Airbnb rocks hotels' ability to profit from mega events
THIS year's United States Republican and Democratic conventions may prove what hotels have long feared.
They could lose a consistent windfall to Airbnb and other home-sharing services.
Normally, hotels would be cashing in on the combined 100,000 people expected to flood Cleveland for the Republican presidential nominating convention next week, and Philadelphia for the Democratic gathering on July 25-28.
But because of what hoteliers call "shadow inventory" from home-sharing brokers, they may not be able to get the convention-week mark-ups they collected in the past.
Airbnb, which expects 5,400 rentals for the two political conventions, is also helping people find lodging in Brazil in August for the Olympics.
Jeremy Adkison, a 28-year-old delegate to the Democratic convention, said he decided to try Airbnb because he thought a hotel would cost too much.
He paid US$442 (S$596) for a five-night stay at a townhouse near the convention site.
Hotel rooms are still available in Philadelphia.
The Marriott Courtyard Philadelphia, for example, is advertising rooms for US$989 a night, triple its normal rate.
This is not out of the question for what the trade calls a "compression" period. These times of peak demand, typically associated with a nearby event, contribute 25 to 30 per cent to hotels' annual profits.
Still, "Airbnb is hurting the ability of (hotel) companies to collect on high-priced nights", said C. Patrick Scholes, managing director of lodging and leisure equity research at SunTrust Robinson Humphrey.
The impact is difficult to quantify, however, he added.
Research firm TravelClick found hotel rates in Cleveland and Philadelphia had risen 20.7 per cent for the 2016 convention months from a year earlier.
That is solid but well below the 34.75 per cent increase in Tampa, Florida and Charlotte, North Carolina, during the 2012 convention months, according to CBRE Hotels, another research firm.