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
Design is a huge factor in appealing to travelers in their 20s and 30s because, as proven by Airbnb, they're no longer seeking cookie-cutter hotel experiences. Airbnb's rally cry is "live like a local," and hotel chains are embracing that idea as well.
"Millennials don't want to walk into a chain and say, 'Oh, this looks like the one I stayed in last week on the other side of the country,'" O'Donnell said. "They want to feel like it's homey, comfortable and interesting to look at."
Red and other hotel brands are focusing on creating an ambiance with local flavor. Red, for instance, commissions local artwork for each of its hotels. "When you walk into the Red in Portland, it's going to be different than what you'll see in Minneapolis, which will be different than what you'll see in Brussels," Flores said.
Marriott's Renaissance brand is taking design to a hyper-local level by using themes that match the neighborhood of each hotel's location. Renaissance's new hotel in New York's Garment District features fashion-themed artwork made from the backs of high-heeled shoes, push pins and collar stays, and coasters that look like buttons and sewing machines. Its Montreal location features graffiti to match the downtown art district, and its Allentown, Pa., lobby is designed with local wood and industrial materials like iron and steel, a nod to the region's steel-making history.
"We challenge our designers to design a hotel for the locals, for the neighborhood, because that's where our travelers want to be," said Toni Stoeckl, vp of lifestyle brands at Marriott. "We had to dig deeper for Allentown. Our designers had to do a little more research. But when you walk in, it really feels like Allentown."
Boutique hotels are particularly well positioned to offer local flavor and compete for the millennial audience. 21c Museum Hotels, a boutique chain with locations in Louisville, Cincinnati; Durham, N.C., Oklahoma City, Lexington, Ky., and Bentonville, Ark., has local flavor in spades. Each hotel features a contemporary art museum on the first floor, and they're all built in restored historic buildings. "When we design them, we're responding to those historic buildings, and their former uses, and that ensures that each hotel will be unique," said Molly Swyers, chief brand officer at 21c Museum Hotels.
The chain also partners with local art museums, mixologists and distilleries to host events. "We're offering something more than just a place to spend the night," Swyers said. "When you walk in the door of a 21c, you can have a cultural experience in addition to a lodging experience, and that appeals to millennials."
21c Hotels were purposely built in small markets in the South and Midwest—Swyers calls them "blue cities in red states."
"There's a great appetite for cultural experiences in the middle of the country, not just in New York and L.A.," she said. "Our model works in these cities where some hospitality companies might shy away from because they don't have the largest populations. We've found a niche and been successful combining art and commerce in a new way."
Focusing on service and unique offerings
In some cases, having the resources of a big hotel chain is an advantage because it lets these brands create unique marketing programs that appeal to young travelers. Westin, for instance, built its brand identity around health and wellness, and offers a workout gear-lending program, a health-focused menu and a concierge service that provides guests with local running routes.
"Seventy-five percent of millennials say that travel is one of the most important things to them, and more than 65 percent say health and well-being is the most important thing," said Brian Povinelli, svp and global brand leader for Westin Hotels & Resorts. "We have a compelling proposition that could only come to life, realistically, with the resources we have as a full-service hotel. We have the infrastructure to deliver that, whereas Airbnb doesn't."
The service and amenities of traditional hotels also keep guests coming back, Swyers said. "Your Airbnb experience is only as good as your host. At 21c, a guest can expect consistent service standards at each property. The art and design may bring our guests in, but what brings them back is our service."
Meanwhile, Airbnb could come under fire from pending regulations. The New York State Assembly passed a bill in June that criminalizes the act of advertising entire unoccupied apartments for short-term rentals in New York. "That's going to be the No. 1 threat for home sharing—different states coming up with rules for taxation and new legal rules. As Airbnb becomes more successful, they're going to see pushback and see their piece of the pie shrinking," O'Donnell said.
Still, the hotel industry will need to continue to evolve to appeal to the next generation of travelers, Marriott's Stoeckl said. "Our business is not just heads in beds. It's not just a functional stay anymore. It's not just a clean shower and a comfortable bed," he added. "It's more about providing an experience."
Read more about the tactics and trends reshaping the tourism industry in Adweek's Travel Marketing Report.