With the current trend towards creating a sense of place and embracing the local community among many boutique hoteliers, we caught up with Alan Clarke, CEO of HomeStay.com about how the short-term lodging rental sector is evolving.
Alan Clarke’s previous e-commerce roles at McKinsey, Yahoo, and gaming giant Paddy Power – all focused on global technology platforms, and being an avid traveller, HomeStay seems a natural progression. “HomeStay is the e-commerce business that facilitates hosted travel experiences, connecting people with like-minded interests where technology is the catalyst,” says Clarke.
Recently described as ‘the next disruption in travel’, and with boutique hotel commentators split on whether similar new alternative accommodation options actually impact on revenues and profitability within the sector, we were keen to discover more about this new player.
Airbnb has featured on these pages many times, credited for spearheading the emergence of the short-term rental market, gaining publicity for having a plethora of choice accommodation options, from serviced apartments to treehouses to lighthouses and igloos. It continues to drive consumer awareness of genuine alternative lodging options with or without the host present. What Airbnb tends to overlook however is the actual lodging experience, an area ripe for new disruption.
“Delta Partners (our investors) were excited about not just the product but the size of the opportunity – the home stay travel vertical had no platform until now, and we estimate it’s worth around €10 billion in market size,” says Clarke.
Home stays are clearly becoming more popular whilst evolving, with two million students globally using home stays for overseas study for instance, with a spend of nearly US$3 billion annually. Broad consumer demand for the hosted travel experience is also being driven by:
- Relocating professionals
- University housing needs for student overflow
- Solo travellers
- Small family holidays
- Tourists and other leisure travelers
“Our average length of stay is 12 nights and guests spend between one and 230 nights at hosts’ accommodation. We’ve done lots of work understanding the nature of our customer with around 50 per cent being over 30 years of age. The business model is based on providing our hosts and guests value for money among like-minded individuals, and we take a 15 per cent fee from each host for every home stay booked,” says Clarke.
As social travel networks including HomeStay, TripTogether and others gain popularity facilitating like-minded connections, and the choice of accommodation options expands, guests are no longer confined to hotels that can feel solitary, empty places at times, particularly when travelling alone. The choice of where to stay is much more of a ‘social’ decision making process.
Like Airbnb, Roomorama, Tripping and other disruptive short-stay rental companies, ‘trust and transparency’ to an already happening transaction overlayed by host and guest reviews continues to be an important pre-determining factor for the booking process. “We’ve just implemented host reviews, and guest reviews and a verification process will be arriving shortly,” says Clarke. “It won’t be long before we offer a Skype video calling option. We don’t have blunt rules within our customer eco-system, we just aim to offer good incentives for guest and host to engage.” Chip Conley, brand ambassador for Airbnb, calls it the ‘generosity of spirit’.
These companies focus on embracing the behaviour of the individual, and making it easier for them to control and facilitate the capture of information that is necessary to get the results they’re looking for, something the hotel sector is only just starting to get its head around. Because of the nature of the hotel owner today, the sector over the generations has lost many of the family owner mentality and is much more of a business – a different real estate asset class with higher risk and higher potential return, not necessarily conducive to the generosity of spirit which has diminished over years passed. There remain lots of exceptions within the independent boutique hotel sector. But with the influx of large hotel brands launching boutique and lifestyle offerings into the space, the latest being Hilton’s Curio lifestyle hotel collection, there is less flexibility based on brand standards, revenue and profitability targets.
What is clear with a closer look at short-term rental companies is a big push towards democratising hospitality and travel, and we’re only at the start of the journey with developments in socially-connecting digital technology driving easier real life experiences.
Ironically, “the more digital we become, the more ritual we need,” says Conley. “The more we’re possessed by our URL websites and communicating through phones, communicating through texts, the more we need the IRL experience – the ‘in real life experience’. There’s a thirst for people to have that sense of connection,” he says.
Homestay’s connection in its purest form requires a host to be present and to add value. Value being defined by the traveller’s desires: true engagement with the local community, language immersion, shared interests with the host – eg. cooking, sport, similar social interests etc…
Challenges in making the short term rental market more ubiquitous include the complex rules and many differing regulatory concerns often cited city by city and country by country. Current market fragmentation based on quantity and quality of often disparate providers and their approach to technology or not, as the case may be, is an inhibitor too. That said, when quizzed on satisfaction levels so far, Clarke states a healthy “85 per cent of our hosts and guests rate the experience as very good or excellent. Five per cent say the experience didn’t fulfill their expectations.” One wonders how that would compare to hotels on Trip Advisor? Now that’s another story.
Boutique hoteliers keen to take a closer look at the short term rental market may wish to pay more attention to an established hostel sector that has been creating a sense of place and community for decades. This market does of course have its challenges too, and these will be explored, with budget travel and more, at the inaugural Hostel and Budget Travellerconference, hosted on November 17-18 in London.