Airbnb Occupancy Rates Catching up with Hotels

by Morgan Solem
Friday, July 25 2014

Can you guess the current occupancy rate for Airbnb listings in San Francisco?

We'll give you a hint. The local Airbnb occupancy rate is almost identical to local hotels. In fact, almost 87% of San Francisco's Airbnb listings are currently booked.

As recently as last December, Airbnb noted that they had a lower occupancy rate as compared to hotels.

Therefore, we were surprised by San Francisco's high occupancy rate, and wanted to investigate whether this statistic represented an anomaly or a trend.

Importantly, if San Francisco’s occupancy rate proved representative of a larger trend, Airbnb would be well on its way to claiming the title of world’s largest accommodations provider, as measured by revenue.

Examining other Cities

To dive deeper, we investigated current occupancy rates in Los Angeles, Chicago, and two international cities, Tokyo and London.

We predicted the broad geographic distribution of the Los Angeles would dramatically impact occupancy rates. However, the current occupancy rate in LA is greater than 65%. And in Chicago, we found that 79% of Airbnb listings were currently occupied.

The numbers in Tokyo and London proved equally impressive. Despite reaching Tokyo & London after these US cities, the occupancy rate in both these markets is already greater than 60%.

These impressive results raise an interesting question. As Airbnb markets mature, do they trend toward matching the occupancy rates of local hotels?

How Airbnb will Improve Occupancy Further

Airbnb seems focused on features that should continue to cause occupancy rates to rise.

For example, in the past year, they launched automatic booking and prioritized search results for hosts who enabled this feature. Further, it has long been speculated that Airbnb will work with hosts to provide keyless entry systems.

These and other advancements will make Airbnb easier to use, and it is quite reasonable to speculate that Airbnb's occupancy rates will trend upwards.

Implications of Higher Occupancy Rates

If Airbnb comes to match the occupancy rates of hotels, the revenue implications will be dramatic. Let's explore this possibility.

Last year, the average occupancy rate for hotels in America was slightly greater than 62%.

Of the reported 650,000 active listings, let's posit that the average listing is available 40% of the year, as there are many part-time hosts. Lastly, to estimate nightly revenue, we'll use a recently reported figure that the average Airbnb sells for $125/night.

These statistics & projections would put Airbnb's top-line annual revenue (revenue generated by Airbnb hosts) above $7 Billion.

(650,000 listings * 365 nights per year * 40% available * 60% occupancy rate * $125 nightly revenue = $7.1 billion)

Sure, Airbnb only takes a portion of this top-line revenue (8-12% from guests), but with the Airbnb community earning more than $7 billion, Airbnb would be well on its way to matching the revenue figures for the world’s two largest hotel chains: the Marriott ($12.8B) and the Hilton ($9.8B)

Conclusion

Surely, in many younger markets, Airbnb still has a much lower occupancy rate in comparison to hotels.

However, San Francisco and other cities illustrate the possibility that as Airbnb markets mature, they begin to match the occupancy rate of local hotels.

If these occupancy rates prove to be a leading indicator, it means the accommodations space is undergoing a transition far more quickly than previously imagined.



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