Initially slow to be a
A handful of progressive hotel operators have tried to react to this trend by entering the homestay market themselves. However, so far with limited success, and considerably more activity is with the homestay corporations, especially Airbnb broadening their industry reach through acquisitions and partnerships in such areas as hotel and restaurant booking systems, design development and property franchise, management and leasing companies.
While there is evidence that homestay helps to induce demand into some markets, there is undoubtedly direct competition, especially in budget and leisure sectors; peak pricing gets disrupted and business cannibalised. As homestay products become more sophisticated and luxury/business-oriented, the competitive impact on upper scale corporate hotels will intensify. The varied choice offered by homestay products has already been a significant driver of change in hotels, whereby traditional uniformity gets replaced by an explosion of branded lifestyle products offering greater personalisation, casual interaction, neighbourhood styling, community integration, cultural experiences, social zones, and even flexible guestroom spaces.
Furthermore, with the establishment of professional homestay management companies and hotel operator brands, this potentially opens up a new residential asset class for investors as part of a residential or multi
Advantages of Homestay
- Price: Most homestay units do not have the overheads of a typical hotel, management and servicing are usually ancillary functions of the owners, and the capital cost of the property is often not considered in pricing. Incomes from spare rooms or second homes are mostly opportunist, and therefore homestays generally pitch their pricing somewhat below market levels of traditional accommodations.
- Personalisation: A typical homestay has one or two personally invested owners offering one apartment, whereas a budget hotel may have one employee per four or five rooms, each with narrow roles and many on minimum wage. The homestay owner can provide individual and accountable support from pre-arrival to post-departure, has detailed knowledge of the local environment and culture, facilitating an authentic local experience for guests.
- Configuration: For efficiency of build & management and brand standardisation traditional hotels have a consistent room double, twin and limited suite configuration. Homestay apartment and vacation rentals vary considerably in shape and size, and families or small groups have the choice to find properties that precisely match their needs, such as with 4-bedrooms plus a shared space. Homestay also typically has the added advantage of providing in-unit laundry and kitchen facilities.
- Location: In many historical cities building restrictions do not facilitate the scale required to build a hotel, whereas existing apartments or small boutique properties may occupy a prime old town setting. In a countryside location or an outlying town district close to a secondary attraction or lesser business zone, it is often not financially feasible to develop a hotel, with homestays in these areas guests can benefit from walking distance proximity rather than compromise with a central, but less conveniently located hotel.
- Character: The limitations of scale and requirement for a degree of brand conformity restrict the individual character achievable by a hotel, especially with unique building/accommodation formats. Homestays offerings may include a remote cottage, canal boat, farmhouse, yurt, treehouse or temple. With accommodation making a central part of the travel experience and these Instagram opportunities, such distinctive homestays can be impossible to match.
Homestay’s & Trust
While the internet and social media have provided the tools and platform for the growth of homestay, trust and credibility have been its main barriers. Bridging the trust barrier has been the key to success for the thriving homestay companies, and they have utilised strategies such as below to achieve this:
- Guest Reviews: In an extension to typical guest review systems, Airbnb and HomeAway employ a two-way scoring system for the guests and hosts to review each other. The dual review increases the engagement of the parties and provides for guest attention and attachment enhancing the need for fulfilment by the host and a duty of care by both the host and guest.
- Social Media: Building on guest reviews and social media trust is distributed away from institutions. For generation Z, millennials and earlier generations formal tourism rating systems and even brands have diminishing trust value versus peer confirmation.
- Scale: Airbnb claims to host 2 million guests every night, an affirmation of trust, especially in a growing company focused on reputation.
- Risk Analysis: Before listing predictive analytics and behavioural analysis technology is used to asses risk and screen hosts, and in certain jurisdictions, background checks.
- Payment: The homestay platforms provide secure payment, multi-factor authentication and scam protection guarantees.
- Insurance: As at 2019 both Airbnb and Homestay provide primary coverage for liability insurance up to US$1 million for traveller claims on reservations made through their systems as well as third-party property damage to communal spaces or neighbouring buildings. The subject property is typically not included for property insurance, nor is business interruption insurance.
