizona in 2014, according to the Arizona Office of Tourism. Only 17 percent of these visitors came for business purposes, while 83 percent traveled to the state for leisure. From hiking and exploring the casinos and nightlife to visiting the Grand Canyon and Sedona, experts said out-of-towners have plenty of reasons to check out the state.
High-profile events throughout the year also drive in tourists. From February through April, this year’s spring training baseball attracted 1.9 million fans and generated more than $809 million in economic impact, according to the Cactus League.
During these high-demand events, Long admitted that Airbnb could become a viable form of competition.
“The only time I can think of where Airbnb would affect us would be during a season, like NASCAR or spring training,” Long said. “That’s when our prices get way way higher, like around $100-$150 a night.”
There’s also another strand of tourists: Those who specifically come to enjoy the award-winning resorts within the state.
Visitors want the activities that come with the resorts – a round golf, a margarita by the pool, an onsite massage, a nature hike.
Activities that Tina Newman, the vice president of sales and marketing for Enchantment Resort in Sedona, said people might find much harder to do at a personal residence.
“(There’s) unique and beautiful facilities that are usually not available in a private home,” Newman wrote in an email. “Especially here in Arizona, where the properties have fabulous pools, interesting dining options, amazing views, professional service and people to meet.”
Collins agreed: “The high-end luxury providers are able to give a very personalized experience.
Many of them have spas, golf courses, recreation, food and beverage to offer their clients.”
Of all the hospitality providers, Collins felt resorts wouldn’t feel the effects of Airbnb as much because the amenities aren’t readily available in a private home. Even if a visitor books a mansion off of Camelback Mountain on Airbnb, the lack of room service and specialized attention could be a major “con” in selecting that venue over a resort.
“I think right now, the folks using Airbnb are looking for good deals,” he said. “They are very price sensitive and because of it, the lower to mid-range hotels are more in the cross ends of this phenomena.”
And Arizona’s average visitor isn’t the type that generally leans toward Airbnb, either. According to the Office of Tourism, the average age of an Arizona tourist coming into the state for leisure is 45 years old and will spend $767 in trip expenditures. It’s a disconnect with the typical millennial Airbnb user who is much younger and with less disposable income.
Some states and municipalities have engaged the hospitality site in legal battles over issues surrounding taxes, safety and affordable housing.
In November, San Francisco residents defeated Prop F – a ballot initiative that would have restricted private, short-term housing rentals to 75 nights per year and would have collected hotel taxes.
“We have lost between 10,000-12,000 units of housing that have been converted into full-time tourist accommodations,” said Dale Carlson, co-founder of Share Better San Francisco, an organization that backed the proposition. “And this is at a time where we are suffering through one of the worst affordable housing crises in history. It’s unacceptable at a time where working class families are really struggling to stay in the city.”
While the proposition lost, Airbnb didn’t come out of the fight unscathed. The company reportedly spent $8 million to defeat the proposal, according to the San Francisco Chronicle. The city’s Board of Supervisors also could attempt to pass tighter regulations for home sharing.
In New York, Attorney General Eric Schneiderman said 72 percent of the New York listings on Airbnb violated zoning codes or the state’s Multiple Dwelling Law, according to a news release distributed by his office. Instead of peers renting out spaces periodically, the data suggested many had become commercial real estate moneymakers, with one user making $6.8 million – all while skirting taxes.
Airbnb also received criticism from others in the hospitality industry. The American Hotel & Lodging Association, an organization that represents the hotel industry in the United States, has publicly denounced the company, saying it does not uphold the rigorous standards of safety and well-being as the long-standing brands.
“(Hosts) are not mom and pops, these are individuals or companies operating multiple properties as a business,” Vanessa Sinders, the association’s head of government affairs, said in a Federal Trade Commission workshop this summer. “These are not students making ends meet. They are rogue commercial interests. They are simply illegal hotels. And they should have to meet the regulatory obligations of the jurisdictions in which they operate, as hotels do, to protect the health, safety and well-being of their guests.”
While Phoenix-based Best Western declined an interview on the record, a spokesman pointed to CEO David Kong’s recent blog post on this issue. Kong wrote that Airbnb simply can’t provide the guest with needs he or she may have during their stay.
“Every room is different at Airbnb,” Kong wrote. “You can’t mingle with staff and fellow guests in a lobby. Need a document printed? Want your room cleaned at 11 p.m.? A wake up call with a friendly voice followed by a fresh, well-done complimentary breakfast? Need a suit pressed before your business meeting? You’re on your own with Airbnb.”
Future of home-sharing in the Grand Canyon state
Although local hospitality representatives said Airbnb hasn’t made them squirm yet, the stakes are high.
In 2014, the state had record-breaking figures for tourism. The industry raked in $8.3 billion while hosting 40.7 million overnight visitors. That amount will likely climb again for 2015, considering the Super Bowl attendance numbers.
And where these visitors stay makes a difference.
The Office of Tourism reported that the type accommodation directly impacts the amount of money a visitor will spend. For example, visitors in hotels and motels in 2014 spent a combined total of $8.4 billion, while tourists staying in a private home spent $4.4 billion.
And while Airbnb hasn’t made a huge dent in Arizona yet, experts said it could happen.
“When you have an inventory of second homes, folks are going to be interested in driving an additional revenue stream when they aren’t there,” said Collins, referring to the state’s large population of “snowbirds,” who only live in the state part of the year.
And the population is aging. According to a survey released by travel insurance company Allianz Global Assistance, 60 percent of millennials said they trusted Airbnb, compared to only 37 percent of older generations. Additionally, while only 17 percent of all American travelers planned to use the “sharing economy” during their trip, 28 percent of millennials reported they would, according to the survey.
As millennials age, they could carry over their traveling preferences with time, strengthening the Airbnb brand.
“This is just another competitor out there, attracting a large crowd,” Collins said. “And while I do believe they will take a good part of the market share, others will have to respond by adding extra value. It’s just the natural evolution for the business model.”