In Battle With Airbnb And Vrbo, Hotel Giants Deploy New Tactic: ‘Full Attack’

Amid a booming revival in business travel, the U.S. hotel industry and Airbnb are locking horns again — and deploying aggressive new strategies in a crucial battle for market dominance.

Major brands like Hyatt Hotels Corp. and Wyndham Hotels & Resorts are ramping up their extended-stay options, while Airbnb co-founder Brian Chesky has vowed to “get our house in order,” with an improvement plan that includes potentially allowing properties on the platform to be leased for a full year.

“It seems like not a day goes by that one of the well-known hotel chains isn’t moving into alternative accommodations,” said New York University Associate Professor Richie Karaburun with the Jonathan M. Tisch Center of Hospitality. “What that tells me is that hotels are now in full attack on Airbnb and Vrbo.”

Extended-stay projects now account for 32% of the hospitality construction pipeline nationwide, with 2,083 projects totaling 214,500 rooms underway at the end of Q2 2023, according to Lodging Economics. That number is expected to grow to 42% in the next 12 months.

Earlier this year, Hyatt rolled out Hyatt Studios, an upper-midscale extended-stay lodging brand for North America, with its first locations in Mobile, Alabama, and Marysville, California.

In July, Wyndham said the company was upping its Echo Suites Extended Stay brand by 60 more properties in North America, bringing the pipeline for the Echo Suites to 265 properties. In June, Marriott International announced plans to further expand in the sector with an “affordable midscale extended stay brand” that has yet to be named. 

The company is already in nontraditional hospitality, with Marriott International's Homes & Villas by Marriott Bonvoy, a product aimed directly at short-term rentals.

Marriott launched the brand just before the pandemic, and it has since grown to over 130,000 properties worldwide. The platform complements the company's standard hotel business by offering more options, Homes & Villas by Marriott Bonvoy Vice President Jennifer Hsieh told Bisnow in an email.

“We are a platform of whole homes that are all professionally managed, so not the pure peer-to-peer like other tech platforms,” Hsieh said. “Our whole home rentals cater to a trip purpose that needs the space and amenities of a multi-bedroom home in unique destinations, such as a boat dock by the lake.”

Traditional hoteliers are branching into new platforms in response to the threat posed by short-term rentals — both leading up to and during the pandemic.

“It's possible that the extended stay hotels will take some business from Airbnb and Vrbo — some longer-term business,” Highland Group Partner Mark Skinner said. “Airbnb made a concerted effort to go after that business during the pandemic, and I have seen reports from them about how much it's grown. I think I'm right in saying that on their app, there's a section for 30-night-plus stays.”

Short-term rental companies came out of the pandemic in relatively good shape, Karaburun said, because the properties on the platforms offered travelers home-like accommodations, usually without having to interact with anyone, a definite advantage during the days of strict social distancing.

“Staying in home-like accommodations is part of the consumer sentiment now,” Karaburun said, with a pandemic-forged class of digital nomads now traversing the globe.

Still, Airbnb’s Chesky addressed his company’s struggles to compete with hotels, particularly on pricing. Travelers have also complained about cleaning fees, unreliable amenities, or even necessities like heat, and a lack of customer service.

“We want prices to move and to be more competitive vis-à-vis hotels — that is really important,” Chesky said in an interview with Bloomberg earlier this month.

Since well before the pandemic, extended-stay brands usually catered to workers who need to be somewhere temporarily, including white-collar workers, but also those in construction or healthcare. Often the properties were opened in secondary and tertiary markets with fewer hospitality options, according to Ridgemont Hospitality President Dhruv Patel.

By contrast, Airbnb and other peer-to-peer rentals tended to be more of a group and family travel platform, Patel said, serving travelers at more popular destinations.

“Extended-stay and Airbnb have been a bit of a different animal,” Patel said.

It is still true that most of the extended stay clientele are construction, healthcare and IT workers, but those lines between extended stay and peer-to-peer are blurring, Karaburun said.

Consumers are still looking for a home-like experience, but they are also open to the kinds of amenities that a standard hotel offers, such as no-extra charge cleaning or room service, or prepared meals, he said. As hotel companies roll out new brands, that is a strength they hope to capitalize on.

Investor interest in extended stay has also skyrocketed, especially following the 2021 acquisition of Extended Stay America by Blackstone and Starwood.

“Extended stay properties are very much in demand,” Berkadia Managing Director Natalie Castillo said. “The question I get from most investors is that they'd love to buy, but it's hard to find anything in the market. There is a significant shortage of extended stay products.”

Travelers often resort to staying at a conventional hotel when extended stays aren’t available, even though they are staying for a week or more, usually due to a lack of choice in the market they’re visiting, Skinner said.

For the 12-month period ending June 2023, room revenue from guests staying seven consecutive nights or longer was $8.97B at traditional hotels compared to $7.39B at extended-stay hotels, Skinner noted.

“So there is plenty more extended-stay business housed in nonextended-stay hotels,” Skinner said. “That is potentially available for extended-stay hotels to capture.”

In the years since peer-to-peer hospitality was created, extended stay has been able to overcome any challenges it might pose, Skinner said.

“But while Airbnb and Vbro have grown, there still are more people staying in extended stay hotels than ever before,” Skinner said. “If they captured some business from extended stay hotels, it's more than being replaced."