New data that came out from a report by CBRE last week suggests that Airbnb spaces now account for 9% or more of the total lodging accommodations in major markets.

In New York, Airbnb rooms make up 16% of the total lodging units, Los Angeles 12%, San Francisco 11%, and Miami 9.2%.

Now on the income side, Airbnb pulled in just 6% of hotel room revenue in Los Angeles and 5% of revenue in New York, San Francisco, and Austin.

This disproportionate comparison of spaces to earnings could mean a few things:

1. Airbnb rooms are cheaper than traditional hotel rooms

We already know this is true. In some cities, Airbnb rental rates are on the rise since inventory is low relative to the local travel demand, but for the most part, hotel rooms are at a premium price point compared to an Airbnb space. With cheaper rooms on Airbnb, there will not be as much income per space if occupancy is equal for both hotels and Airbnbs, so focus on getting your occupancy up, not your nightly rate.

You can have an Airbnb rental perform well outside of the most attractive areas, just price it accordingly. If you’re in the middle of a neighborhood, far from the attractions and local draws, try dropping your price to increase occupancy. Once you have social proof in the form of reviews, you can now step your pricing up a bit every month until you start to see your occupancy rate drop.

2. Occupancy of Airbnb spaces is lower than the comparable hotel rooms

With so many distributed spaces in all parts of the city, not all Airbnb units will perform well or be profitable. Hotels choose specific locations because they believe that those areas are most attractive and convenient for guests, whereas Airbnb spaces can pop up anywhere in the city. With little control over the location of an Airbnb rental, there is no guarantee that it will be in demand. You can offer it, but guests aren’t going to come if it’s not priced relative to its location.

If you’re considering expanding your Airbnb portfolio and adding a new unit or two, make sure to do your research. Find out which neighborhoods are best in your area and find a space to list there. Need help finding out which parts of your town are doing the best on Airbnb? Check out Everbooked’s Market Reports to learn more about your area.

3. Airbnb spaces usually can accommodate more guests

Many of the rental spaces on Airbnb can accommodate more guests than a traditional hotel room. Before Airbnb, many traveling groups that wanted privacy had to book two or more separate rooms which could double or even triple the cost of travel. Now, with Airbnb, guests can get a bigger space with separate rooms and possibly pay only 50% more instead of 100-200% more for the equivalent amount of guests in a hotel. If your space can comfortably accommodate large groups, explicitly say that in your description.

Now back to the discussion at hand: does the hotel industry have to be worried about Airbnb taking over too much of the lodging inventory?

Yes and no.

There will ALWAYS be a demand for hotel rooms, but Airbnb will chip away at that demand slowly and convert people to home sharing users. U.S. Airbnb units doubled from October 2014 to September 2015 while hotels saw only a 1.1% growth in rooms available. Yes, Airbnb units can be ‘created’ within a day and can respond to increased consumer demand quickly while a hotel takes years to construct. Airbnb is kicking butt in the primary markets (NYC, LA, San Francisco), but hotels still have a stronghold on the secondary and tertiary markets.

One thing Airbnb should also be focusing on is their unit churn. Many units come on the market and if they aren’t booked within a few weeks, hosts quickly become disappointed and quit. This is why Airbnb puts the new units first in the search results, to help encourage new hosts with bookings so that they will stick around. They also do this to see if your room is worth promoting, kind of like a test run.

My last piece of advice: if you’re going to post a new listing, make sure you are putting your best efforts into the way it looks. Be sure to take high quality pictures, have a catchy listing title, and write a well-crafted summary.

Remember, you’re selling an experience, not selling the home. People don’t care about your granite countertops and new roof…tell them about how the place will make them feel and what they can experience in your space. Your Coral Guidebook is perfect for curating your guest experience and is a worthy investment that will pay dividends in the long run.

Instead of writing “we have two bikes”, you can say something like, “Guests can enjoy a ride along the boardwalk with our two well-maintained bikes.” Create a scene so that guests can visualize themselves enjoying your space.

You only get one first impression (with guests and with Airbnb) and if you tank when Airbnb gives you a shot at the top of the search results, you’re going to have to overcompensate in the future to gain higher search rankings.

Lastly, check out this article about the MOST popular Airbnb rental. It has over 790 reviews!


This article originally debuted as an email newsletter to our Weekly Digest subscribers on 02/10/2016. If you’d like to receive our weekly newsletter featuring hosting tips, tricks, and resources please subscribe by signing up for Coral.

This article was written by Jim Breese. Jim is an Airbnb expert and creator of LearnAirbnb.com, a premium source of information to help you become a smarter Airbnb host.

The Coral Team