Traditional suppliers and upstarts enter frenemy territory

Photo Credit: Illustration by Shutterstock

In 1974's "The Godfather: Part II," Michael Corleone famously advised: "Keep your friends close but your enemies closer." As peer-to-peer accommodations and transportation providers -- e.g. Airbnb and Uber -- steadily edge their way into the mainstream of a travel industry long dominated by hotels and taxicabs, many of those more traditional businesses appear to be taking that advice to heart.

With U.S. hotel-room occupancy this year forecasted by PricewaterhouseCoopers to reach its highest level since 1981, Hyatt Hotels, Wyndham Worldwide and long-time hotelier Barry Sternlicht all have recently invested in accommodations intermediaries that either compete with hotels by arranging for stays at private homes or offer an alternative and often discounted distribution channel by facilitating last-minute bookings.

Meanwhile, both Hyatt and Hilton Worldwide have collaborated with ride-hailing operator Uber, considered by some as the enfant terrible of the new economy for its rapid growth and the brashness of its management, and San Francisco's convention and visitors bureau is including both Airbnb and ride-hailing service Lyft among its travel-service partners.

While these hoteliers are quick to broadly tout their own advancements in technology, service or geographical reach, they have largely kept mum on the subject of these collaborations, disclosing little in terms of financial or operational involvement.

Hyatt Hotels in 2015 invested an undisclosed amount in London-based Onefinestay, which rents out luxury homes in cities such as New York and Paris.
Hyatt Hotels in 2015 invested an undisclosed amount in London-based Onefinestay, which rents out luxury homes in cities such as New York and Paris.

Hyatt, which last year notably added an Uber button that guests could access on the hotelier's mobile app, earlier this year participated in a $40 million equity round that doubled the total funding for Onefinestay, the 5-year-old, London-based company that arranges for high-end, vacation-home rentals in London, New York, Paris and Los Angeles.

Upon receiving the funding, Onefinestay also announced that it had tapped former InterContinental Hotels Group executive Tom Singer as its new CFO.

Neither Hyatt nor Onefinestay would say how much Hyatt invested. But with the investment announced about six months after Hyatt sold its Hyatt Residential Group timeshare division to Interval Leisure Group for about $220 million, it appears to reflect a strategy adjustment in terms of capitalizing on guests looking for longer stays.

"We're applying learnings from some of the most successful established hospitality operators as we continue to grow internationally and refine our offering," said Onefinestay spokeswoman Morena Oliveira.

In a statement, Hyatt added: "Hyatt is always staying abreast of changing consumer preferences and testing new ways to deliver on those expectations. Whether it's collaborating with Onefinestay [or] teaming up with Uber ... we continually look for ways to better the guest experience, both inside and outside the walls of Hyatt hotels. We intend to continue to test a variety of offerings, work with a number of companies and make investments to continue innovating the guest experience."

Wyndham Worldwide began collaborating with London-based Love Home Swap in 2015.
Wyndham Worldwide began collaborating with London-based Love Home Swap in 2015.

Last month, Wyndham Worldwide's exchange and rentals division and London-based home-exchange operator Love Home Swap confirmed a partnership, though neither company disclosed investment amounts or operational details. Wyndham said in a statement that the collaboration, which launched in 2011, "offers a home-to-home exchange business model that complements our RCI [vacation-rentals] business and presents opportunities that may enhance the future benefits we offer our customers."

Such investments followed a decision early last year by Sternlicht, former CEO of Starwood Hotels & Resorts and current chief of hotel owner Starwood Capital, to invest in HotelTonight, the last-minute booking app launched in 2011. Neither company disclosed how much Sternlicht invested, though HotelTonight said at the time that Sternlicht's was the largest investment by an individual.

The investments and growing willingness to collaborate reflect the acceptance by traditional entities that have little choice but to address the growing market share of peer-to-peer and home-based accommodations services such as Airbnb and HomeAway.

While closely held Airbnb does not disclose revenue figures, the company said last month that the number of guests who stayed with Airbnb hosts this summer more than doubled from a year earlier, to about 17 million.

And HomeAway's second-quarter revenue, factoring out exchange-rate swings, jumped 19% from a year earlier.

Meanwhile, the average percentage change in monthly unique visitors to alternative accommodation websites jumped 24% last year, compared with a 3% increase in hotels' site visitors and an 8% drop in traffic to OTAs, according to Phocuswright. Moreover, the percentage of OTA visitors shopping for hotel rooms who cross-shopped with sites like Airbnb jumped to 15% in February from 4% in July, Millward Brown Digital reported in a July presentation.

Both hoteliers and the financial markets have taken notice. Airbnb secured a $1.5 billion funding round that valued the company at more than $25 billion, the Wall Street Journal reported in June. That's more than the market value of either Marriott International or Hilton, the two largest U.S. publicly traded hoteliers, and more than triple Hyatt's market value.

With that in mind, peer-to-peer accommodations leader Airbnb has hosted executives from Hilton, Hyatt and Marriott. In a March interview with Travel Weekly Editor in Chief Arnie Weissmann, Airbnb's head of global hospitality and strategy, Chip Conley, called those meetings "immersion sessions" that help to enhance collaboration and co-promote travel and tourism.

"There are lots of conversations about how to be collaborative and how we can work together to promote travel and tourism globally," said Conley, who is the founder and former head of San Francisco-based boutique hotelier Joie de Vivre.

Airbnb has since declined repeated requests from Travel Weekly to elaborate on such discussions, as have the three hoteliers.

