Yahoo Finance Are Airbnbs Cheaper Than Hotels? What the Numbers Show
Are Airbnbs cheaper than hotels? Airbnb said recently that its global average daily rate in March for a one-bedroom was $114 while CoStar reported that the equivalent rate for a hotel room was $140.16.
On that basis, Airbnbs were clearly cheaper.
That is important to Airbnb: After all its original tagline, according to co-founder and CEO Brian Chesky, was “a cheap, affordable alternative to a hotel.”
But let’s unpack some of the ways those numbers.
First, the lower price advantage goes to Airbnb because its average daily rate is the total price, including cleaning fees, before taxes. The hotel average daily rate does not include fees, including resort fees.
In addition, CoStar includes hotel data from China, and Airbnb withdrew from domestic China in 2022.
Guests who book Airbnbs and hotels often travel in groups, and affordability probably skews in Airbnb’s favor there because you can generally accommodate more people in one listing.
These numbers are averages of all rooms, from luxury to economy. If you’re not interested in spending a lot, it’s more useful to compare within categories.
“If somebody is just looking to book something based on price, they might go for an economy (hotel) room,” said Jan Freitag, national director of hospitality analytics at CoStar Group. “That’s 70 bucks versus what Airbnb is talking about, which is $114 for a one bedroom.”
To be precise, CoStar found that that average global nightly rate for an economy class room in March, the latest statistics available, was $64.70 and it was $73.70 for a midscale class hotel room. So bargain hunters in those cases might find a hotel room as more affordable.
Freitag said you can look at the “plain average” Airbnbs versus hotels globally, but it’s more interesting to look at the use cases, whether it’s a couple looking to splurge on a weekend getaway or a consultant seeking to be as frugal as possible.
“It depends on the market, it depends on the time of year, it depends on the month,” said Freitag. “They (Airbnb) obviously have high demand around the world in certain markets, versus the soft season for a lot of other markets. So it’s hard to make a blanket statement about what’s more affordable. It depends on who it is and what you’re looking for.”
Why Is Affordability an Issue Now?
A couple of years ago, many Airbnb guests complained that cleaning fees had become excessive and that stay prices were rising. Airbnb introduced several measures to convince hosts to lower prices.
Chesky brought up the topic of Airbnb’s affordability versus hotels in the company’s earnings call in early May. “Now one-and-a-half years ago, we noticed that there was a lot of concern about Airbnb prices increasing,” Chesky said. “And so we created a whole team to identify a series of initiatives to modulate our prices, and they are working.”
It’s important to note that hosts set the prices of a stay – not Airbnb.
In late 2022, Airbnb began displaying the total price before taxes in regions where it wasn’t already showing them, and 300,000 hosts have trimmed or eliminated cleaning fees, according to the company. At the end of 2023, 60% of Airbnb hosts charged a cleaning fee and 40% didn’t.
In another prod to lower prices, Airbnb introduced a tool for hosts to show which rates in their neighborhoods are attracting bookings, and which aren’t. Hosts might use the tool to see if their rates are too high to generate bookings.
Chesky also pointed out that two-thirds of hosts offer weekly or monthly discounts. So the longer you stay in an Airbnb, the more affordable it can become.
So while the average rate for a one-bedroom Airbnb fell 2% year-over-year to $114 in March, hotel prices increased 1.6% to $140.16.
“The net of all of it is that hotel prices are up year-over-year and Airbnb listings on a like-for-like basis are down,” Chesky said. “So today, the value of Airbnb versus hotel is better than it was a year ago, and I think that trend line is going to continue given all of our efforts.”
Reliability Is the Next Hill to Climb for Airbnb
If affordability, based on nightly rates, is trending in the right direction for Airbnb, reliability is a looming challenge.
Airbnb has long grappled with an inconsistent guest experience because its properties tend to be unique, and so are hosts. You basically know what you are going to get in a Marriott or Accor, but not necessarily in an Airbnb, even as carefully as you read a listing’s reviews. In 2023, Airbnb removed 59,000 fake reviews and 157,000 bogus listings, the company said.
Airbnb introduced superhosts years ago as a way to spotlight reliable hosts, and it also debuted Guest Favorites last year to entice travelers to book stays at properties that other guests thought were swell.
In an interview with Skift this month, Chesky argued that Airbnbs can be more reliable than mid-range hotels. “Guests Favorites are more reliable than the Sheraton. You can quote that – ‘Guest Favorites are more reliable than the Sheraton,'” Chesky said. “We don’t have all the services. And that will come down the road. Guest Favorites are more reliable than any midscale hotel. We have more data. We have data from half a billion reviews.”
Chesky, during the earnings all, said that Airbnbs are more affordable than hotels, provide a more local experience, and are advantageous for groups.
“And so we think quality and reliability is a multiyear road map,” Chesky said. “So you’re going to be hearing every year major updates from us on quality and reliability.”
Correction: We corrected the story to show that the $114 average nightly rate for an Airbnb includes fees, but not taxes.
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