Brian Chesky, Airbnb's CEO and co-founder, likes to tell the story of how seven investors rejected his $1.5 million valuation when he first launched the home-sharing site in 2008. Eight years later, his San Francisco-based company is about to close an investment round valuing it at a $30 billion--proving that his company's disruption of the hospitality and lodging industries has paid off in a big way.
But not every company is waiting around to go out of business. From hosting special events to offering freebies and incentives, boutique hotels, in particular, are attempting to topple Airbnb's dominance--and according to some sources, that strategy is starting to have an effect.
The boutique hotel segment--typically high-end establishments with ultra-personalized service and accommodations--has grown faster than the upscale hospitality sector overall in the past six years. That's according to the Boutique & Lifestyle Lodging Association, an industry group based in West Hills, California, which tracks the category. Demand for lodgings at these locations is expected to outpace the industry between five and 25 percent over the next couple of years, according to Frances Kiradjian, founder and CEO of the association.
This growth is largely thanks to competition from home-sharing companies like Airbnb and HomeAway, says Clay Markham, an architect and vice president of the hospitality sector at CallisonRTKL, a real-estate design firm in New York. The sites have pushed hotel brands to more creative approaches, says Markham, adding: Brands are trying to "dial up what they offer so it's not as cookie cutter as it has been over the past years."
At the leading edge of this trend is West Hollywood's Sunset Marquis. The storied hotel has a long history of catering to rock-n-roll clientele like Ozzy Osbourne and members of The Who. But tales of glamorous parties and dazzling stars don't pay the bills.
In 2012, the hotel started to consider alternative strategies for drumming up new business--in particular, it looked at ways to foster so-called "experiential" travel. Travelers who enjoy this type of tourism favor real-life experiences that connect them to the culture they're visiting over the rehashed "must-see" tourist attractions.
Among other things, the Sunset Marquis made its underground recording studio available to guests, and in 2013, it introduced the Morrison Hotel Gallery on its grounds.
The gallery, which hosts fine art photography of celebrities by world-renowned music and sports photographers, is an extension of the New York City-based gallery of the same name. It's run and curated by celebrity photographer Timothy White. In addition to managing the exhibitions at the gallery, White handpicks all of the artwork around the hotel.
These features keep the Sunset Marquis top of mind among guests and non-guests alike, says Christopher Cope, vice president of sales and marketing at the hotel. "Smart hotel operators will figure out how to make experiences more unique," he adds.
Starting this summer White has also been experimenting with monthly themed events that draw large crowds, like a celebration of the Ramones' 40-year anniversary or its upcoming Hip Hop themed party in September. He combines photographic exhibitions with music and unseen or rare video footage of celebrities displayed in an over-the-top massive screen to create a unique experience for hotel guests and visitors.
"I can't attribute a certain dollar amount," says Cope about the success of these strategies. "But I can tell you that on 17 of the last 20 months we've set new records for room occupancy."
For White, experiential travel is a no-brainer. "Airbnb is great for one thing. [But] part of the fun of being at a hotel is that there are always people; it is that interaction you want. In Airbnb you're away from it all," explains the photographer.
Of course, some hotels are attempting to go the way of Airbnb. Hotels including 11 Howard in New York and The Wilshire in Los Angeles, now offer more residential-type services like replacing minibars with empty fridges and adding microwaves. People like the "convenience of being able to purchase something and not have to go out," Kiradjian says. She adds some hotels are even offering ready-to-go food so travelers can store them in the fridges and heat them up in the microwaves later.
Markham, the architect from CallisonRTKL, also recommends hotels better utilize their lobbies. On top of modern architecture and smart interior design, he believes lobby activation--that is, encouraging clients to use the space for something other than just checking in--can help hotels stand out.
Other boutique hotels like the Aqua-Aston Hospitality group in Hawaii rely in old-fashioned incentives. Every time a guest makes a reservation through the hotel's site, they receive a $20 Starbucks gift card. So far they've handed out 1,200 cards since November 2015, when the promotion started.
At the end of the day, consumers shape the market and businesses adapt. Or as Cope of the Sunset Marquis advises: "Accept it and figure out how to compete against it."