Hotelier Barry Sternlicht in early 2014 invested in HotelTonight, which specializes in last-minute, hotel-room booking via its app. Its Aces concierge service provides information on local destinations such as restaurants.
Hotelier Barry Sternlicht in early 2014 invested in HotelTonight, which specializes in last-minute, hotel-room booking via its app. Its Aces concierge service provides information on local destinations such as restaurants.

Still, AccorHotels CEO Sebastien Bazin said in June that hoteliers stood to learn just as much from startups about subjects such as digital marketing as the startups could ascertain from hoteliers about hospitality operations. That month, the company, whose brands include Sofitel, Pullman, Novotel and Ibis, said it would adopt more of a listing-services revenue model favored by Airbnb by adding a spate of independent, nonaffiliated properties to its digital-distribution inventory and expanding its listings to more than 10,000 hotels from 3,700.

"You have a lot of new players in the travel and hospitality market, which I define either as being innovators or disruptors," Bazin said, referencing companies such as Airbnb as well as metasearch leader Kayak, now owned by Priceline. "We can't only watch them provide new services and product; we also have to be innovators."

Whether such companies run the risk of incurring the wrath of other traditional travel entities remains in question, though, especially given the contentiousness among lobbyists for the hotel and taxicab industries and peer-to-peer providers.

Hilton, which was founded in 1919 and has long been associated with the old-line hotel industry, said last month that it would collaborate with the 6-year-old Uber by adding Uber "ride reminders" to customers' reservation details. It said it would also include a list of top local destinations from Uber riders on the app designed for Hilton HHonors loyalty members.

Rich DeStefano, Hilton's senior director of Web and mobile product management, declined to address whether or not the hotelier had received any pushback from the traditional taxicab industry for its partnership with Uber.

"Uber is a leader in its industry and shares our customer-focused vision for making the travel experience more convenient and seamless through the use of technology, making them the right partner for us," DeStefano said. "Partnering with a leading innovator like Uber allows us to continue to make the HHonors app the remote control to a guests' entire travel experience."

The San Francisco Travel Association in August announced that it would launch a marketing agreement to help promote peer-to-peer, ride-hailing operator Lyft.
The San Francisco Travel Association in August announced that it would launch a marketing agreement to help promote peer-to-peer, ride-hailing operator Lyft.

In San Francisco, the home base of Airbnb as well as both Uber and smaller competitor Lyft, the city's convention and visitors bureau this year became the country's first to launch marketing partnerships directing potential visitors to both peer-to-peer accommodations and transportation.

In July, the San Francisco Travel Association said it would work with Airbnb on highlighting unique characteristics of the city's neighborhoods and further connect Airbnb with meetings and event planners. Last month, the bureau announced a marketing partnership with Lyft.

San Francisco Travel Association President Joe D'Alessandro said the bureau considered working with Airbnb only after the company agreed to start collecting occupancy taxes on behalf of its hosts.

He also noted that many of the city's Airbnb units are in the Mission and Castro districts, which have a minimal hotel presence, and not so much in more hotel-heavy areas such as Union Square or near the city's Moscone Center convention facility.

The San Francisco/San Mateo hotel market had the country's third-highest occupancy rate, at 84%, according to STR.

"Some of the hoteliers are concerned about competition and the role Airbnb plays with us, and, frankly, the hotels provide the funding for our operations, so we're very sensitive that the agreement doesn't have a negative impact on the hotel industry," D'Alessandro said. "We are an open organization for any business legally operating within hospitality. And the whole sharing economy is here. It's part of our DNA."

That is not the case in New York. Even though New York City posted the country's highest occupancy rate last year, at 85%, city and state officials and hotel lobbyists have for the past two years decried what they say is a spate of residential units that are illegally rented on a short-term basis through sites like Airbnb.

Meanwhile, New York officials have been pressured by taxicab lobbyists, who allege that peer-to-peer drivers haven't been held to the same regulatory standards as cab drivers. Additionally, the city faces what some estimate to be a 40% drop in revenue that taxi companies will pay for medallions during the next few years because of the influx of drivers to the ride-hailing companies.

As a result, officials were set this year to enforce a limit on how many Uber drivers would be allowed to operate in the Big Apple. The city decided in July to hold off on enforcing that cap after Uber said it would supply data for a study of the impact that more ride-hailing services have had on New York's taxicab industry.

Still, some of the largest suppliers of technology to the taxi industry, while not collaborating with Uber or Lyft, are at least recognizing the value those services provide to the travel industry with their advanced ride-hailing and payment systems and are following suit.

Since July, competing taxicab vendors Verifone and Creative Mobile Technologies, which make the credit-card and video-screen systems in the back of cabs, have debuted ride-hailing apps.

Verifone’s Way2ride ride-hailing app is set to go live in cities such as Philadelphia, Miami, Boston and Las Vegas.

Verifone's Way2ride app is also set to go live in cities such as Philadelphia, Boston, Miami and Las Vegas this month, while Creative Mobile Technologies' Arro has plans to expand to cities such as San Francisco and Washington.

In addition, Arro spokesman Michael Woloz said Verifone and Creative Mobile Technologies, which just about split market share of Manhattan's yellow cabs down the middle, might make their apps compatible with each other by the end of the year.

Such apps would give traditional cabs the technological advantages of the peer-to-peer hailing services but without the surge-pricing practices of the newer companies or concerns over proper licensing or safety compliance, say both Woloz and Jason Gross, vice president of strategy and innovation for Verifone.

"We very much prefer to innovate within the regulatory framework," Gross said. "But the one thing we've seen is that passengers want to be able to get a ride with their phones."

JDS Travel News JDS Viewpoints JDS Africa/MI