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How serious is Airbnb threat to hotels in Thailand ?

Daniel Lorenzzo by Daniel Lorenzzo
June 6, 2019 - Updated on November 27, 2020
in Lifestyle, Property, Real Estate, Startups, Tourism, Travel
Reading Time: 4 mins read
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Offering new alternatives to travelers, there is no doubt that Airbnb has taken some market share from traditional hotels. However, findings from JLL shows that hotels in Thailand have been less affected by online home-sharing platforms than expected.

The findings were based on data collected from more than 11,200 accommodations offered by Airbnb and hotels in Bangkok, Phuket and Chiang Mai.

JLL analyzed demand sources based on key price determinants from a range of utility-based attributes including locations, room characteristics, amenities and reputational signals.

“It is evident that for Thailand most travelers still prefer traditional hotel accommodations, particularly those operated by brands that they are familiar with and give them more confidence in security and levels of services.”

Chakkrit Chakrabandhu Na Ayudhya, Senior Vice President of Hotels and Hospitality Group at JLL

The preference of traditional hotels to the home-sharing accommodations can be reflected by the higher number of hotel guest reviews. In Bangkok, for example, traditional hotels and Airbnb accommodations receive an average of 664.2 and 31.3 reviews respectively, according to JLL.

More affordability is another factor that has helped traditional hotels maintain their competitiveness.

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Airbnb posing less significant threat to hotels in Thailand than expected

Most people would expect that staying at an Airbnb is cheaper than booking a hotel room. However, unlike most countries, hotels in Thailand are surprisingly more economical than Airbnb and thus have remained more competitive.

Mr. Chakkrit.

While not an apple-to-apple comparison, JLL’s findings indicate that that the average prices per night for hotel accommodations is lower than Airbnb across all the three markets studied, especially in Phuket, where the average price per night of hotels is less than half of the average price of Airbnb. In Bangkok, the two types of accommodation are closely priced, with Airbnb being slightly more expensive.

“The price comparison between Airbnb accommodations and traditional hotels is a challenge,” said Pichayut Vacharavikrom, an analyst at JLL’s Hotels and Hospitality Group.

“Since hotels often have many rates for the same type of rooms, our research looked at the lowest rate available. In addition, Airbnb offers much larger spaces through offerings that include entire villas, houses, apartments and bungalows, which can accommodate a larger number of guests than hotel rooms. In fact, it may be accurate to say that Airbnb in Thailand is creating an additional hospitality market by offering new alternatives to travelers and attracting a new generation of guests, particularly millennials, who represent an increasing portion of travelers that are constantly seeking new experiences,” he explained.

Other interesting findings

·         While reputational signals are less influential to Airbnb accommodations, an increase in rating (increments of 1 out of 10), a key indicator of quality, is highly significant and associated with price increases for hotels in all three cities. By applying the hedonic pricing model, the study has found that a one-point increase could on average translate to price increases of 13.81% in Chiang Mai, 16.35% in Bangkok and 23% in Phuket.

·         The average distances of the two types of accommodation offerings in Chiang Mai to attraction points, public transport and airports were significantly different. This implies that the two are capturing different markets, with accommodations being better distributed or more scattered across the city, compared to Bangkok and Chiang Mai.

Mr. Chakkrit commented that the home-sharing platform has remained in its infancy in Thailand, but its influence in the longer term should not be underestimated as it is expanding rapidly worldwide. “This is evident from Airbnb’s latest acquisition of HotelTonight, a platform known for its last minute hotel booking experience. Prior to this, it has invested in OYO, a hotel startup based in India that will allow Airbnb to enhance travel experiences and scale through technological applications,” he cited.

“While this radical shift undermines the traditional business of hotels in many countries, it has nonetheless served as a catalyst for hotels to continue to innovate and improve their product offering to stay relevant. We have already seen a number of major hotel chains embracing the same trend including AccorHotel’s acquisition of Onefinestay and Hyatt Hotel’s investment in Oasis Collections. Just recently, Marriott has entered the home-sharing business with the announcement of their own platform through the Homes & Villas by Marriott International,” Mr. Chakkrit concluded.

Tags: hotels
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