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May 6, 2019 • Volume 36


Image from Marriott

Marriott tries home sharing, Amazon ups the ante on shipping speeds

Marriott, Airbnb and the evolution of lodging

Marriott International, the world’s largest hotel brand, recently announced that it would expand a pilot program renting luxury homes into a corporate division, called Homes & Villas by Marriott.  At first blush, it seems that Marriott is acknowledging the threat that Airbnb poses to its business, but further reading reveals that this move is not an embrace of Airbnb’s homeowner-managed business, but a new twist on the traditional model of big hotel brands managing properties owned by franchisees.  This is just a new kind of property – a full [luxurious] home rather than a room in a building. Rather than relying on a host’s star rating, Marriott is betting that its brand equity will trump the quirky, but lovable, homeowner that leaves delicious scones in the kitchen but asks that you feed her cats.


At the same time, Airbnb has gotten deeper into the territory of Marriott, Hilton and other hotel chains with two announcements in the past few months. In March, Airbnb announced that it had acquired HotelTonight, which sells unsold hotel rooms to last-minute bookers.  And more recently, Airbnb announced a partnership with RXR Realty to turn 10 floors of New York’s Rockefeller Center art deco skyscraper into 200 Airbnb rental units [rooms in a building]. 


Airbnb is looking to create a hedge against cities, which are beginning to assert their authority to regulate the new flavors of the hospitality business it has unleashed. This is a smart move in today’s political environment, where regulation of big tech is more in vogue than ever.


The big hotel chains have generally said that they do not see Airbnb as a threat - that the core business traveler prefers the dependability, services, locations and rewards that big hotel chains uniquely offer.  And these heavy business travelers are certainly the lifeblood of the hotel industry.  When we look at online bookings of hotel rooms in the U.S., Rakuten Intelligence data reveals that heavy travelers--those that booked at least 10 room nights online in 2018--accounted for 51 percent of online booked hotel dollars, despite accounting for only 13 percent of online hotel bookers.


But are these travelers at risk of migrating to Airbnb?  A study cited in this New York Times article by researchers at Boston University found that since when Airbnb launched in 2008, revenue per available room dropped by 2 percent in 10 major American cities. But, 2008 also coincides with the beginning of the Great Recession, so it is tough to attribute this drop solely to Airbnb. 


At Rakuten Intelligence, we’ve got the unique ability to look at bookings by members of our panel across all lodging options.  When we look at those heavy online hotel bookers, we see that they are indeed availing themselves of what Airbnb has to offer.  In fact, they are doing so more heavily than light and moderate travelers. 

In 2018, those who book more than 10 nights in the year accounted for 18 percent of Airbnb bookings. Of those heavy bookers who used Airbnb, they spent an average of $1,250 on Airbnb, 26 percent more than the annual spend on Airbnb by light and moderate hotel buyers.  For more fun Airbnb stats, check out our blog post from April, which looks at Airbnb growth and compares the demographics of Airbnb buyers with traditional hotel buyers. 


This data clearly shows that heavy [likely business] travelers do not live in a parallel universe, unaware of the homey, local allure of Airbnb – scones, cats and all. But there is strong evidence that Airbnb can be complementary to hotels, at least from the perspective of heavy travelers.  The strongest evidence of this is that Airbnb’s share of online lodging booking dollars peaks during summer months, when the nation’s road warriors take to the road again, this time with their families, spending their own money rather than the company’s.  Suddenly that $20 continental breakfast doesn’t seem like a very good deal, even if the room is paid for with points.


In our view, it is inevitable that the inventory Airbnb adds to the market will affect hotel chains. There are a lot of moving parts in this narrative: How will corporate travel departments treat this over time? What role will local regulators play? The only thing that does seem clear is that Airbnb cannot be quickly dismissed by the big hotel chains.  And it is clear that Airbnb has calculated that a more traditional sort of lodging arrangement cannot be dismissed.

The downstream consequences of one day Prime deliveries

When it released its Q1 2019 financials, Amazon announced that it planned to invest $800 million in just the second quarter to ‘morph’ standard Amazon Prime delivery from two days to one, putting new pressure on competitors to keep up. 


Readers of this newsletter know that Amazon already has a strong lead when it comes to delivery speed.  In the chart below, we see that in 2018, the average Amazon.com package took 3.2 days from when an order was placed to when it arrived on the customer’s doorstep [or, click-to-door, in Rakuten Intelligence parlance]. For all other retailers,  the click-to-door speed is six days. [For those looking to reconcile Rakuten Intelligence’s data with Amazon’s, know that we track a sample of all Amazon customers, not just Prime customers, and we track calendar days, not business days]. 

Over the past few years, retailers have begun to narrow their gap with Amazon, but this migration to one day delivery will likely force many retailers to consider whether they really want to continue to try to compete with Amazon on the speed-of-delivery dimension.  Some will [wisely] decide that there are cheaper ways to differentiate.


Interestingly, this actually moves the delivery market to a more favorable position for companies like Instacart and Shipt, which will find many retailer partners very interested in their same-day delivery services as a way to keep up, or maybe even [gasp] one-up Amazon without having to make big fixed cost investments.  Amazon has inadvertently added significant value to Instacart over the past two years, as other grocers scrambled to keep up with Whole Foods after Amazon acquired it and launched one-day delivery.


The other possibility, of course, is that the whole industry wakes up one day and decides that profits trump growth, and consumers will be forced to settle for 3 or 4 day click-to-door intervals.  I’ve been saying the same thing now for 20+ years, though.  So take that warning with a grain of salt.

About Ken

Ken Cassar is vice president, principal analyst at Rakuten Intelligence, where he looks at trends in the e-commerce industry armed with Rakuten Intelligence's robust set of online sales data.

Ken brings a rich online retail background to Rakuten Intelligence. Most recently, Ken was SVP, Media Analytic Solutions at Nielsen, where he developed several innovative digital commerce measurement and advertising effectiveness solutions. Prior to Nielsen, Ken was an analyst at Jupiter Research, where he was an early thought leader, trusted adviser, and media source on e-commerce. His prescient outlook on fledgling e-commerce industry was a key contributor to Jupiter’s dominance as a digital media zeitgeist at the dawn of the Internet.

Ken has an MBA and Bachelors Degree in Political Science from the University of Connecticut. Ken aspires to stay technologically ahead of his teenage children, as evidenced by his ‘Gadget Geek’ Rakuten Intelligence's profile. He also has the appropriate jacket for every occasion.