Why people choose
Airbnb over hotels

By Stephen Saugestad

Though I have a vested interest in supporting hotels, I often stay in an Airbnb when I’m paying for travel. The reasons are common among people who use Airbnb. There are some great takeaways for Hoteliers, so I’ll outline them in this post.

When it comes to Airbnb, some of the energy from hoteliers are focused on the wrong things. Hotels have been trying to level the playing field by lobbying for enforcement of existing rules, and through regulatory reforms that better reflect a sharing economy. Technically Airbnb is running an illegal hotel business, a largely unregulated one that took big shortcuts to becoming a $25 billion hospitality company. But none of this is going to change the calculus here. Airbnb is not going anywhere. It’s getting better and better at what it does, and already diversifying into new markets.

A similar thing happened to taxis. They continue fighting for market share by trying to enforce the rules that allowed it to maintain its monopoly, rather than winning customers back through innovation. And industries that benefit from a monopoly are not very good at innovation, or change for that matter. But a lot of hoteliers are coming to the conclusion that a multi-prong approach of leveling the playing field while adapting to new consumer trends is a smarter approach.

So why do people stay in Airbnb over hotels? According to a recent study, it’s not always because they’re more “authentic” – despite the company’s marketing efforts. People also choose Airbnb because of cost, location, and amenities. I would include the sophisticated technology platform, but it all aligns well with the reasons why I stay in Airbnbs. Since Millennials make up the biggest segment in the travel market, a lot the focus in this post will be on them.

Authenticity

Staying in the right Airbnb can feel really authentic if they’re unique, and capture a sense of place. A lot of hotels understand this, so they embrace local culture in ways that traditional hotels have not. For example the F&B program can integrate local palettes and ingredients, hotel promotions connect to local events, art can include local ties, and event programming can support local culture. Our friends at Bunkhouse do this really well – they’re annual South X San Jose event is a shining example of a hotel embracing local culture.

Cost

This is the place where hoteliers have the least wiggle room, because once a hotel is built, costs are pretty much what they are. Airbnb can scale at zero marginal cost, and in the process offer a range of nightly rates. A lot of budget travellers stay in Airbnbs because you can choose from a range of low cost options that also incorporate amenities not offered by hotels. They also save money by renting a house as a group, or a unit with multiple bedrooms. Yet to the consternation of hoteliers, Airbnb has a higher nightly average that hotels. In the last few years, major hotel brands have been trying to capture this market through sub-brands that cater to Millennials with the right amenities and appropriate price points.

Location

This is not a differentiation that necessarily sets Airbnb apart. Locations among listings on Airbnb runs the gamut from the mundane to spectacular, though hotels generally have a higher floor in terms of location quality as they are generally located around city centers and hubs.

These days (especially Millennials) a lot of travellers don’t want to be next to an airport or in the city center. They want to be in up and coming neighborhoods or less urban areas that are in the early stages of gentrification. Certainly there are logistical hurdles around zoning, space, costs, etc., where hotels won’t be able to compete with a spare bedroom in house in a chic neighborhood, but this is an important consideration for new hotels.

Amenities

Travellers stay at Airbnb because they want access to a kitchen, extra bedrooms, kitchen tools, condiments, etc. Things that make your stay feel more like home. And this is a trend that’s influencing hotel design, for brands that cater to Millennials. Among the clients we serve, we are seeing hoteliers hiring interior designers who work on residential properties, and by creating sub-brands.

Recent trends also show that travellers prefer large, functional communal spaces that allow them to interact with travellers and takes them outside of their rooms. They also prefer to stay in places that are less homogenous than a conventional hotel. They want the option of accommodating groups in the same unit, and to be able to cook or read a book outside. Hotels won’t always be able to go head to head with Airbnb on this, but owners everywhere have started thinking outside the usual conventions of building new hotels and look at ways they can offer more choice around price, space, and amenities. Room spaces are becoming smaller but more functional, while public spaces are combining amenities like coffee shops, bars, and restaurants where guests can interact and work.

However Airbnb guests expect their accommodations to be similar to hotels for things like cleanliness, comfort, and quality assurance. Airbnb hosts are not hoteliers, and you can’t really maintain a high level of quality from an army of freelancers. This is an area of differentiation where hoteliers have a big advantage.

Technology

A sharing economy relies heavily on technology, and this fits well with this demographic. Technology plays an outsized role in the the decisionmaking process for Millennials when they shop around for travel. Social media and FOMO factors heavily in their travel decisions, while stock photos and images that are staged tends to resonate poorly with travellers in this age group.

Airbnb’s technology platform is very good. The platform provides a sophisticated communication channel, the search is granular and easy to use, and it makes it easy to manage multiple trips. I’ve heard arguments on both sides of the hotel/Airbnb debate about whether listings on Airbnb are accurate. My experience is that they are more “honest” than professional photography relied on by hotels because they’re taken by amateurs, and they don’t employ photography techniques that artificially inflate the quality of the images. You could do the same with photos in Airbnb, but people will call you out.

The review system is another matter entirely, and this is where the platform fall short. They skew too positive because identities are not anonymous, and people are just reluctant to leave bad reviews for others. I’ve often stayed in Airbnbs that had overwhelmingly positive reviews, only to find the accommodation to be quite unspectacular. While my strategy in these scenarios is to be as factual and as objective as I can be, doing so has always incurred the wrath of the listing owner. Good reviews are expected, and owners feel entitled to them.

The last point I want to make is that technology enables the growing preference among travellers for less human contact. In a travel economy that’s trending towards less interaction (e.g. you can text to check in, or order room service), having to tip the valet, and doorman feels very intrusive.