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Analysis

High-end Homesharing: Is the threat to luxury and business brands real?

Hospitality ON looks at attempts to enter the luxury accommodations segment, and how hotel groups have responded.

Homesharing sites such as Airbnb and HomeAway have sent shockwaves through the traditional Hospitality industry. Many consumers have flocked to homesharing sites, seeking lodging at lower prices and the ease-of-use offered by the online platforms. Airbnb’s disruption of the hotel industry is significant, both existentially and economically. A recent study by Dogru, Mody, and Suess (2018) found that a 1% growth in Airbnb supply across 10 key hotel markets in the U.S. between 2008 and 2017 caused hotel RevPAR to decrease 0.02% across all segments. While these numbers may not appear substantial at first, given that Airbnb supply grew by over 100% year-on-year over this ten-year period means that the “real” decrease in RevPAR was 2%, across hotel segments.

However, homesharing sites have been far less successful at seducing luxury vacationers and executive business travelers. These guests are far less price-sensitive and more attuned to service levels, unique and exclusive locations, and consistent high-quality, on-site aimenities. In short, these guests are seeking a comprehensive luxury experience; not simply lodging. What are homesharing sites doing to draw these customers, and how are the traditional brands responding?

Airbnb Luxe and ThirdHome

In an effort to attract high-end travelers, homesharing sites are turning to landmarks and historic properties, castles and presbyteries, and, according to Airbnb, there have been more than 21 million searches for stays in castles, of which Airbnb lists over 4,900.

Understanding that luxury travelers are seeking services and amenities, not just unique locations, Airbnb Luxe assigns “Trip Designers” to each guest to assist in staffing and local transportation needs. Different from traditional luxury hospitality, which has experienced and well-trained teams of concierges and service providers, the homesharing segment assembles these teams ad hoc from either existing household staff or local providers, which represents a real challenge.

Nukutepipi
Nukutepipi

In 2017, attempting to break into the luxury space, Airbnb acquired Luxury Retreats, a villa, mansion, and penthouse rental agency.  Rebranded as Airbnb Luxe, offerings include 8-bedroom penthouses in London's tony Mayfair and Nukutepipi, an entire Polynesian Island available for 900,000eur per week.  Most recently, Airbnb Luxe has created a promotional “sweepstakes” for one of ten stays at Highclere Farm, setting for the famed Downton Abbey series and movie.

Most recently Airbnb has listed Highclere Castle for the first time, making the home of Downton Abbey available to two people for one night. On November 26, the lucky twosome will stay in a guestroom, and enjoy evening of cocktails followed by an extravagant traditional dinner in Highclere Castle’s iconic State Dining Room as well as a tour of the castle and its grounds.

Hadi Moussa, General Manager for Northern Europe Airbnb, remarks:  

At Airbnb we are passionate about offering unique and unforgettable travel experiences to our community, and we are certain that guests will have a magical experience while staying on the iconic location of Downton Abbey.

 

ThirdHome has taken a different approach to luxury homesharing. Founded in 2010 by real estate developer Wade Shealy, ThirdHome was conceived as a membership-based luxury home exchange. After having their property vetted by ThirdHome (membership requires homes with a minimum value of $500,000; the average ThirdHome property is valued at $2.2 million) members receive credits for sharing their property to be used enjoying other member properties. By 2018, more than 10,000 properties were available on the ThirdHome platform.

In May of 2018, ThirdHome opened its portfolio of second homes to the public. In addition to generating the aforementioned credits, members now have to opportunity to generate revenue  from their second home. Unlike the dedicated service staff associated with high-end hotels or the “Trip Designers” of Airbnb Luxe, owners liaise directly with renters to connect with services and amenities. While this represents a significant cost savings, service level can vary widely.

Marriott and Hilton respond with exclusive clubs and service 

Marriott International is expanding into personalized luxury through its Homes & Villas by Marriott International in 100 destinations, as well as its different clubs that offer ownership: Ritz-Carlton Destination Club is part of an expanding family of brands that also includes Sheraton Vacation Club and Westin Vacation Club, Marriott Vacation Club, Sheraton Vacation Club, Grand Residences by Marriott, The Ritz-Carlton Club and St. Regis Residence Club.

