Hotel prices often fluctuate wildly -- a room may cost $59 one week and then a few weeks later cost $299 because a trade show is in town, etc.
Cities like New York have an insufficient supply of hotel rooms to meet demand. There are often no hotel rooms in NYC available for last-minute booking for under $400/night.
With AirBnB, even if everyone paid all the taxes, there would still be thousands of extra rooms available in NYC, many of which would be cheaper than $400 per night.
Hotels are a nice idea if you need the sheets changed every day, the room cleaned every day, porters to bring up the luggage, a pool, a front-desk to call to ask how late the pool is open, etc.
AirBnB also ads value by offering lots of other permutations. I stayed at an AirBnB in DC and was asked to put my own sheets on the bed (there were freshly laundered sheets in the closet). Upon leaving, I was asked to remove the sheets I used and put them in a basket. The 10 minutes it took me to do those things effectively saved me $100 on the stay, and yes I probably avoided $10 in taxes too.
You don't think this will happen with AirBnb, similar to "surge pricing" with Uber? Continuing with supply & demand, at times of great demand, prices will rise no matter if it's a hotel or AirBnb, even if there is a great deal more supply, there will always be huge bursts of demand (trade shows, what-have-you).
AirBnb would seem to flesh out the low-to-mid-range end of the market. If money isn't an object, there are places to stay in NYC (I think--I'm not at that level, myself!). But if you're looking to stay in NYC comfortably for fairly cheap, AirBnb exists with offerings that fit that, albeit they may be illegal (right now). I just question whether that market is "worth" more than the major chains (based on valuations, which I know is a shaky number to use).
In SF on new year's eve, getting a yellow cab can take up to an hour (or more). One year it took me nearly two hours to get a cab to go home. There is way more demand than supply so there is a huge queue.
With Uber's surge pricing, the price simply goes up to help supply meet demand. You can book an uber at 2x or 5x surge pricing and count on it showing up a few minutes later, and count on getting home at a reasonable time.
The best part, however, is that it's in Uber's best interest to have surge pricing happen rarely. Nonetheless, it's a great way to attract new drivers. Want to make $500 on New Year's eve, sign up to be an uber driver and drive from 12:30 to 3am and benefit from surge pricing.
This opens up a larger pool of drivers, which in turn increases supply and reduces the price.
There are certainly price fluctuations with AirBnB too, however increased supply makes the spike less pronounced.
Which is better is a matter of taste, I suppose. A lot of people love hotels. I don't. But, for the price ranges that cover 80% of rooms in most cities, I think it's hard to claim that AirBnB is only better value at the lower tiers. There are some awesome places at the 'sold my company to google' price ranges.
Selection bias says the most responsive hosts will get booked early so the bookings that still show as available at the last minute tend to be less responsive hosts. A room that's still showing up as available at the last minute might be doing so because the host went on a hiking trip and forgot to update the calendar rather than because it's actually available.
Although I didn't realize you could use "has instant booking" as a search parameter - thanks! Now if only I could get hipmunk to honor that restriction too...
AirBnB can allow individuals to do the work of providing accommodation part time, after work, as students, working mothers, retired people. We often mention disruptive businesses making new markets displacing non-consumption rather than substituting competition. AirBnB does something similar on the supply side.
Also, since AirBnB basically unlocks the productive potential of real estate, there's an interesting financing angle. Individuals have the ability to finance the purchase of a house or apartment with mortgages on pretty good terms. There is no other financing product available to the common man en masse comparable to home mortgages, certainly not business loans. AirBnB can help turn that into a business.
Owner-operator setups have all sorts of other little efficiencies over more hierarchical monolithic setups. Hotels have huge overheads. A lot of those are like airline or airport overheads in the sense that they're inherited from a world where hotels were originally designed for the rich (the gentry in the case of hotels) and then redesigned for the "discerning business traveler".
The condos and apartments people rent out on Airbnb are built by developers.
So as Airbnb becomes more popular, developers will recognize the ability for tenants to profit from renting out units. In response, they will try to capture that profit on the front end by raising the selling point of the unit.
Practically, the increases in property value Airbnb generates will ultimately flow back to developers, and make housing less affordable.
It's a double whammy for the people that are buying units and not renting them out, because they now have to more for units that don't want to rent out.
Edit: Also, the U.S. real estate stock depreciates by 3% annually, so it ultimately will have to be replaced with new units.
First, just because you're making more doesn't mean developers can charge more. Building is a fairly competitive industry. Land is usually the thing that can increase in value in response to rising demand.
Overall when thinking about housing prices the thing to consider is supply. Housing stocks take time to build up and there are all sorts of forces preventing them from increasing. That's really a different discussion but my personally opinion on it is that housing costs go up where and when the government and the citizenry want it to.
Rising house prices are a weird pathology. They help credit markets, which everyone is fond of (banks, developers & home buyers directly; retail and any consumer spending focused industry indirectly). Homeowners feel wealthier when their property increases in value, even though the house is still the same house and they have no way of realizing those gains without moving to a different town.
Since AirBnB allows the rental of full units, individual rooms, and even shared rooms, it makes housing more affordable. Now, someone can afford a 2BR and plan on renting out one of the rooms a few nights a month to help afford the rent.
If there were massive competition, the price of renting a room on AirBnB for one night would approach 1 30th of the monthly rent price. Right now people typically rent a flat for one year. Why is that? Why not rent an AirBnB for 3 months and then try living in a different neighborhood? All these options are enabled by AirBnB and all of this extracts more value from existing infrastructure.
Both alternatives include the additional value that AirBnB creates and I'd expect both to result in increased investment in housing across the board, both new construction and improvement.
Also, real estate in general is a very capital intensive industry, which takes out 99% of competition anyways. How many people are there that can raise $200 million to build a project. Not many.
First, you don't need many for competition; you just need a few. Second, there are lots of people who can raise a mere $200 million.
lol ok
If this is true, it will also apply to their competitors, right? Either the prices of Marriott will fall if/when they stop charging some crazy-expensive taxes on their guests, or AirBnb will have to start paying/charging for those taxes. One way or another, it'll change. Right now, one of AirBnb's advantages is that they are ignoring zoning restrictions and the like; either those restrictions will go away or they'll have to play by those rules.
To me, the biggest thing AirBnb has going for them is that they are choosing to play fast-and-loose with the laws, and hoping that they can grow fast enough to change them (similar to Uber). That gives them a huge advantage against the established businesses who have to play by the rules. Marriott can't just say "we're going to build a giant hotel in this area that isn't zoned for it", but AirBnb can hide behind its hosts because presumably they hold all the liability.
I imagine there will be some pushback at some point where AirBnb presumably makes most of their money: in big metropolitan areas. In Boston, where I'm at, these are generally illegal/against rental policies. People tend to look the other way for now, but at some point it might become a bigger issue. For me, personally, when I was setting up my condo association, myself & the other owners specifically wrote it into our documents that AirBnb and short-term-rentals are NOT allowed without prior authorization.
On a separate note, I wonder what percentage of the hotel revenue is business travel. I know in companies I've worked for in the past, they had some pretty good deals set up with hotel chains, so no matter where you traveled, you stayed at whatever the preferred chain was.