The Rise of Alternative Lodging

By Michael Chamberlian-Torres, Owner/Chief Consultant at Hospitality by Torres

Mr. Andy Divine, Professor at the University of Denver’s Knoebel School of Hospitality Management once told me, “If you work in this business [hospitality], you will always have a job. No matter what happens in the world, people will always need somewhere to eat and somewhere to sleep when they are away from home.” These were wise words from a very wise man. No one can deny that innkeepers have been providing travelers with food and shelter for thousands of years. At its core, hospitality has remained the same, but the shape it takes is ever evolving.

When most people think of travel accommodations, their first thought is a hotel. With the growth of industry giants such as Marriott, Hilton, and Starwood over the past half century, it seems like there is now a brand name hotel in even the most remote corners of the earth. Hilton even touts the fact that in many languages around the world “Hilton” has become the word for “hotel” because prior to their arrival the concept of a modern hotel was completely unknown. These companies have gone to great lengths to try and identify various segments of the market and create sub-brands (“flags,” as they are called in the industry) tailored to each. Marriott for example, has 19 different flags within the company. For many years their goal was to create standards which were so detailed and dependable that the amenities, design, and guest experience were intended to be the same regardless of the property location. The motivation behind this practice was simple; it is what the “Baby Boomer” generation of guests demanded. Those traveling regularly for business wanted the comfort of knowing that once they found the flag that was right for them, they could get the same experience from city to city. But as is the case with everything, change is inevitable.

With the exponential growth of air travel, came an equally rapid growth of global tourism. This change coupled with a new generation of business traveler, lead companies such as Mandarin Oriental to notice a shift in the way people viewed hotels. They focused on making each hotel in their portfolio have a “sense of place,” as they call it. This means that each property is distinctively designed to reflect its individual location, to blend with its environment. As the new millennium began, so did the era of the “boutique” hotel. Modeled after smaller, independent hotels, boutique properties are in many ways a return to what hotels were before the era of international chains. Many of those very chains now offer a special collection of hotels that strive to maintain the appearance and feel of an independent operation, but are still very much a part of the larger corporation. While they may be more unique, these properties are still hotels. So how does all this history relate to alternative lodging?

Boutique hotels meet the needs of travelers who dislike the often sterile, cookie cutter feel of large hotel chains; however, due to their smaller size, they often come with a much higher price tag. Here is where the internet and alternative lodging come into play.

The concept of an individual property owner renting out their vacation home isn’t something new, but the ease of this process has transformed dramatically over the past couple of years. The internet has changed the structure of the rental market; now websites such as Airbnb, Roomorama, Windu, 9flats, and Rentalo make it extremely easy for property owners and travelers to connect. These sites have changed the rules of the vacation rental game, so that anyone can play. Rentals are often found in urban areas and compete directly with hotels for business; accommodations range from tiny studios in Brooklyn to luxurious condos in Milan. In a price comparison the private rental will almost always give the traveler more bang for their buck than a boutique hotel, and the supply is growing every day. One of the first movers in this new market, AirBnB has grown their inventory from 120,000 listings at the start of 2012 to over 300,000 at present. Last year alone, more than 3 million travelers used their site to book accommodations and their listings span 192 countries across the globe. The booking process is pretty similar to what you would expect to find from a hotel company. Travelers can search based on location, accommodation type, price range, guest reviews, cancellation policy and more; reservations can often be made instantly with secure online payment. If you have never booked a place to stay using one of these sites, you are behind the curve and should give it a try next time you travel.

Many hoteliers and lodging professionals are fighting this “room revolution” with all their force. The growth of this market will undoubtedly take market share from traditional establishments, and governments argue that it will lead to a decline in lodging tax revenues. These statements are both true, but the alternative lodging segment of the business also injects a great deal of money directly into communities by keeping profits local and allowing owners to generate a worthwhile return on their property investment. Savvy companies will (and already are) finding ways to profit from this emerging lodging segment. While on the higher end of the spectrum, Exclusive Resorts is one such company that years ago realized the value of purchasing real estate around the world to create a club which allows members access to each of their distinct properties. Their target market is high-income individuals, but what they offer is most certainly an alternative to traditional hotels.

The issue of lost tax revenue, once appeared to be the major obstacle holding governments back from embracing this new trend, but in October of this year, Airbnb released a statement saying, “We believe it makes sense for our community of hosts to pay occupancy tax to the cities in which they live, with exceptions under certain thresholds, and we are eager to discuss how this might be made possible.” This sentiment seems to be shared amongst other companies in the industry. If websites and governments are able to reach agreements and create legislation that addresses the issue of lodging taxes, then we are likely to see this segment continue to grow for years to come.

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