May182015

Airbnb effect makes 2015 year of the midscale and economy hotel chains

If you told me two years ago that in 2015 I would be searching for hotel stays primarily in Choice Privileges, Wyndham Rewards and IHG Rewards Club, I would have imagined I had gone bankrupt as the most probable reason for a downmarket move in hotel stays. In reality, I blame the Airbnb effect.

Airbnb Effect

There was a Boston University research study published 18 months ago and revised this month, The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry (pdf link), discussing the negative impact of 8 to 10% on hotel rates in Texas in areas where Airbnb had rentals. Their study covered hotel rates from 2003 to present and correlated the effect of Airbnb becoming a consumer choice in 2008 with hotel rates. The research paper is university research and mathematical.

The short version is the hotel rates of several thousand hotels were tracked and Airbnb had a negative impact most heavily on lower market segment hotels of 8 to 10%.

Our work is among the first to provide empirical evidence that the sharing economy is significantly changing consumption patterns, as opposed to generating purely incremental economic activity, as has been argued in prior work. Focusing on the case of Airbnb, a pioneer in shared accommodations, we estimate that its entry into the Texas market has had a quantifiable negative impact on local hotel room revenue. The substitution patterns we observe strongly suggest that Airbnb provides a viable, but imperfect, alternative for certain traditional types of overnight accommodation. Our analyses pinpoint lower-end hotels, and hotels not catering to business travelers, as those that are most vulnerable to increased competition from rentals enabled by firms like Airbnb.

Georgios Zervas School of Management Boston University

Davide Proserpio, John W. Byers Computer Science Department Boston University

The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry

Think Choice Hotels and Wyndham Hotels with their 25 hotel brands and 12,000+ hotels in economy and midscale market segments. I passed by a Ramada Limited yesterday. So, there is Ramada Limited, Ramada and Ramada Plaza, just in that one Wyndham Worldwide brand.

Wyndham Worldwide Hotel Brands

Wyndham Brands-a 3-31-15   Wyndham brands-b-3-31-15

Choice Hotels Brands

Choice Hotels names one brand Comfort Inn and has a unique logo for Comfort Suites.

Comfort Inn logo     Comfort Suites logo

Choice Hotels brands

The Big 2 Wyndham and Choice Boost Hotel Loyalty Programs

Wyndham Rewards and Choice Privileges are the two largest loyalty program hotel chains when measured by the number of hotels worldwide. Wyndham is over 7,000 and Choice has over 6,000 hotels. The vast majority of their hotels are in the USA.

For me, there seems to be a connection between truly enhanced loyalty programs in these 2015 changes for the lower market segment hotels with Choice Privileges and Wyndham Rewards. I find great value with points in these two hotel programs and far more availability of hotels for reward nights.

In 2015, Choice Privileges added Points Plus Cash rewards. You can buy points for $7.50 per 1,000 points to buy the reward night, as long as you have 8,000 points to spend too. The new members of Ascend Collection are growing quickly with independent hotels aligning with Choice Hotels. There are even vacation rental agreements with over 200 cabins in the Great Smoky Mountains that earn Choice Privileges points.

Wyndham Rewards added Go Fast points last week for reward nights at 3,000 points + $25 to $95 per night depending on the hotel cash category. This is probably more beneficial for good points value than all hotels worldwide at 15,000 points per hotel reward night. Wyndham Rewards points can easily cut $20 to $30 per 1,000 points off the published room rate with Go Fast 3,000 points rates and some Go Free 15,000 points rates at top-end hotels.

IHG Rewards Club is pushing to stay in the upper midscale market and higher. I’d say the changes in Choice Privileges and Wyndham Rewards gives more incentive to IHG Rewards Club to maintain PointBreaks Hotels at 5,000 points per night.

Airbnb growing fast in an increasingly sharing economy

Airbnb is growing with the sharing economy options at a fast rate, according to the researchers. This pressure may have contributed to recent changes by two of the largest hotel chains globally to enhance their hotel loyalty programs.

It is an exciting time as the hotel value for frequent guests has opened up for the lower market segment hotel loyalty programs. The real deal is finding the gems of Choice Hotels and Wyndham Worldwide out of their 13,000 hotels worldwide. With that many properties, there are actually plenty of wonderful hotels and places to burn hotel loyalty points.

Seems to me there will be an impact on the higher end market segment hotels too at some point with the sharing economy.

Starwood Preferred Guest, Hyatt Gold Passport, Marriott Rewards and Hilton HHonors may actually have to cough up some good promotions over the course of the next year to keep up.

About Ric Garrido

Ric Garrido of Monterey, California started Loyalty Traveler in 2006 for traveler education on hotel and air travel, primarily using frequent flyer and frequent guest loyalty programs for bargain travel. Loyalty Traveler joined BoardingArea.com in 2008.

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  1. I remain highly skeptical that Airbnb is — or will be — a major force in the USA lodging business. Traditional b&bs have never been terribly popular in the USA; we seem to prefer the anonymity — and predictability — of chain hotels. I firmly believe that only a tiny slice of the USA travelling public are likely candidates for non-traditional lodging choices.

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