If you can’t beat them, join them. That’s the message from Accor’s purchase of Onefinestay, an upmarket competitor to Airbnb.
Accor agreed on Tuesday to buy the company, which lets homeowners rent out their property to paying guests, for €148 million, and will invest €64 million more to expand the service internationally.
The move is aimed at fending off competition from Airbnb -- which has flooded the market with extra rooms -- as well the increasing might of the online booking agents, which demand a share of revenue in return for listings on their sites.Onefinestay, which offers apartments in London’s trendy Shoreditch district for £245 a night, will help CEO Sebastien Bazin to keep on expanding his growing luxury business.
Accor classes about 16 per cent of its rooms as luxury and upscale, and in December, the hotelier agreed to pay $2.9 billion for the Fairmont and Raffles chains. By contrast, the Onefinestay deal is tiny. The purchase price is just 4 per cent of sales. (Accor didn't provide any financial statements for Onefinestay.)
The company has about 2,600 properties available. That’s dwarfed by the 511,000 rooms Accor had at the end of the fourth quarter, according to Bloomberg Intelligence. But Bazin is buying himself an option on the sharing economy. Instead of adding another hotel chain - and relying on economies of scale and cost cutting -- he is attempting to beat Airbnb at its own game in the upmarket leisure sector.That looks like a smart move.
Alternative capacity in the hotel market isn’t going away: Airbnb has 36,000 listings in New York alone. That compares with 105,000 hotel rooms, according to Bloomberg Intelligence. Airbnb has become a massive force in lodging market, and crucially, once consumers and owners get used to the accommodation platforms, they don’t easily switch back.
Accor reckons wealthy individuals spend €32 billion on leisure travel in the top 40 cities around the world every year. While they will stay in one of Accor’s hotels for business, they might stay in a rented luxury home for their holidays with family or friends.
Accor wants to make sure it captures that leisure travel spend too.Of course there are risks, such as ensuring upscale properties are maintained to the highest standards that their wealthy guests expect. But Accor says Onefinestay picks its properties carefully, accepting one in every 25 it is offered.
What’s more, adding the Onefinestay residences to its hotel network increases the scope to deal with any maintenance problems.It might also be a timely moment for Onefinestay’s backers to check out. Demand for hotel rooms may be reaching a cyclical peak, and like the traditional hotel operators, it too faces competition from Airbnb and other energetic upstarts. The management will remain after the deal, and in a more difficult environment, there are worse places to stay than at Accor.