Airbnb Impact on Hotel Market Greatest in New York, San Francisco, and Miami
Airbnb’s presence in key markets throughout the U.S. is growing at a rapid pace, with users spending $2.4 billion on lodging in the U.S. over the past year, according to analysis from CBRE Hotels’ Americas Research.
Over the study period of October 2014 – September 2015, more than 55 percent of the $2.4 billion generated was captured in only five U.S. cities (New York, Los Angeles, San Francisco, Miami and Boston), representing a significant portion of the lodging revenues in these markets.
CBRE Hotels compiled select information for hundreds of U.S. markets to assess the relevancy of this sharing platform to the traditional hotel industry. From this data, the firm has developed an Airbnb Competition Index. This measure incorporates a comparison of Airbnb’s Average Daily Room rates (ADR) to traditional hotel ADR’s; the scale of the active Airbnb inventory in a market to the supply of traditional hotels, and the overall growth of active Airbnb supply in that market, into a measure of potential risk. New York was identified as the number one domestic market at risk from the growth of Airbnb, with an Airbnb Competition Index of 81.4, followed by San Francisco, Miami, Oakland and Oahu.
“It seems reasonable that Airbnb will impact hotels in two ways,” said R. Mark Woodworth, senior managing director of CBRE Hotels. “For existing hotels, the growth of average daily rates will most likely be curtailed. The fluid nature of Airbnb’s supply suggests that traditional hotel’s historic price premiums realized during peak demand periods will be mitigated. The other impact may be on new hotel construction. Airbnb may be an impediment to traditional hotel construction and could reduce traditional hotel supply growth in many markets.”
In addition to a national analysis on Airbnb’s impact on the lodging industry, CBRE Hotels has compiled city level reports highlighting the annual performance of Airbnb and compared it to relevant lodging industry data. These reports detail the estimated performance of Airbnb units covering 59 U.S. cities, encompassing 229 submarkets. Contrary to popular belief, Airbnb is not always the lowest priced option for those seeking temporary accommodation. The average rate paid for an Airbnb unit was $148.42, which is 25 percent higher than the average hotel rate of $119.11 reported by STR, Inc.
“By comparing hotel revenue per available room to the number of active Airbnb units in a particular location, it appears that hosts respond to market incentives, such as a higher room rental rate and excess demand. The presence of these factors causes more Airbnb units to appear in the market,” said Jamie Lane, senior economist of CBRE Hotels. “This holds true at the macro level--where markets with higher ADRs and occupancy have the highest number of active Airbnb units, and on the micro level--where we see a spike in the number of active Airbnb units during major events such as the Super Bowl and New Year’s Eve.”
More information about our national findings can be found HERE. Reports detailing the estimated performance of Airbnb facilities covering 59 U.S. cities, encompassing 229 submarkets, may be found at https://store.pkfc.com.
CBRE Hotels is a specialized advisory group within CBRE providing brokerage, valuation, consulting, research and capital markets services to companies in the hotel sector. CBRE Hotels is comprised of over 375 dedicated hospitality professionals located in 60 offices across the globe.
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.