Commentary

Marriott Rolling Out High-End Home Rental Initiative

The home rental business is getting even more crowded and competitive, with Marriott announcing yesterday it will offer 2,000 premium and luxury homes located in more than 100 locales in the U.S., Europe, the Caribbean and Latin America. 

Meanwhile, Airbnb -- the most nettlesome nettle in the hotel industry’s side of the hospitality business -- is partnering  with a real estate developer, RXR Realty, to convert 10 floors of a prime New York City commercial property into apartment­-style suites.  

The Marriott program, called Homes & Villas by Marriott International, follows a pilot in several European cities where the average guest stay was more than triple the typical hotel stay.

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“Guests will be able to book their home-rental reservations through the Marriott website, the company said. They will earn and can redeem loyalty points as they do when booking a stay with any of Marriott’s 29 brands, which include Sheraton, W Hotels, and Ritz-Carlton,” Craig Karmin writes for the Wall Street Journal, which had the story first.

“Other big U.S. hotel operators, including Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp., also have been exploring or studying the home-rental business, say people familiar with the matter. Some hotel executives, who had long dismissed Airbnb and Expedia Group Inc.’s HomeAway as competitors, now believe they are growing partly at the expense of hotel companies, especially with leisure travelers and large families,” Karmin continues.

“Until Marriott’s new initiative, much of the effort of traditional hotel groups in countering online competition has been to improve customer loyalty programs. Groups including InterContinental and Accor have either improved or relaunched loyalty schemes, including offering more enticing benefits such as free rooms and tickets to events,” Alice Hancock writes for Financial Times.

“Accor and Hyatt have both introduced home rental brands but only through acquisitions. Accor added Onefinestay to its points scheme two years after it bought the brand,” Hancock adds.

“For younger generations booking group travel, it’s not ‘Who’s in charge of the hotel?’ It’s ‘Who’s in charge of the Airbnb?’” Robert W. Baird & Co. analyst Michael Bellisario tellsBloomberg’s Patrick Clark. “Home sharing is here to stay. The best thing hotel companies can do is embrace it.”

Clark goes on to observe that “the app-driven home-sharing service has grown from scrappy upstart to a global giant whose private market valuation of $31 billion [is] bigger than most publicly traded hotel companies.” 

In a study published this year, Makarand Mody, an assistant professor of hospitality marketing in the School of Hospitality Administration at Boston University, and his colleagues “found that revenue per available room, a common hotel performance metric, fell by 2% in 10 major American cities since Airbnb emerged in 2008. Airbnb’s disruption of the business, he added, ‘has been a wake-up call for the hotel industry that there is a need to innovate,’” Elaine Glusac writes for the New York Times.

It is not, however, content to rest on what it has already disrupted. Airbnb and RXR Realty intend to turn space in 75 Rockefeller Plaza, which the latter owns and has been restoring, into high-end getaways in the heart of midtown Manhattan. The suites will be listed exclusively on Airbnb. 

“Airbnb has partnered with property developers in the past on Airbnb-branded apartment complexes, but with its RXR partnership, Airbnb is for the first time collaborating on hotel-style units,” Deirdre Bosa writes  for CNBC. 

“The two companies say they will collaborate on design and services. RXR will be responsible for the execution and management of the locations, while the Airbnb platform will be used to market and book rooms. A third-party operator will manage daily operations,” Bosa adds.

Asked on CNBC Monday if the partnership might exacerbate tensions with local government officials, Airbnb CEO and cofounder Brian Chesky deferred to RXR Realty CEO Scott Rechler,” Paris Martineau reports  for Wired.

“‘Well this is fully compliant,’ Rechler said. Because the building is a commercial space, local laws regarding the short-term rental of residential properties don't apply, Airbnb confirmed,” Martineau adds.

Rechler went on to say that the concept could work in other cities as well. And RXR and Airbnb are “also exploring collaboration at other RXR properties,” such as RXR’s 47 Hall Street project -- a former printing press factory owned by Mergenthaler Linotype Co. across from the Brooklyn Navy Yard, according to the news release.

The hotel industry is certainly hoping for a better fate than the Linotypes.

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