Hotels are Getting into "Home" Sharing!

Mr. Gig

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Dec 6, 2018
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Interesting article about hotels that are trying their hand at home sharing! With mixed success. But they bring up some interesting points and have some pretty good insights into the business.

For instance, Hilton says the barriers to entry for a hotel company are just too great. So they’re going to pass for now. But check out the reasons their CEO, Chris Nassetta gives. He shows some really good insights into why it’s nearly impossible to scale this business and why it’s actually better left to individual home owners and renters – who live on-site.

He says the “quality, consistency and amenities that Hilton customers expect are best provided in hotels.” And he’s absolutely right about that. What he has realized is you can’t scale this business. At least not at a price point that most people would be willing to pay.

The hotel business model is very different from the home sharing business model. And there’s no way to run a home share like a hotel. The reasons are pretty obvious. In a hotel, one maid can clean 20 rooms a day (I'm guessing). That’s because the rooms are all right next door to each other in the same building. And she has an on-site laundry operation that provides her with all the clean sheets and towels she can carry on her cart. Everything is down to factory-like precision. On her cart, she’ll have sheets, towels, a dirty laundry bag, soaps, shampoos, everything she needs to clean each room perfectly is within an arm’s reach.

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Compare that to a maid cleaning an Airbnb. First, she has to show up in her car. All her supplies are in the car and she has to carry everything inside the house. She does her cleaning, but either has to wash (and wait until completion) the laundry on-site or take it to an off-site laundromat. If she washes on-site that means she has to do everything by hand, washing, drying and ironing. That alone can take up to three hours. In the meantime, the hotel maid has cleaned six guestrooms!

If the homeshare maid works for an operation large enough, they could have their own on-site laundry where the maids come and pick everything up and then drop the dirty linens off at the end of their day. That would indeed save a lot of time. But, once she finishes the house, she has to make her way to the next one. And it’s not like just walking to the room next door! She’ll probably have to get in her car and drive a minimum of 20-30 minutes to the next place. Then she has to lug all her stuff in again.

All of this takes a lot of extra time – meaning that laundry and cleaning for an Airbnb-style property is going to be significantly more expensive on a per-property basis than it is in a hotel on a per-room basis.

The only types of properties this could work on for a hotel chain would be ultra-high-end luxury properties that are charging upwards of $1,000 a night. At that price point, then a guest is not going to mind paying perhaps $100 for a cleaning fee. In fact, at that price point it would be relatively easy just to hide the cleaning fee in the total price.

I would estimate a cleaning person for a large home-sharing company would cost about $100 per property. Whereas in a hotel, it probably costs around $20 per room.

What Hotels Could Get Right
That's not to say there's no place for a hotel chain in this market. There are some things they would get right and could better than Airbnb and the other home sharing services. The main thing they could get right is consistency.

Consistency is largely lacking from home share today. It's simply impossible for any company to enforce specific standards when their work force is entirely made up of independent contractors. With Airbnb and the others, it's like every single property is run by a different company with different standards. All the homeowners work in their own unique individual way. And that is indeed a large part of the charm for guests. But it's also a big problem because guests are far more likely to have a bad experience with a host whose standards are far below the norm than they would in a hotel-owned property that is run by the same consistent corporate standards across the board.

So, there's still a place for large corporations to act as hosts... but I believe they will only be able to make a go of it on super high-end properties.
 
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CO Rideshare

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Interesting points you made here. I've never really thought about these before.

From what it sounds like, the economies of scale are there for hotels, and they're not there for home sharing people.

Another thing to keep in mind is that many of the people taking advantage of homesharing platforms aren't doing it to make money as a full time gig. Some are, sure, but many are doing it only when they're not using their homes themselves.
 
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Mr. Gig

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Yes, that's a great point. Not everyone does it full time! That's so easy for us full-timers to forget!

But yes, it's very difficult to scale. I have a friend who has 12 Airbnbs. Well, she did until one of the cities she was in shut six of them down. But she told me it's impossible to find reliable people to clean. Even she pays them very nice bonuses every time she gets a 5 star review. She says they'll still show up for work only when they feel like it. When they don't feel like it half the time they don't even bother to tell her! They just don't show up and she doesn't even know one of her places didn't get cleaned - until it's too late and the next guest calls to complain.

So, are you thinking about doing Airbnb maybe?