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January 22, 2016

Hoteliers brace for impact of Airbnb

The national growth of Airbnb supply has more than doubled over the span of a year for both homes and apartments.

There's a bit more pessimism in the air nationally about lodging this year, at the same time Airbnb's growth is exploding, a hospitality consulting firm representative told the MEREDA annual meeting in Portland on Jan. 21.

Matthew Arrants, managing director at Pinnacle Advisory Group, said that lodging occupancy rates have grown for seven years in a row, but they're off in the first quarter of this year in key markets including New York, Chicago and Boston.

"That worries me," Arrants said.

At the same time, Airbnb's growth is exponential, from 70,000 units to more than 200,000 units from August 2014 to August 2015, a 159% growth rate year-over-year.

According to Bank of America Merrill Lynch, that translates into Airbnb holding a 2% to 4% share of the total U.S. hotel room supply and 1% to 2% of total U.S. hotel room demand currently.

Arrants said he thinks those numbers are too optimistic, though he notes that with Maine's growing leisure travel market, hoteliers should keep an eye on Airbnb.

"There's a condo at Samoset listed on Airbnb," he said. "The biggest issues with Airbnb's are taxes and life safety."

Still, they're eating into the hotel market. He noted the New York City hotel market is softening due to Airbnbs and new hotels.

"Airbnb targets the leisure traveler, so watch for Airbnbs in Maine," he said.

Arrants noted that increasingly, companies are planning leisure activities into business meetings, a trend that shows they have money to spend.

The business-leisure market sector, which he calls "bleisure," is growing rapidly as baby boomers plan to travel a lot and are not price-sensitive. They also are seeking experiential travel, which he said is a real plus for Maine, especially with the National Park Service's 100th anniversary in August.

New hotel boom in Portland drives up rates

With the new hotel boom in Portland over the past couple years, Maine occupancy rates are a bit down from 2005 to 2015, that is, they were 58.8% in 2005 and 56.7% in 2015, according to Smith Travel Research. The average daily price for a room rose, however, from $81.74 in 2005 to $115.98 in 2014 and $119.44 in 2015.

While some market watchers initially expected the Portland peninsula and South Portland hotels to cannibalize each other's business, Arrants said they've turned into two distinct markets, with South Portland hotel rates averaging up to $100 below hotels in downtown Portland. Downtown Portland's occupancy rate is 70%, up 3.6% from 2014 to 2015, while South Portland's rate was down slightly to 66%. However, if the Marriott, Embassy Suites and Doubletree numbers were included in Smith Travel's data, the difference would be smaller.

The Augusta hotel market had an occupancy rate of 53%, up 1.7% from 2014 to 2015, with rooms averaging $109.37 per day. Arrants didn't see any major changes to demand even with the Homewood Suites currently under construction.

The Bath/Brunswick market had 61% occupancy, up 2.2%, with an average daily rate per room of $121.09. Demand is fairly steady because of Bath Iron Works and the redevelopment of the Naval Air Station, he said.

Bangor's occupancy rate fell 7.3% to 65%, with an average room price down 1% to $108.85. The primary reason was the impact of the weak Canadian dollar. One bright spot he cited is the Riverfront Pavilion, which is driving up demand for overnight stays.

Read more

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