Mumbai-born Nakul Sharma the founder of Hostmaker, named one of Forbes’ five fastest growing companies to watch in 2016, believes branded homes are the next big thing
The concept of staying in a stranger’s home instead of a hotel was once inconceivable. Airbnb changed all that and were early pioneers in the so-called sharing economy. The result is that we now find ourselves on the verge of a travel revolution where homes are regularly chosen an alternative to the hotel.
In April last year, Accor, one of world’s leading hotel operators declared the €148m acquisition of Onefinestay - an upmarket Airbnb competitor that provide short-term lets. Accor aims expand Onefinestay’s inventory of 2,600 properties in London by targeting 40 more cities across the globe.
My prediction is that this will not be an isolated case and over the next few years, increasing numbers of hoteliers will move to homes worldwide as the very essence of the industry evolves.
The science behind the branded home
Why will homes become hotels? Simply put, it’s maths. There isn’t enough supply to fill demand when it comes to hotel rooms. In Europe last year, according to PriceWaterhouseCooper, supply for hotel rooms increased by 0.8% while demand increased by 3.1%. This trend is predicted to continue with cities like London, Berlin and Moscow worst affected. The problem has resulted in a spike in the price of hotel rooms and travellers seeking alternative options.
All of this begs the question: why not build more hotels? This appears to be the obvious solution to the problem, however the reality is not quite so simple. During the hospitality boom of the 1950s and 60s, the industry burgeoned because operators actually owned the land they built on.
These days, hoteliers rely far more heavily on real estate developers. This makes building quickly from scratch much trickier than before. Though travel demand has returned to pre-financial crisis levels, there aren’t enough rooms to cater for travellers. Real estate developers run behind prevailing cycles, so building new hotels takes a great deal of time - expect to wait eight to ten years to see these new hotels!
On the other hand, homes will expand to meet demand. Airbnb has demonstrated that consumers are happy to consider this as an alternative. Now the time has come to formalise and scale it up by offering homes as well as hotels to consumers as a standard class of accommodation on trusted booking sites.
Back to basics
Sounds challenging? Well it doesn’t have to be. Over the last few decades, hotels have expanded to launch sub-brands that cater to every class of travel experience, from budget to luxury. Hilton could easily develop a ‘Homes by Hilton’ sub-brand as well as other big names such as Conrad, Canopy and the like.
This will, in many ways, make travelling what it once was. Before mass travel took off, the normal accommodation option for most people was to stay with friends at the destination and perhaps, depending on the distance, in a modest inn en route.
After all, the rise of the hotel as a mainstream accommodation option only really happened when commercial airlines went mainstream during the 1950s. Hotel groups sprang up because risk-averse travellers venturing into virgin and unknown territories craved a semblance of normality - their own food and a consistent experience wherever they went. And, of course, the operational efficiency gained from housing 500 people under one roof is great.
So the big chains can play an important role and are arguably in an even better position than Airbnb or Onefinestay to make this happen
How times have changed. In the globalised age, connected customers don’t crave a homogenised tourist experience that is completely alien from the reality of their destination. They want to experience the culture around them, a trend being tapped by InterContinental’s Indigo brand. But it’s one that can also be fully realised by domestic stays.
This has resulted in a dichotomy. Despite a growing distaste for big-brand hotels, which sometimes lack a personal touch, customers still trust reputable names. So the big chains can play an important role and are arguably in an even better position than Airbnb or Onefinestay to make this happen.
Individuality meets reputation
Combining the uniqueness of an individual home with the reputation, standards and consistency of a brand is, of course, a challenge. But it is one that hotel chains will have ample experience to excel in. To do so, they would be best advised to insert brand touches just as they always have.
Two of Starwood hotel brands have excelled in this respect:
Westin’s ‘Heavenly’ bed, introduced in the 1990s and still sold - both as a room feature and as a separate retail item - is a perfect example.
W Hotels’ Bliss spa chain is another way the operator has given itself a non-room-related brand to leverage
Consistent signals that tell customers they can rely on big-brand reputation, despite staying outside the familiar threshold of a hotel will be essential for success.
Plenty to mull over
There will certainly be a multitude of considerations. Rather than selling identical rooms, hotel groups will have to conceptualise marketing for many individual home types. Should they classify them or brand them? Perhaps different homes could come with different ratings, just like hotel rooms.
Perhaps different homes could come with different ratings, just like hotel rooms
Above all, scaling hotel services such as cleaning, dining and other vital services across the diverse properties that exist in any given city is a huge obstacle. However, establishing relationships with local on-demand businesses such as Deliveroo, Uber and Urban Massage can help create localised, personalised alternatives to room service and cab booking.
For the big players in the hospitality industry, the potential this idea boasts may soon be too appealing to resist. Put together, the big four hotel operators have over 2.5 million hotel rooms worldwide - not many more than Airbnb has activated.
It won’t be long before branded homes are a reality, which poses the question: will the house of today be the hotel of the future?
This guest post was penned by Nakul Sharma, the founder of Hostmaker, which claims to enable Airbnb hosts "to offer a high quality, hassle-free service to guests"