AIRBNB SUCCESSFULLY QUOTED ON THE STOCK EXCHANGE BUT THE MIRACULOUS NON-HOTEL ACCOMMODATIONS SECTOR HAS CHANGED
Airbnb reached the incredible value of well beyond 100 billion dollars, it’s true, and it certainly gives people a lot of hope with regard to market’s feelings toward the tourist industry and its resilience in this time of Covid. In Italy we can only drink to its good health and hope for the best because it will be our success too, as we are a superpower of tourism worldwide. However there is something more behind this exploit, something different and possibly far removed from mere trust in the recovery of tourism for the coming years. The confidence expressed by the market is not so much in the ability of tourism to recover worldwide, as in the ability of Airbnb itself to continue on the path of diversification and assimilation of services and experiences, more or less related to travel, at which it has done so well and that, I think, will probably be the strong point on which the management will focus in the coming months to confirm the choice of thousands of investors that have rewarded the company founded by Brian Chesky.
The main tour operators and market survey companies agree in thinking that the pre-covid dynamics will not return before summer 2023.
Obviously, what interests us are above all is the real estate aspects of the Airbnb phenomenon, so delightedly celebrated by some and intensely despised by others, about which more than enough has already been written. We have read at length about what it has done to the so-called “non-hotel accommodations” sector until now, and about the growth in profitability of residential properties, turning so many private citizens into quasi hoteliers, and creating in many countries a regular social safety net for the middle class. It is certainly true that if the Italians have been able to collect the citizens’ basic income contribution, the lower and medium middle class have had Airbnb and the fixed rental tax rate, both of which had the same effect as an extra income for the family nucleus, helping to ease these years since the crisis of 2008.
Airbnb marked the triumph of the non-hotel accommodations sector, with its so-called “serviced apartments”, of every kind and size, producing serious competition at every level for the hotels, of which they are duly and noisily considered unfair competitors and which, at least from the fiscal and legislative standpoint, they are. However I have a feeling this type of competition is here to stay, though I expect that the decrease in arrivals will lead, at least in the short term, to a collapse in short-term rentals, especially as regards the less attractive apartments. The non-hotel accommodations sector cannot expect to return to its former glory for at least a few years, but this is also true for the hotel sector, and anyone who intends to pursue an income in this sector will have to take account of that from the outset and focus strongly on quality in the scramble to capture the travelers in a greatly reduced market. If we look at the business world and at business travel, for example, we find that nowadays there is a widespread effort among multinational companies and large corporations to cut the costs of business travel for fairs and conferences, because they have seen that many of these activities can be carried out remotely with equal benefit. The trend can certainly be expected to continue in 2021 and 2022, as long as the pandemic continues to rage, but even in the years after that I don’t think we can expect a return to the volume of business travel that was normal in pre-covid times, much as I regret it.
Even a small apartment of high quality, in a good location, clean and sanitized, can compete with the finest hotels.
From this reduction of business travel, it follows that there will be a decrease in arrivals also in the industrial cities, where conferences are held, and so not only in the art cities. Many hotels and apartments of inferior quality will remain inexorably empty. The hotels and high class apartments with quality services will be more than sufficient on their own to satisfy the demand, in view of the reduced turnover. With regard to residential property, in this connection we have to consider, for example, the problem of apartments without elevator, especially if located outside the city centers, which are unlikely to perform well as non-hotel accommodations, in view of the ample offering of central apartments of superior quality with elevator. The rental of apartments lacking an elevator and central location will probably return to university students living away from home, as it was for decades before the success of Booking.com and Airbnb, when this category of renters was gradually excluded more and more as owners preferred to operate in the circuit of short-term rentals, in view of the steady numerical growth of tourism in the last decade which has led to the equally lamentable phenomena of gentrification, abandonment and depersonalization of vast areas of downtown residential districts.
The main tour operators and market survey companies agree in thinking that the pre-covid dynamics will not return before summer 2023, and many think this forecast too optimistic, considering that the airlines are talking about returning to pre-covid levels only in 2024.
All things considered, Airbnb had already seen the need to focus on quality even before the pandemic, diversifying its offering in recent years between Normal and Plus, and more recently , in 2019, launching Airbnb Luxe, for a luxury offering with even a dedicated online concierge. This orientation will certainly continue and will be implemented to enable the company to compete with 4 and 5-star hotels. When it comes to Booking.com, that in recent years had included quality residential properties in its offering alongside the hotels, it has proven once again that this is a market where property owners have to concentrate their attention, remembering that even a small apartment of high quality, in a good location, clean and sanitized, can compete with the finest hotels.
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