The visibility of the "alternative accommodations" space has gained popularity with the rise of Airbnb and eventually forced major hospitality players to follow suit.
Guggenheim says the idea is "going mainstream fast," with analyst Jake Fuller estimating the marquee alternative platforms will do more volume than the top hotel chains by 2021 and is growing at over four times the pace. Alternative accommodations may have once been hard to find, trust or book, but Fuller says this changed with the major players on board.
The analyst says the three major alternative platforms -- Airbnb, Expedia Group Inc EXPE and Booking Holdings Inc BKNG -- should combine for roughly $60 billion in bookings and $7 billion of revenue in 2018. This growth will also provide a sustained boost for online travel agencies and could eventually come at the expense of the hotel industry.
“Evolution of the category has long been seen as a potential risk to the hotel chains, but that risk is hard to quantify,” Fuller wrote in a Dec. 17 note. "Alternative Accommodations should help OTAs sustain double-digit growth despite slowing growth in traditional hotel volume, but on the other side we see alternatives potentially hitting hotel industry growth by around a point over the next several years."
Size And Scope
The analyst says Airbnb is the category leader, but Booking Holdings and Expedia have a solid position in alternatives. Fuller rates Bookings with a Neutral rating. He lists Expedia as a Buy with a $160 price target and remains his "Best Idea."
Collectively, these three companies have over 10 million unique alternative rooms, outpacing the 2.4 million combined total rooms of Hyatt Hotels Corporation H, Hilton Hotels Corporation HLT and Marriott International Inc MAR, which Fuller says effectively rivals the marquee hoteliers on some measures. The analyst has Hilton, Hyatt and Marriott at a Neutral rating.
The analyst says room nights in alternative accommodations are growing at 32 percent, compared to OTA hotel rooms night growth of 10 percent and hotel chain room night growth of 7 percent.
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