More Arkansans and tourists are turning to online home-sharing services, according to a report released Wednesday by California-based Airbnb regarding activity in the state.
The vacation rental company posted a 131 percent increase in guests who secured a stay at an Airbnb-associated property in Arkansas in 2017, compared with the year before. Competitor HomeAway said it grew in the state by nearly 20 percent from 2016 to 2017. HomeAway didn't provide specific numbers.
Home-sharing services have contributed to the state's economy, but eventually these platforms could eat -- if they haven't already -- into traditional hotel and motel profits, said Allen Ellstrand, associate dean of the Walton College of Business at the University of Arkansas, Fayetteville.
National growth rates for hotel-room revenue slowed down to 5 percent in 2016, according to data from PhocusWright, a travel-industry research company. That's down from 8 percent in 2014 and 9 percent in 2015.
"It will be interesting to know if [hotel] vacancy rates are up," Ellstrand said. "Or if in fact [businesses like Airbnb] are starting to erode the hospitality industry."
Arkansas property owners who posted residences as available online for a temporary stay welcomed more than 78,400 guests last year, according to Airbnb data. An increase from 34,000 guests in 2016.
"This comes as Arkansas residents increasingly turn to home sharing to earn supplemental income and make ends meet," the Wednesday report said.
Arkansas hosts earned in total $8.5 million from guests in 2017, according to Airbnb. That's more than double the amount earned in 2016.
The selling point for home-sharing services, like Austin, Texas-based HomeAway, is mentioned on its website: "List your property ... and open your door to rental income." HomeAway, a subsidiary of Expedia Inc., boasts over 2 million homes in more than 190 countries. Airbnb hosts are in more than 65,000 cities in 191 countries.
The trend of renting a spare room or a whole house or an apartment has fragmented the tourism industry, causing hotels and motels to rethink business strategies.
"Competition in the hotels and motels industry is high and ... as the tourism market segments and continues to fragment further, it will create new needs for traveler accommodations," said Andrew Alvarez, hotel industry analyst at research firm IBISWorld, in a statement.
There are now 1,600 Airbnb hosts in Arkansas and the typical host earned $4,600 last year, with typical Airbnb listings booked 27 nights a year, according to the company, which was founded in 2008.
Montine McNulty, executive director of Arkansas Hospitality Association, said all that the state asks is that Airbnb and its competitors comply with hospitality rules and regulations.
"There are examples here and other places where people are doing this like a business, but they're not regulated and taxed like a business," McNulty said. "We just think they should abide by the same state laws."
There are definitely hosts operating their property as a business, said Maggie Rauch, director of research with PhocusWright.
"It was something that preceded Airbnb, but what Airbnb did was bring that into cities and suburban locations beyond the beach and ski resorts," Rauch said.
Airbnb signed an agreement with the state in 2017 to comply with local tax laws. In the report, the company said it's now collecting and remitting taxes in Bentonville, Eureka Springs and Hot Springs and to the state. Airbnb reached an agreement with Fayetteville to collect and remit taxes beginning in February.
Airbnb hosts earned $1.4 million last year in Fayetteville, which Ellstrand of the Walton College of Business attributed to University of Arkansas, Fayetteville football games and the city's annual Bikes, Blues & BBQ event in October.
"No question it's a challenge to established hotel and motel chains," Ellstrand said. "People can stay in a home, if they're willing to stay with friends, that's as inexpensive or less than hotels -- with more amenities."
Currently there's not a huge impact, Rauch said, but more people are comparing private home rentals with hotel prices than they did five years ago.
"We do see that number going up," she said.
However, Jordan Hoefar, HomeAway corporate communications manager, said the company's rentals aren't directly competitive with hotels because HomeAway offers destinations close to lakes and other rural areas. There might not be hotel inventory nearby, Hoefar said in an email.
The average Airbnb price is $129 in Arkansas, according to the company's website, with most people paying close to $80 per night.
Worldwide it's cheaper to go with Airbnb than a typical hotel room, Forbes reported Tuesday, compiling January data from AirDNA and the Hotel Reservation Service. In New York, an Airbnb room on average is 40 percent cheaper, or $187 per night, than a hotel room.
With 131 percent growth in the state, "clearly Airbnb is outgrowing tourism and hospitality," said Martin Thoma, principal at Thoma Thoma marketing firm. Home-sharing services are offering a more personalized experience that keep guests coming back for more, Thoma said.
Business on 01/25/2018