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Behind The Brand

To Fill Rooms, Hotels Are Turning To Airbnb

Airbnb doesn't just compete with hotels; it also competes with online booking sites like Expedia.

[Photo: Flickr user Jason Kuffer]

About 60 million people have used Airbnb to find an alternative to a hotel. Now, some hotels are using Airbnb to find new customers.

Managers at boutique hotels say they use the platform similarly to the way they use booking services like Expedia and Priceline, which typically charge hotels a 10% to 25% fee per reservation. Airbnb, by contrast, charges hosts a 3% fee. "The commission is so much more attractive," says Stephan Westman, a hotel industry consultant who has listed hotel rooms on Airbnb. "Any hotel that needs to fill rooms, I don’t understand why they wouldn’t need to use it as one of their marketing arms."

Airbnb has already established itself as a booking agent for bed-and-breakfasts and hostels, so much so that hosts have options to categorize their listings as "bed and breakfasts" or "dorms." Boutique hotels are another step toward becoming not just a platform for booking rooms in other users’ homes. Hotels are a big business. Online travel agents account for 13% of global hotel bookings, according to a 2013 white paper by travel industry research firm Phocuswright. Expedia, which owns Hotels.com, Travelocity, and Orbitz, did $5.8 billion of business last year. Priceline, owner of Booking.com and Kayak, did $8.4 billion. Both companies list Airbnb as a competitor in their SEC filings.

Earlier this month, Airbnb released data that showed 3,500 listings in New York City that belong to hosts with three or more entire home listings on the platform. Airbnb’s critics have called listings like these "Airbnb hotels," or apartments rented in already tight housing markets for the sole purpose of booking short-term guests. A small number of them are boutique hotels.

The Box House Hotel in North Greenpoint, Brooklyn, which offers apartment-style suites, lists at least five of nine rooms on Airbnb; The Riff in Manhattan, which recently converted from hostel to hotel, lists one private room in a "hipster hotel/hostel;" and The Union Hotel in Gowanus, Brooklyn, advertises "plush carpeting floors, quilted custom beds, penny-tiled bathrooms, and deco chandeliers," and concludes, "Cutting edge is an understatement."

The Guesthouse Hotel in Chicago, which was named one of Chicago’s best new hotels of 2014; The Sea Rock Inn, a budget hotel in Los Angeles; and The Lumber Baron Inn, a mystery theater and wedding venue in Denver, also list on Airbnb.

Airbnb's New York City manager, Wrede Petersmeyer, told Fast Company that Airbnb permits listings for rooms in hotels as long as they're clearly portrayed as such.

Not all hotels that advertise on Airbnb are as pleased with the arrangement as Westman. "Might as well," says Daniela Benhamou, a manager at New York Loft Hostel, about listing on Airbnb. The New York Loft Hostel offers hotel-like amenities like a sun deck, bar, and laundromat. "There are many other ways it could be an actual opportunity instead of taking people out of our business and putting them into an apartment business. It’s definitely not a good thing for the hostel industry." (A from operating in New York City, but many still work under hotel licenses. The New York Loft Hostel, according to the Department of Buildings, has a hotel tax status.)

Airbnb has more than 2 million listings on its platform, arguably making it by number of rooms the largest hotel chain in the world. Even while competing with Airbnb’s peer-to-peer rental business, smaller hotels could utilize Airbnb's large-hotel-chain visibility by appearing in its search results.

That helps explain why last month Expedia announced plans to acquire Airbnb competitor Homeaway for $3.9 billion.

"I think it’s a threat that we look at," Expedia CFO Mark Okerstrom said at a conference earlier this month, referring to the possibility that Airbnb could become a competitor. "We should take it seriously, and I think at the same time, we look at what Airbnb is doing, and we look at that as a potentially attractive opportunity for us."

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