We Might Be Overestimating Airbnb's Disruptive Potential

• Morgan Stanley believes that Airbnb’s staggering growth will not impact the hotel industry as much as feared.
• The firm remains bullish on hotel stocks.
• Morgan Stanley believes that Airbnb could have its most disruptive impact in the online travel space instead.

The meteoric rise of Airbnb has had hotel investors uneasy for the past year or two. However, a new report by Morgan Stanley analyst Brian Nowak suggests that concern over the company’s disruptive potential in the hotel space is likely excessive.

The survey
Nowak’s conclusions are based partly on results of a 4,000-person survey of travelers. Survey results indicate that Airbnb has already reached 12 percent traveler penetration rate, and Morgan Stanley is predicting that rate will climb to the 16-18 percent level in 2016.

With a more than 90 percent satisfaction rate and only 41 percent of those surveyed even aware of the service at this point, there’s a strong case to be made that Airbnb will continue its rapid growth in the near future.

Hotels at risk?
For hotel investors that are worried that Airbnb will completely disrupt the industry in coming years, Nowak explains that the impact might not be as catastrophic as feared. “Airbnb (for now) is primarily focused on non-hotel, leisure, longer-duration stays, rather than corporate single-night stays,” he writes.

In Morgan Stanley’s base case scenario, the firm is not predicting Airbnb will “material impact” the hotel industry at all. The firm remains bullish on Overweight-rated Hilton Worldwide Holdings Inc HLT, Starwood Hotels & Resorts Worldwide Inc HOT, Sunstone Hotel Investors Inc SHO and InterContinental Hotels Group PLC (ADR) IHG.

Airbnb’s true disruption
Although Morgan Stanley believes that hotels will mostly survive the Airbnb surge unscathed, the same cannot be said of another market group: online travel agencies “We acknowledge the OTAs have posted strong room night growth in 2015 even as Airbnb has ramped, but longer-term we see the online travel players competing more directly for online travelers’ wallets,” Nowak explains.

Morgan Stanley maintains its Equal-Weight rating on Priceline Group Inc PCLN and Expedia Inc EXPE.

Disclosure: the author holds no position in the stocks mentioned.