Fitch: Airbnb Not a Competitive Threat to US Hotels -- Yet

NEW YORK--(BUSINESS WIRE)-- Most lodging companies do not view website Airbnb as a competitive threat to their businesses, but Fitch Ratings believes that additional supply generated as a function of Airbnb could amplify future downturns in the U.S. lodging sector.

Fitch sees the potential for Airbnb to exacerbate lodging industry downturns, in addition to the ongoing secular challenges the industry could face from lost demand. Airbnb listings are likely to spike during recessions when labor markets weaken, forcing some individuals to find alternative avenues to meet financial obligations. There is anecdotal evidence of this already occurring in high cost of living markets like New York and San Francisco, notwithstanding current tight labor market conditions.

The last three U.S. lodging downturns showed progressively more RevPAR volatility, which Fitch attributes to the widespread adoption of sophisticated revenue-management software, coupled with increased pricing transparency caused by online travel agencies. Whatever the cause, lodging companies have shown a race-to-the-bottom pricing mentality -- despite credible evidence of demand inelasticity -- that could be exacerbated by a corresponding spike in Airbnb supply during the next downturn.

During this earnings season, an influential hotel owner cited Airbnb directly for negatively affecting pricing power around select large, leisure-oriented group events due to lost demand to Airbnb. These are the most granular comments we have heard to date regarding Airbnb's impact on the lodging business. Only limited data is available from privately held Airbnb to analyze its lodging industry impact.

Importantly, lodging companies continue to enjoy robust industry fundamentals. Record occupancies and low levels of new supply have translated into meaningful pricing power for hotel owners. Fitch continues to expect U.S. RevPAR to grow by 7% during 2015.

Online, short-term accommodation rental site Airbnb has rapidly emerged as one of the largest global hospitality companies, with over 1.5 million short-term rental listings in over 34,000 cities in more than 190 countries. The company recently completed an up-round private equity offering at an implied valuation for the entire company that makes it the second largest U.S. hospitality company behind Hilton Hotels Worldwide, according to press reports.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Airbnb Not a Competitive Threat to Hotels -- Yet (What U.S. Lodging Companies Are Saying)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869494

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View source version on businesswire.com: http://www.businesswire.com/news/home/20150806006226/en/

Fitch Ratings
Stephen Boyd, CFA
Director
U.S. REITs
+1 212-908-9153
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Kellie Geressy-Nilsen
Senior Director
Fitch Wire
+1 212-908-9123
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Media Relations:
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Source: Fitch Ratings

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