Impact of AirBnB on Hospitality Industry: Strategies for Perth Western Australia

HOSPITALITY AND TOURISM MANAGEMENT
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Table of Contents
1.0 Introduction:..............................................................................................................................3
2.0 Problem area:.............................................................................................................................4
3.0 Proposed diversified strategic directions:..................................................................................6
4.0 Recommendation:......................................................................................................................8
5.0 Conclusion:................................................................................................................................9
References:....................................................................................................................................10
Appendix:......................................................................................................................................12
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1.0 Introduction:
The present report attempts to prepare a range of diversified strategies for the CEO of private
equity firm and the hotel management of Perth Western Australia (WA), considering the pros
and cons of AirBnB operations in the hospitality industry. Among the given scenarios, the
scenario 1 has been chosen to prepare the present report. Different market surveys have been
conducted in this regards globally, which projected that AirBnB has a significant impact on the
hotel industry in both positive and negative ways. The negative impacts found so intense that the
few hotels and accommodation providers also been banned from the listing of AirBnB. Taking
these things into consideration, the report develops three diverse strategies and provides the
recommendation to overcome the negative impacts over the business.
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2.0 Problem area:
The Perth hotel market is experiencing a higher competitiveness due to the flourishing of new
hotel rooms and softening of the business travels. One of the major reasons is the significant
increase of the non-traditional accommodation via the booking of AirBnB. The government
survey indicated that more than 25% of Western Australia’s room capacity is maintained by
AirBnB, and the supply is increasing at about 4% per month. The monthly income of WA’s
AirBnB hosts exceeds by AU$ 4.5 Million (Bcec.edu.au, 2018).
On the other hand, Aznar, Sayeras, Segarra&Claveria(2018) stated that due to the emergence of
issues such as neighbourhood amenity problems, tax avoidance and impacts on the varied
investment models, some of the renters are trying to avoid their listings with AirBnB. The
revenue percentage of the international hotels is getting some hits due to the indulgence of
AirBnB in the unconventional accommodation offerings. At the same time, the Australian
Government also focused on priority areas such as increased demand for AirBnB due to the
disruptive tourism offered by the company. It has been identified that more than 6% of WA’s
incominginternational travellers’ are created by AirBnB. Customized services at an affordable
rate and attraction of getting homely services rather than going for traditional hotel services are
the major concern for the tourism industry today (Alonso & Liu, 2013).
This scenario is found more crucial in other parts of the globe as well. The AirBnB listings,
occupancy rate and revenue of AirBnB hosts from entire Europe can be considered as a potential
example. More than 27,093 listings were to be found in the 14 cities across Europe in the FY
2016 (Tse-fr.eu, 2018). On the other hand, the revenue distribution is found uneven across
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Europe (see Table1 in the appendix). At the same time, the proportion of multiple listing is also
found complex and highly different, which can be seen in Table 2 of the appendix.
In order to resolve these issues, some of the jurisdictions are managing the adverse effects
through establishing an essential line between the commercial and private monarchy of operation
(Ruhanen, Whitford& McLennan, 2015). Thus, analysing the impact of AirBnB have become
more crucial for the present hotel operating in the Perth of Western Australia, and the CEO of the
equity firm, as the main business is concentrated on real estate business. The present report
produces some diverse strategies to exploit the optimum benefit of AirBnB listing with the CEO
of the Equity Firm.
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3.0 Proposed diversified strategic directions:
a) Promoting houses and rental via AirBnB:
The report published by National Visitor Survey (NVS) and International Visitor Survey (IVS)
Australia, provided the demand of AirBnB and comparative analysis of AirBnB demand with the
traditional accommodation providers. Volgger, Pforr, Stawinoga, Taplin& Matthews (2018)
stated that the increased booking in the WA refers a broader scope for Arena Utopia Hotel to
expand its operation through rental via AirBnB.
The overall findings from Figure 1-5 (see appendix) indicates that the share of AirBnB listings is
increasing significantly (more than 20% per year) in the city of Perth, Australia. In this regard,
Smallwood (2011) stated that major revenue earning occurs in the holiday season, by the
Australian hotel industry. Thus, considering the data of figure 4, it can be stated that customers
from age group 30-49 and 70-80 would be more attracted towards the AirBnB services due to the
cost effectiveness and customized non-traditional services. Moreover, the buying pattern of
international travellers is also changing which can be found in figure 5, as the majority of the
Asian and European travellers are attracted to the listed hotels of AirBnB.
The reports indicate that the occupancy rate of AirBnB is increasing almost 40% on a yearly
basis (Li & Srinivasan, 2018). Simultaneously, it has also been identified that the average price
in the given region for the hotel is approximately $226, whereas, the same for AirBnB is just
$123, which is substantially lower. In other words, the Uthopia Arena Hotel may get the leverage
of tie-up and collaboration with AirBnB with respect to real estate properties. In nutshell, the
increased demand for AirBnB would be beneficial for the CEO to earn greater profitability
through renting the real estate business in the WA region.
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