Homes & Villas by Marriott International - Anguilla
Homes & Villas by Marriott International - Anguilla

In an attempt to directly compete with homesharing platforms, Marriott International created Homes & Villas by Marriott in April of 2019.  Comprised of over 2,000 homes in 100 markets worldwide, Homes & Villas resulted from a pilot program called Tribute Portfolio Homes in 2018. Initiated exclusively in Europe, Tribute was Marriott's attempt to test the homesharing waters while extending the brand's service, consistency, and rewards program.

Homes & Villas by Marriott allows guests to select from curated homes while still receiving Marriott Bonvoy loyalty points. Stephanie Linnartz, Global Chief Commercial Officer, Marriott International, explains:

The launch of Homes & Villas by Marriott International reflects our ongoing commitment to innovation as consumer travel needs evolve. What started out as a pilot a year ago is now a global offering, providing our guests with the space and amenities of a home backed by a trusted travel company, and the very best in loyalty benefits.

Marriott International's Grand Residences, on the other hand, offers fractional ownership that combines all the advantages of a second home with the amenities and personal service of a luxury resort.

Ritz Carlton Destination Club invites its members to elevate their travel to personalized, luxury vacation experiences. To become a member one purchases a beneficial interest in a trust that holds title to real estate. Because each interest is deeded, it is equity ownership and may be passed down to your children and grandchildren. Members/Owners may customize vacations through a unique points-based currency system.

Meanwhile, at Wyndham, there are three types of ownership: Club Wyndham Select, Club Wyndham Access, Presidential Reserve, and Club Wyndham Discovery. “Select” ownership can be a deeded interest or points at a select resort offering Advance Reservation Priority (ARP) at the owner’s "home resort", but it also offers access to the entire Club Wyndham portfolio of resorts. “Access” ownership involves a certificate for the amount of points purchased providing access to a group of resorts, rather than a deed to an individual resort. The owner has access to Advance Reservation Priority (ARP) at each Club Wyndham Access resort and the ability to book at the entire Club Wyndham portfolio of resorts. With “Presidential Reserve” ownership come exceptional quality and comfort, and an experience to be shared with loved ones. It offers direct access to Platinum VIP status, the elite level reserved for owners with 1,000,000 points or more, plus the option of exclusive fee-based resort services. “Discovery” is a 24-month trial program that offers a sampling of the ownership experience. This program gives you access to a selection of amazing resorts and benefits.

Hilton has its own program : Hilton Grand Vacations. Ownership/timeshare provides all the benefits of owning a vacation home without the responsibilities of traditional home ownership. An owner with Hilton Grand Vacations, receives a deeded ownership interest at one of our resorts, which becomes your Home Resort. Owners are also Members of Hilton Grand Vacations Club, a point-based reservation system and receive an annual allotment of ClubPoints each year based on the type of accommodations and season owned at the Home Resort. Unused ClubPoints may be rolled over and saved for future vacations, or the following year's ClubPoints may be borrowed for this year's vacation. Rather than traditional hotel rooms the club offers a little slice of home in spacious and elegant accommodations, ranging from studios with kitchenettes to multi-bedroom suites appointed with fully equipped kitchens. They have more room to spread out in a private space without sacrificing resort experiences, including sparkling pools and private cabanas, poolside cafes and restaurants, activity centers and kids' camps, spa services, fitness programs, and concierge services ready to provide personalized insights about area activities for to enjoy.

To each platform its own strength

Homesharing has clearly been a disruptive force throughout the hospitality industry. Pricing pressure, a massive influx of inventory, and comparative ease of use have forced traditional hoteliers to "up their game," while seeking to level the regulatory playing field. The effects of increased regulation on the homesharing networks remain to be seen, however, it is clear that homesharing, in some form, is here to stay.

Meanwhile, traditional hoteliers are learning to leverage their unique strengths: quality of staff training and service, consistency of amenities and experience, and network of premium locations into a hybrid model to effectively maintain the loyalty of the luxury guest. Brands matter when it comes to expectations: time will tell if the new, hybridized offerings of the luxury brands can effectively stave off the attempts of homesharing networks to move upmarket.

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