Across the world, travelers identify the Marriott International (NASDAQ: MAR) name as a mark of quality and distinction. That reputation only improved when Marriott acquired Starwood Hotels & Resorts three years ago to become a colossus in the hotel industry.
Yet there's been a more fundamental transformation in recent years in the way that many travelers choose where they're going to stay. Rather than visiting traditional hotels, many have taken advantage of services like Airbnb that allow homeowners to offer accommodations on massive online platforms. Airbnb in particular has grown to become the leader in the niche, helping to host 2 million people nightly and moving toward its own initial public offering. Along with its peers VRBO and HomeAway, many see Airbnb as an existential threat to regular hotels.
Now, Marriott is reportedly looking at its own service to offer short-term accommodation rentals. Some have been quick to see this as an admission that Airbnb is a threat even to hotel companies the size of Marriott. Yet if the service successfully delivers the convenience of home-sharing with the reputation for quality that Marriott has, then it could quickly build a competitive advantage that even Airbnb will struggle to overcome.
Image source: Marriott.
What Marriott might do
Marriott hasn't yet made the details of its service public, but reports speculate that it would closely resemble many aspects of Airbnb and other home-sharing websites. Guests would be able to search through listings and choose properties that fit their needs, reserving them through a central reservation portal.
However, there would be some key advantages to the Marriott service. The most important would be its integration to the company's newly integrated Marriott Bonvoy loyalty program. By allowing rentals to earn points toward hotel rewards or allowing those who have stayed at Marriott hotels in the past to redeem points toward rental stays, the hotelier would create a seamless network covering a wide scope of accommodation types.
An expectation of quality -- and a completely different experience
What could truly make the difference for Marriott is the extent to which it would vet and stand behind the properties that homeowners list on its service. One hesitation that many travelers have in using Airbnb is that travelers have to rely primarily on information that owners provide and reviews that other visitors have left. Although there's a clear incentive for owners to build a positive reputation on Airbnb in order to put would-be travelers at ease, the company itself plays no significant role once guests arrive at an owner's location.
By contrast, Marriott has choices in developing a service that could eliminate many of those concerns. The hotelier historically has had substantial experience in working in the real estate rental property market, having spun off its Marriott Vacations Worldwide (NYSE: VAC) timeshare business in the early 2010s. Shares of Marriott Vacations are up sixfold in just over seven years, and although the two businesses are now independent, Marriott hasn't lost its experience with vacation rentals and the particular opportunities they provide. The company has already rolled out a small home-sharing program in key European cities, concentrating on high-margin upscale properties where its brand awareness can bring the biggest profits.
Segmenting the market
It's unrealistic to expect any home-sharing venture from Marriott to take away Airbnb's aspirations entirely. Given their respective brand positioning, the two companies' target audiences probably don't completely overlap. For instance, Airbnb offers single-room accommodations within single-family residential properties that in some cases are at such low prices that they'd be hardly worth the time or effort for a company the size of Marriott. Even some of the full-home listings that you'll find on Airbnb cater primarily to budget-conscious travelers who would prefer staying in a hotel but can't afford it.
Instead, what Marriott's venture is most likely to accomplish is to break the addressable market into two key segments, with Marriott focusing on taking hold of the high-end upscale side of the business. If it can successfully take away a significant portion of Airbnb's highest-priced listings -- and the revenue that those listings provide for the home-sharing service -- while still offering high-quality, reliable accommodations for its loyal customers, then Marriott will have accomplished its goal of putting Airbnb in its place and not only defending its traditional turf but expanding into the promising new market that home-sharing pioneers have opened up.
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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of Marriott Vacations Worldwide. The Motley Fool recommends Marriott International. The Motley Fool has a disclosure policy.