Home-sharing apps testing alliances with hotel booking rivals

The line between traditional hotel listings and home-sharing is blurring as specialists in one area branch out into others. It is a development being watched closely by a hotel industry already squeezed by digital upstarts from Airbnb to Expedia.

Airbnb made its latest foray into the territory of online travel agents (OTAs) and hoteliers last month with the roughly $200m acquisition of Luxury Retreats, a Canadian company that specialises in high-end villas.

According to people briefed on the discussions, the San Francisco-based group has also held tentative talks with some global OTAs, such as Trivago, the German hotel search site majority-owned by Expedia, about including Airbnb homes in their search listings. But the people add that these talks are unlikely to lead to partnerships, at least in the short term.

Also in February, Expedia said it had begun a closer integration with HomeAway, the online holiday rentals marketplace it acquired for $3.9bn in 2015. Roughly 20,000 HomeAway properties are to be listed on the main Expedia site, so displaying home rentals alongside hotel rooms on the search engine.

Dara Khosrowshahi, Expedia’s chief executive, has said it is proceeding on a “test and learn” basis, to determine whether customers are happy to be offered the mix of traditional hotels alongside holiday rentals in the same list of search results.

“If the tests go incredibly well, you could imagine that you have an accelerated integration,” says Sarah Gavin, vice-president of global communications at Expedia.

Priceline is trying to take a greater share of the growing home-sharing market through its Booking.com site, best known for hotel room listings. Its inventory of vacation rentals almost doubled in the past eight months to roughly 625,000, according to data from AllTheRooms, an accommodation search engine. People close to the company’s leadership say Priceline is considering ramping up marketing for these private homes and villa offerings.

Hoteliers are trying to respond to such moves. Sébastien Bazin, chief executive of French hotels group Accor, has said that 30 per cent of its business will come from revenue streams other than hotel rooms within five years.

One way it plans to do this is by expanding the offerings on Onefinestay, the upmarket home rental site it acquired for roughly €150m last year. “Accor should be going into the travel space, which means not just being a hotels provider,” says Mr Bazin.

Other major hotel companies are considering their options. “Airbnb is a booking site, that’s not what we do — we provide safe, secure, guaranteed quality experiences under brand names,” says Richard Solomons, chief executive of InterContinental Hotels Group. “Our business could easily move [into providing home rentals], but it’s about finding the right supply in the right locations.”

Though Airbnb has built its brand around being different to traditional travel companies — co-founder Brian Chesky often expresses his disdain for “mass tourism” — it plans to expand into areas that will compete even more directly with them. The company has already added guided tours, and plans to eventually add flight booking, car rental and concierge services.

But analysts say the US group is under pressure to increase its customer base in order to justify its $30bn valuation. While the majority of Airbnb listings are private homes, more than 33,000 hotel rooms are also now listed on the site, a threefold increase from the middle of last year.

“You have actually seen the industries start to merge,” says Joseph DiTomaso, chief executive of AllTheRooms. Accommodation has “consolidated, couch to castle”, he adds, referring to the different types of lodgings now available on the same platform.

Airbnb, Expedia and Priceline are each attempting to make booking a home-share more closely resemble a hotel stay through “instant book”, a feature that allows guests to immediately confirm a room, rather than waiting for the host to approve the guest’s visit.

Airbnb has heavily promoted its instant book feature over the past year. Roughly 1.25m of the site’s rooms, representing about a third of its inventory, are now able to be booked instantly. Priceline has always insisted that its private rentals, like its hotel rooms, can be booked instantly.

Expedia has been pushing a similar shift at HomeAway — to the dismay of some hosts. About half of HomeAway’s 2m listings are now available to book instantly.

HomeAway had its origins as a classified listing site: after seeing an ad, travellers could call owners to book and then pay in person. The transition to an online-focused platform has at times been a painful one, and HomeAway’s co-founder Brian Sharples stepped down as chief executive last September.

“If you have instant book, then the product starts to look a lot more like an online travel agency. The more instant book listings, the more it allows [online travel agencies] to plug into their system,” says Mr DiTomaso.

Hotel groups are being buffeted by the encroaching strategies of the digital groups. In September, Morgan Stanley said it expected the US hotel industry to enter a cyclical downturn. The bank’s analysts reported that US revenue per available room — the industry’s preferred measure of sales — has been slowing since 2014 and forecast it to turn negative in 2018.

Morgan Stanley says the pressure on hotel groups is being exacerbated by the likes of Airbnb and HomeAway, as they flood the market with alternative accommodation and squeeze hotel occupancy rates.

Douglas Quinby, vice-president of research at Phocuswright, an analyst group, says there are beneficiaries from the growing competition, however. “For travellers, this is good. They have more options and it introduces downward pricing pressure.”