Marriott's home-sharing lacks a disruptive edge

New York

MARRIOTT International's home-sharing venture lacks a disruptive edge. The US$46 billion hotelier is borrowing Airbnb's model of renting out high-end homes.

Potentially, it expands the business without heavy investment. But the upside is probably limited.

Industries like hotels and taxis have struggled to don new skins without cannibalisation and brand damage. The phenomenal growth of firms like Amazon, Uber and Airbnb have left traditional rivals struggling to compete.

Tactics such as outsourcing asset ownership, using contract workers, side-stepping regulation, and aggressive tax minimisation mean new entrants, especially with online nous, can often undercut traditional businesses.

Siphoned-off demand means lower returns on existing traditional investments in storefronts, medallions and hotels.

Plenty of traditional retailers have struggled online, and old-school taxi companies have not benefited greatly even after introducing smartphone apps.

Likewise, pushes by hotel chains into the sharing economy have not gone smoothly. French firm Accor and America's Hyatt Hotels both invested in and/or collaborated with two firms specialising in online home rental, Oasis Collections and Onefinestay. Both took writedowns on investments last year.

While there are potentially savings from centralised booking and payment, loyalty schemes and other overlaps, there are challenges.

Unlike hotels, home rentals are not standardised, and quality control may suffer. A dirty or ill-equipped residence with no staff on hand to rectify problems is a recipe for damage to a brand. And if clients choose cheap apartments over hotel rooms, it may leave hotels emptier.

Marriott's plan may get around some of these concerns. A property-management firm ensures maintenance and cleaning help is at hand. And it is specialising in what it describes as luxury and premium homes, which should limit cannibalisation of business travelers' lucrative use of hotel rooms.

Limited potential scale

By the same token, though, that focus may limit the potential scale. The most active bazaar, Airbnb, will remain most regular renters' first port of call. Furthermore, Marriott's probable incentive is to promote hotel rooms over any comparable shared properties. The bigger Marriott's asset-light, new-economy overlay grows, the more uncomfortable it may become.

Marriott International said on April 29 that it would expand its home-sharing programme to 2,000 properties worldwide.

The hotel chain began renting out homes in Europe last year. The division, called Homes & Villas by Marriott International, uses property management companies to service what it calls premium and luxury properties, which can also be rented for points on the company's loyalty program.

Airbnb's chief executive Brian Chesky said during a CNBC interview on April 29 that the home-sharing company would be ready for an initial public offering later this year. Airbnb was valued at US$31 billion in its last funding round in 2017. REUTERS