Memorial Day Weekend and compression pricing

Memorial Day marks the start of the summer travel season and for countless families seeking an affordable vacation, every dollar counts. This is one of the many reasons why more consumers are embracing Airbnb as an affordable travel option. Sadly, the big hotel chains and their trade group, the American Hotel and Lodging Association (AHLA), have launched a coordinated attack on the middle class people who share their space on Airbnb.

Despite four years of record profits, the big hotel chains are targeting people who share their homes because they want to continue exploiting their control of supply in markets in order to use “compression pricing,” the industry term for price gouging, to raise prices for consumers.

In addition to offering authentic experiences, Airbnb has succeeded by providing a platform for hosts to make their space available for occasional short-term rentals and increasing choices for consumers who want to avoid compression pricing. In fact, in 14 cities and seven other common tourist destinations over Memorial Day Weekend this year, the typical traveler on Airbnb will save a projected $276 by using our platform rather than a hotel. Consumers are getting more affordable choices and more value, too — many Airbnb listings include kitchens, wifi, a washer/dryer and other amenities.

Airbnb also makes city economies stronger. With roughly three quarters of our listings located outside hotel zones, Airbnb gives millions of everyday people the chance to travel to cities and neighborhoods they might have missed if they had stayed in a hotel. And Airbnb guests stay longer and spend more money in the communities they visit than a typical hotel guest: 31 percent of the people who travel on Airbnb say they would have stayed home or wouldn’t have stayed as long but for Airbnb, and 97 percent of the listing price stays with their hosts in the communities they visit, unlike big corporate hotel chains that take their profits out of the communities where they do business.

In an effort to contribute more information and data to the discussion about how Airbnb is saving consumers millions of dollars, Airbnb is releasing a new report regarding compression pricing around Memorial Day Weekend.

As travelers prepare to hit the road for the three-day weekend, hotel rates in major cities and small towns have increased. According to AAA, travel on Memorial Day Weekend this year will be the busiest in more than a decade and more expensive than last year, with the average three diamond-rated hotel costing $215 a night, an 18 percent increase over 2016. While some price fluctuation in all types of accommodations can be attributed to basic supply and demand forces and is appropriate, there have been countless examples of the corporate hotel chains engaging in explicit price gouging. A search of Hotels.com one week before the upcoming holiday weekend found hotel accommodations to be even more expensive:

  • The 2-star Red Carpet Inn chain hotel in Brooklyn, New York is charging no less than $250 per night.
  • The 4-star Riviera, a Starwood property in Palm Springs, California, is charging more than $1,200 per night.
  • The 4.5-star La Playa Beach Resort, a Pebblebrook Property in Naples, Florida, is charging $429 per night.

This report builds on industry analysis and highlights hotel compression pricing and Airbnb savings over Memorial Day Weekend. The report is divided into three parts:

Part One: Fighting compression pricing

Part One examines corporate hotel chains’ propensity to use compression pricing and hurt consumers even when enjoying record-breaking rates and profits. It also reviews what these corporate hotel chains and industry experts are saying about Airbnb’s impact on their ability to exploit traditional hotel supply and raise prices on consumers.

Part Two: Consumers saved $12 Million on Memorial Day Weekend last year using Airbnb

In Part Two, we discuss how Airbnb is increasing supply and creating a marketplace that is more fair, more transparent, and offers more choices for consumers. This work is in stark contrast to the corporate hotels that benefit when supply is restricted. We then compare hotel and Airbnb pricing data from Memorial Day Weekend 2016 in 14 cities and seven common tourist destinations. The analysis indicates that Airbnb users saved a combined total of $12 million compared to what they would have spent had they stayed in hotels.

Part Three: More savings with great amenities this year

Part Three introduces evidence indicating how Airbnb is continuing to offer affordable options for Memorial Day Weekend this year, all while providing unique accommodations that include amenities for which hotels typically charge extra or, worse yet, roll into hidden resort fees. The analysis indicates Airbnb room rates for bookings so far during the Memorial Day Weekend average $92 less than the $215 average hotel price according to AAA, amounting to $276 in savings for a room booked for the full three-day weekend. Further, the vast majority of Airbnb listings provide free wifi and have a washer, dryer and kitchen.

This analysis comes at a time when the travel and hospitality sector is surging. Travel accounts for 10 percent of global GDP (bigger than the oil industry and growing faster than many other sectors), claiming one in every 10 jobs. The annual number of global air passengers is approaching 4 billion, increasing by 3 billion in just the past three decades. As the industry continues to grow, Airbnb is democratizing travel, bringing more people and more communities the opportunity to benefit from tourism’s growth. In addition to one-third of Airbnb guests worldwide saying they either would not have traveled or would not have stayed as long without Airbnb, 89 percent say their listing locations were more convenient than hotels.

We look forward to continuing our work to spread the benefits of travel to more people by creating a fair, transparent travel marketplace that gives consumers more affordable, meaningful choices.