Homestay Issues & Controversies
In reaction to issues of affordable housing and hospitality petitions, several municipalities introduced or started enforcing regulations to control the homestay market. These have included short-term rental regulations such as caps on the number of rental nights a residential property can sell a property, the need to register/certify a change of class of use, restriction on new permits, or an outright ban. However, in a non-binding statement in April 2019, the advocate general of the European court of justice found that under EU law, Airbnb should be classified as a digital information provider not a real estate agent. Should this opinion be upheld by the European court, this would permit Airbnb and other homestay platforms to work within the EU without the obligation to ensure owner compliance to holiday let regulations. On a national and municipal level, a variety of laws have been enacted to try and counter issues such as:
- Housing Shortage: The rapid growth of properties used for homestay receives the blamed for a shortage of supply and a lack of affordable permanent housing especially in large metropolitan cities such as New York and London where hotel rates are high. In some cities, landlords have been able to increase rental incomes by more than 200% with the use of homestay.
- Touristification: Transformation of the character of residential districts of cities to transient consumption, loss of authenticity, changing the social nature of inhabitants and commerce, noise pollution, gentrification and subsequent adjustment to facilities and increased cost of amenities to remaining residents.
- Level Playing Field: Hotels and other registered accommodation providers have complained and lobbied against the unfair advantage of homestays, whereby they are not subject to the same tourist taxes/levies, life-safety, health and accessibility regulations/approvals and financial/ownership transparency.
Major Homestay Brands
Airbnb: Founded in San Francisco in 2008, Airbnb is now the leading global alternate accommodation platform. Their name derives from ‘airbedandbreakfast.com’. Airbnb lists more than 6 million places to stay in 191 countries. In June 2019 Airbnb launched Airbnb Luxe with 2,000 new listings with an average asking price of $2,000/week including trip designers, the properties were previously under Luxury Retreats an Airbnb acquisition made in 2017.
HomeAway: A vacation rentals platform predating Airbnb and founded in 2005. Until acquired by Expedia in 2015 for $3.9 billion HomeAway consolidated over 20 related companies including Vrbo. HomeAway lists more than 2 million places to stay in 190 countries.
Booking.com Apartments: While principally an OTA (see also OTA) focused on the hotel sector, their rapidly expanding ‘homes, apartment and other unique places to stay’ in the 2018 annual report states 1.744 million property listings, making them also a leading influence in the homestay market.
Homestay brands data as published on respective websites as at June 2019.
Fees: Today most homestay brands do not charge a listing fee. HomeAway and Booking.com charge owners a commission typically around 15%, of the whereas in most cases Airbnb charges owners a service fee of 3% and separately adds to the guest charge a scaled fee of 0%-20%, dependant on property listing and length of stay, typically the higher the total cost the lower the fee %.
Hotel Operator Homestay Brands
Since 2015 Hyatt and Accor have explored the homestay markets each directly involved with both onefinestay and Oasis Collections with questionable degrees of success. Following a pilot program with Tribute Portfolio Homes, in May 2019 Marriott announced the introduction of a new homestay initiative.
Onefinestay: Founded in 2010 and acquired by Accor in 2016, onefinestay operates unique luxury private home rentals on a global (USA, UK, France, Italy) scale, servicing the properties and meeting guests. Accor states 5,000 properties listed in 7 cities.
Oasis Collections: Originally founded 2009, between August 2017 and September 2018, Hyatt Hotels had an investment partnership; however, withdrew after issues of inventory control and portfolio reduction. In October 2018 Oasis Collection was acquired by Vacasa. The website states +1,000 listings in 15 cities in South America and Europe.
Homes + Villas by Marriott: Following the Tribute Portfolio Homes pilot program, in 2019, Marriott launched its vacation rentals brand. The property servicing is via regional professional property management companies in a large number of destinations in the USA, Central America, Carribean and Europe (including France, Italy, Croatia, UK, Ireland, Greece and Spain).
Ama Trails & Stays: In February 2019 the Indian Hotels Company Limited (IHCL), managers of Taj Hotels, announced the formation of India’s first branded product in the homestay market, comprising of a group of heritage bungalows, guesthouses and home-stays at unique locations across India. There are nine properties, and the plan is to increase to 100 properties by 2020, before considering international expansion.
Hotel operator homestay brands data as published on respective websites as at June 2019.
Homestay Property Management
The proliferation of homestay has opened business opportunities in the management and servicing of properties, notably in the upper scale and luxury sectors, clustered in large cities. While the scope of the management companies vary their roles generally include: interior design and insurance advisory, photography & profile copywriting for homestay site listings, site optimisation, pricing, yield management (including revenue optimisation for cities that have cap on short term rentals), contract management, guest communication, arrival & departure keying, cleaning & property servicing, amenity procurement/standardisation, account management, performance reporting and property maintenance. Examples of such platforms include Lyric Hospitality (USA), Hostmaker (Europe & Thailand), and Airsorted (Europe, Australasia, Canada, Middle East, South Africa).