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JLL: Can home rentals, resorts share the spotlight?

The accommodation sharing industry has hosted more than 100 million guests in the past 10 years. Though that number is a small percentage of hotel guests, experts can’t stop talking about the sharing economy’s impact on hotels, especially in markets that depend on tourism revenue.

To determine the real impact of accommodation sharing on resort markets, JLL worked with the Hawaii Tourism Authority to survey 33,000 recent visitors to determine if home rentals were encouraging additional tourists to visit and, if so, why those guests decided to stay in a rental, according to Lauro Ferroni, global head of research, JLL’s Hotels & Hospitality Group. More options mean more visitors.

JLL found that 61% of the travelers surveyed paid less for their home rental than the average hotel room night costs in Hawaii. JLL concluded that this likely represents induced demand – people who otherwise would have likely not made the trip. “The two most common reasons for using home or vacation rentals are the relatively lower cost and more flexible, larger accommodations,” Ferroni says. “We expect that many of these visitors would not come to Hawaii without the option of shared accommodation.”

A home rental on the island of Kauai / Christopher Porter via Flickr
A home rental on the island of Kauai / Christopher Porter via Flickr

Not all guests alike

In turns out that there is not much overlap between tourists who regularly stay in hotels and those who choose a home or vacation rental.

Larger parties are more likely to go the shared accommodations route than a typical hotel room. A group of six would need to book two or even three hotel rooms to accommodate everyone. Instead, they can rent a three-bedroom house, sharing one space and saving money on the nightly rate.

Tourists who use home rental sites are more likely to be traveling for leisure than business. JLL research shows that in gateway cities like New York and Los Angeles, only 15% 20% of alternative accommodations guests were traveling for business. That percentage in resort markets is even smaller.

Embracing the future

The accommodation sharing sector has grown tremendously over the past decade, but several factors point to a near-term slowdown of that growth.

“We expect that the industry will soon reach a structural ceiling in major U.S. gateway markets,” Ferroni says. “Between the number of hosts who are willing to rent out their homes and increasing city regulations, growth will begin to slow.”

Despite an expected slowdown, accommodation sharing is here to stay. City planners and tourism boards should embrace this sector and figure out how to make it work for tourists and residents. “There is certainly a need to incorporate the shared accommodations industry into community and economic development planning,” says Dan Fenton, executive vice president with JLL’s Hotels & Hospitality Group.

Cities must strike a balance between support and regulation of this emerging industry. One solution is a registration system that encourages rental hosts to be open about their accommodation without enforcing too many regulations. By maintaining a controlled approach to the growth of the shared accommodation sector, hotels and rentals can live in harmony.

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