Hacker News Reader

Comment by dlss | Hacker News Reader

> Trivial: Because the market size increases. More people are renting hotels/airbnb + more often + for longer durations.

Lol, yes, this is fair. The hotel market doubling in revenue would be headline news at the WSJ, etc though.

We can actually get a rough sense of what's happened to the market as a whole by looking at the stock prices and cashflows of the major hotel chains. Looks like Mariott has lost a bit of value in the last year[1], same for Hilton[2]. La Quinta holdings went way down[3]. Please check the hotel chain of your choice if you feel I cherry picked these examples (Motel 6 and Best Western were my first choices, but are privately held).

Which is to say it doesn't appear that the market doubled in size.

[1] https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...

[2] https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...

[3] https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...

View on HN

It doesn't need to double. The market size only needs to increase by [roughly] whatever airbnb revenue increase is.

added the word 'roughly'

89%, which is to say roughly double (from https://news.ycombinator.com/item?id=12732978)

If Airbnb is 10% of the market and increases revenue by 89% whilst all others stay flat, that only requires an 8.9% increase in the market.

Of course, if that happens, others would be losing "share", albeit not shrinking in absolute terms. But, in fairness, the article seems very wishy washy in its definition of "market share".

AirBnB isn't the entire hotel market.

If total revenues for the whole market are 100, and AirBnB's share is 1. Then the total revenues only have to go up to 102, for AirBnB to capture all the new revenue and thus double its revenue.

The marketshare isn't based on revenue, but total supply of rooms/listings available, so its possible to lose marketshare and gain revenue.

The parent comment is taking about "the market for people staying places when they travel", and you're giving numbers for "the market for people staying in hotels". Those two things were almost equivalent for a long time, but are now detached, and AirBnB occupies that gap.

But that's exactly the point. Only way for AirBnB to grow would be that gap that AirBnB is occupying to grow. This could be created by an increase in "the market for people staying places when they travel", or a shrinking of the market for "the market for people staying in hotels". That 100% of the growth is coming from the former is very suspect.

If true, it would also mean there was an increase in bookings on AirBnb relative to hotels. Which would imply:

> Option 1. They didn't lose market share across the board, and instead cherry picked non-representative markets for their 13 region hotel comparison.

(from higher up this comment chain)

And it's easier for me to believe that the market for, say, app-summoned cars is more elastic than the market for renting a room while traveling.

In the former case, you're competing with a bunch of alternatives that you're happy to substitute given a better/cheaper option. Maybe you take less public transportation or don't ask for a ride or don't drive yourself and use Uber.

AirBnB, on the other hand... Yes, some people will travel more/stay longer given cheaper lodgings but there are a lot of other costs associated with travel (including, for most, vacation time) so it's harder for me to believe that AirBnB will dramatically increase lodging days to the same degree that Uber could potentially increase taxi or private car-like service miles.

You would be surprised. I've personally increased lodging days a lot due to AirBnB being cheaper (and subjectively better) than hotels.

Also, AirBnB doesn't only compete with hotels... a lot of the market share in my country (Uruguay) was actually taken from real estate agencies for short-term vacation rentals, not hotels.

Edit: same in Portugal and Ireland, see https://news.ycombinator.com/item?id=12732874

>Also, AirBnB doesn't only compete with hotels... a lot of the market share in my country (Uruguay) was actually taken from real estate agencies for short-term vacation rentals, not hotels.

That's not market elasticity though. That's shifting from one booking agency to another. When my family rented a vacation home we used various small vacation home services. I have no doubt we'd consider using AirBnB today if we still had the place.

I don't doubt that lower prices, where they exist, make a difference at the margins. I'm just skeptical that the effect is big. And, as the business traveler that I am most of the time, I mostly want predictability and a 24-hour desk from a hotel.

The US hotel industry had about $200 billion in revenues in 2015. Airbnb processed about $200 million in payments, or 0.1% of the hotel industry's revenue. At that scale, doubling or tripling your revenue doesn't even appear as noise to the hotel industry.

Thus AirBnB is two orders of magnitude smaller than booking.com and hotels.com

Stop looking at hotels chains. This is just wrong.

First, huge hotel chains are an American thing, the rest of the world (Europe in particular) is managed by many smaller players for which you cannot have numbers.

Second, the American chains are a fairly stable and fixed business limited by physical buildings, AirBnb is worldwide and extending to 100 countries as we speak. The current hotels vs airbnb state in America is already determined BUT only valid for America. What will be the market shares per country and cities... this has yet to be determined. Meanwhile AirBnB starting from 0% everywhere else is enough to justify growing income and revenues.

Third, there could be 10 (or 100?) times money stuck in the black market. (People who pay hand-to-hand, rent to a friend of a friend, gumtree, newspapers listings and the likes). AirBnb can tap into this black market and make it emerge, whereas this space is irrelevant for hotels.

You wanna talk business. Please compare numbers from hotels.com and booking.com and airbnb.com

I wanted to talk "market size increases" in response to your comment. If you're now postulating that a market size increase occurred w/o effecting the chains, I find that even more implausible, but am not sure what to say.

As I said before. These chains only capture a specific market: the intersection of people who live in America AND people who use hotels chains AND people who can afford hotels chain.

That's a multi billion dollars audience yet only a small fraction of the global housing and rental markets.

AirBnb is playing in many more markets than just competing with hotels.

Reply on news.ycombinator.com