How Hotels Are Luring Millennials in the Era of Airbnb

Since its founding in 2008, Airbnb has been cited as a huge disrupter in the hotel industry, heralded as the next big thing in travel as consumers embraced the sharing economy. As more young travelers ditched traditional hotels in favor of Airbnb's funky local lofts, tree houses and houseboats, some wondered if it would crush old-school hotel chains' business.

The answer is, not yet. While Airbnb's growth rate has been impressive (from 47,000 guests worldwide in the summer of 2010 to 17 million in the summer of 2015), it actually hasn't yet made a dent in hotel chains' bottom lines. From 2014 to 2015, a key metric known as RevPAR—or revenue per available room—for U.S. hotels was up 6.2 percent, from $74.11 to $78.71. And from 2010 to 2015, RevPAR rose from $58.45 to $78.71, according to hotel industry research firm STR.

"The last two years have been banner years in terms of top-line revenue growth," said Douglas Quinby, vp of research at Phocuswright, a travel research firm. "Airbnb is a media darling, and they've innovated in a lot of ways, but honestly, the incidents of Airbnb usage among U.S. travelers isn't so high that it's imperiling the hotel business in the near-to-medium term." 

Airbnb execs said there's room in the hospitality industry for both their business and hotel chains to thrive. "We've always believed that for us to win, no one has to lose," said Nick Papas, director of public affairs PR at Airbnb. "Hospitality is a large, growing market, and we think there's a place in this market for everyone." 

Still, the rise of the sharing economy has caused hotel chains to do some soul searching and shake up their business models to appeal to the all-important millennial traveler. Eighty-two percent of millennials took a vacation in the past 12 months versus 75 percent of all U.S. consumers, according to Mintel.

"This is the biggest generation of travelers. They're larger than boomers or Gen X, and they travel much more, and they're more passionate about it," Quinby said. "They want different things from their travel experience," including communal spaces, digital connectivity and local design touches.

Here's a rundown of hotel chains' efforts to appeal to those changing travel tastes:

Launching entirely new, millennial-focused brands

Several hotel chains have created brands in their portfolio that are specifically designed to appeal to millennial travelers.

Marriott's brand, Moxy Hotels, launched in 2015 with young travelers in mind and has properties in Milan; Tempe, Ariz.; New Orleans; Munich; and Frankfurt, with more set to open in the next two years. You won't find a front desk when you arrive—instead, you'll check in at the bar. And you're guaranteed fast and free Wi-Fi.

"We did tons of research to find out what millennials wanted, and the ideas of authenticity and communal spaces were very important. The idea is to create a living room where you can hang out with people and also always be plugged in," said Vicki Poulos, global brand director of Moxy Hotels. "It's like a boutique hotel that has the social heart of a hostel. That's why people stay at an Airbnb, so we built a brand that had that same communal spirit." 

Radisson Red, Radisson's millennial-focused hotel brand, has an app that allows you to check in online and order drinks from the bar. "The brand has a DIY component to it. The millennial generation has grown up with their entire lives online, so we're infusing the hotel brand with more social connectivity," said Rich Flores, vp of branding.

Affordability is another value proposition at both Moxy and Red, with rooms at a lower price point than the chains' luxury brands.

"Millennial-targeted hotel chains are value-brand hotels, but what they're doing differently than old-school budget brands is, they're focusing on the design aspect, which is huge for millennials," said Fiona O'Donnell, director of travel and leisure research at Mintel. "The branding, the color schemes, the layout of the hotel—it's all been turned on its head. It's a lower-cost option, but they're doing it with some flair. You look forward to staying at these places because they're fun, and they're hip and cool and new."

Developing localized design

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