The heartbreaking consequences of Airbnb on small hotels

Closed sign in a shop showroom with reflections - red sign over desaturated background

By Hannah Edensor

The threat of Airbnb to the hotel industry is nothing new.

Larger hotels and hotel chains are feeling the full brunt of the sharing service in ways nobody could have predicted.

But what is it doing to small hotels and hostels in smaller, more remote areas?

Well, as it turns out, it’s absolutely devastating businesses.

Case in point?

A short-term accommodation provider in regional Victoria run by Mohya Davies which has had to shut up shop thanks to a lack of clientele.

The YHA backpackers hostel and apartments in Foster, which has been running for 15 years, will be closing indefinitely tomorrow as Davies and her husband are unable to cope with the rise in holiday renting in the area.

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Speaking to Travel Weekly, Davies – who is no longer affiliated with YHA – said that while Airbnb has been great for the consumer, it has completely ruined her hostels’ popularity.

“There are now 10 or 15 more options in Forster, which is great for the consumer, there’s a lot of choice for them.”

“Although,” she adds, “it also means that our business has become marginalised.”

According to Davies, the Airbnb takeover has been recent.

“Slowly over the last two years and then we went to the YHA conference and realised it wasn’t just us its everyone.”

“In Phillip Island, there are 500 Airbnb beds, it’s really just turned into an economic decision for us,” Davies added.

Making a comment on the rise of Airbnb accommodation in Australia, YHA CEO Julian Ledger said the concern is namely three things.

“The impact of tourists staying in non-approved accommodation, affecting residents and so giving tourism a bad reputation.”

“Accommodation being used as tourist accommodation which is not compliant or fit for purpose.”

“Cheaper alternatives undermining the viability of approved operators.”

According to Ledger: “These problems have been particular to the CBDs, inner suburbs and beachside suburbs as well as certain locations in regional areas such as Byron Bay. ”

“From the 1980s, it was mainly the problem of illegal backpacker hostels operating out of former boarding houses and larger private residences.

“In more recent times, the problem has been exacerbated by the emergence of online letting platforms.”

“Whilst these do incorporate some checks and balances into their business model the sheer number of new holiday lets has increased the impact.

Back in November, Travel Weekly questioned whether Airbnb had reached its tipping point, as industry experts predicted the sharing site would fail to gain more users than it has already acquired.

In its third AlphaWise survey, Morgan Stanley found the popularity of the home sharing start up may be waning, with Airbnb use in consumers growing by only 3.3 per cent in 2017.

While the numbers are still promising for Airbnb, and counting in the fact that only around two-thirds of global consumers were surveyed, the industry speculates the service is plateauing.

However, even if the platform is indeed slowing down, the devastating effects it is having on small businesses such as Davies’ hostel will only continue.

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Email the Travel Weekly team at traveldesk@travelweekly.com.au

Latest comments

Duke says:
February 1, 2018 at 2:09 pm
Another point of view…. I own a hostel and have fully embraced Airbnb for 4 years. We are superhosts and host over 450 airbnb reservations a year with 88% 5 star reviews and then 98% 4-5 stars and only 2% 3 star reviews. We mostly only offer our rooms on airbnb midweek and off season when we won’t fill up without them.
I feel that Airbnb has expanded our market from just those in the hostel “scene”(backpackers from the 1960’s -2010), to now creating a whole new scene where people are interested in shared spaces and experiences. Airbnb is a trendy thing now. “Just get an airbnb”.
Hostels have been providing the Airbnb experience for over 50 years! We should dominate this new space.
We get people that would have never thought to search out a hostel, but who are keen on airbnb and find our homestyle hostel listings there and book there.
I don’t like the high fees and commission sites from Airbnb and OTAs. But, you have to be where the people are booking. OTAs monopolizing the internet is a whole other issue.
Had this hostel used Airbnb to their advantage, they might have found a whole new market of customer’s looking for authentic experiences. The article makes Vacation Rentals and Airbnb into purely a villain. But I’m just wondering if there isn’t some fault with management for not changing with the times. Do they distribute their hostel beds through a channel manager to booking.com, airbnb, their own website, YHA website, and other hostel sites?
The tradition lodging category (Hotels-hostels-motels-BnBs-etc) type have felt the downward price pressure of thousands of vacation homes popping up in our ski town as well. But by offering a great experience and getting great reviews and distributing inventory to where guests are looking to book, you CAN stay relevant and thrive. Its not easy and there is a technological learning curve, but it can work. Airbnb is just another tool to be used by any lodging owner.
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1Lionel says:
January 31, 2018 at 7:11 am
The article does not address the fundamental issue at hand: a lack of a level playing field. Airbnb hosts buy their homes usually with a mortgage that is directed at residential homes and therefore a lower rate. Many lenders in fact will not give a “primary” home rate if they were told the home was being used for commercial purposes. Further, their real estate taxes are significantly lower than for hotels or B&Bs. Thirdly, they do not have to comply with numerous regulations: people with disabilities; fire systems and security.
As for Airbnb itself: It is a rogue company with a dodgy tax structure in Ireland whereby they do not pay even Irish taxes! Their Irish subsidiary collects most of the money from hosts and guests in jurisdictions around the world and send it on to an offshore haven as Irish laws allow that. The whole ruse is called a Double Irish with a Dutch Sandwich.
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KDForsman says:
January 31, 2018 at 6:27 am
we are seeing the impact here in NZ as well – it’s particularly bad in smaller rural regions like Buller 🙁
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Hannah Edensor says:
January 30, 2018 at 2:17 pm
Thanks Raeleen!
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Raeleen Gale says:
January 30, 2018 at 2:16 pm
Just to let you know the hostel is in Foster, Victoria. Not Forster NSW
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