Airbnb: Budget luxury for business travelers?

CNN  — 

With over a million listings in 190 countries, Airbnb already offers up more rooms than Hilton. The home rental service isn’t done expanding, however. Now, the $25 billion company is trying to tap into a market that’s traditionally been the hotel chain’s bread-and-butter: business travelers.

The lucrative business travel space is worth over $300 billion a year, according to to the Global Business Travel Association. Last year, Airbnb launched a dedicated business service to siphon some of that market, and recently announced they’ve seen a 700% growth in the first year, signing up over 1000 companies including Google and Soundcloud.

The service offers apartments in business-specific locations that include the types of invaluable features hotels usually charge extra for (such as WiFi and parking). Many business managers say the service cuts down on expenses.

“Around trade shows, hotels jack up the prices. So it’s a lot more convenient to get an apartment, and if you’re going with two or three other people you can stay at the same place, get more done and save money,” says Jim Bagwell, President of Provgard Technology, who uses the service regularly.

“With hotels you have to pay for parking and other fees,” he adds.

Airbnb also believes that their emphasis on quality of experience can gives them an edge over hotels.

“Business travel is becoming less about being a road warrior and more about ‘bizcation,’” an Airbnb spokesperson said.

“People are combining business trips with weekend stays, which is a great fit for Airbnb’s diverse offerings…The traveler has the flexibility to book their preferred listing and the travel manager has total visibility into location and expenses.”

So far the strategy has been paying off, with business travelers reporting greater satisfaction with Airbnb offerings over hotels. The average stay has been 6.8 days, suggesting clients are combining business with leisure.

“It helps me to see the town where I’m staying,” notes Bagwell.

A bigger threat?

Until recently, hotels had downplayed the threat of Airbnb. But there are signs that concern is growing.

At the recent Revenue Strategy Summit, Mark Carrier, president of B.F. Saul Company Hospitality Group, described Airbnb as “a structural threat to our industry,” citing its ability to undercut hotels on price during critical peak seasons.

At the same event, McKinsey & Company analyst Ethan Hawkes predicted the company could rise from 1% to 9% of the $1 trillion global hospitality bookings market by 2020.

A key challenge will be to poach high-value clients with established travel patterns, according to Sean O’Neill, editor of travel news site Tnooz.

“Airbnb needs to find ways to reward travelers who are invested in loyalty point schemes with the major chains, as an incentive to lure them away.”

O’Neill believes the company will soon offer business-only services aimed at the top of the market, although Airbnb would not confirm this.

While progress has been smooth, Airbnb’s business service remains vulnerable, both from the occasional negative anecdotes about stays gone wrong that hit the press, and legal and regulatory challenges around the world, as cities such as Barcelona seek to protect their hospitality industries.

But some hotels are embracing the challenge. Hyatt, for instance, recently bought a stake in luxury lettings group One Fine Stay.

If hotels cannot stop the rise of sharing economy competitors, they may have to join it.

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