Alternative Accommodations 101: a Look at this Booming Sector with JLL’s Ophelia Makis
The Alternative Accommodations sector is on fire according to a new report from the Hotels & Hospitality Group at JLL. What started as a casual marketplace for individuals to rent out their primary or secondary homes as a means of generating extra income has evolved into a complex, highly matrixed space similar to the traditional lodging industry, which represented $60 billion in revenues last year!
Thanks to the pandemic, the alternative accommodations sector has experienced unprecedented growth over the last two years with increased working from home coupled with a heightened focus on quality of life, creating strong and steady demand. The big players have noticed, this year Marriott Introduced their Abound program, Mandarin Oriental launched their villas, and Accor was ahead of the curve by buying Onefinestay back in 2016.
To learn more, we chatted with Ophelia Makis, Senior Analyst Americas Hotels Research, JLL Hotels & Hospitality Group, who was involved in JLL’s new report, Alternative Accommodations Global Trends & Outlook, which dives into the transformational shift in the alternative accommodations sector.
Give us the scoop, why are alternative accommodations on fire?
The alternative accommodations sector, which was initially designed to appeal to younger leisure travelers on a budget, has considerably expanded its demand base due to the pandemic. Now, corporate travelers, bleisure, business groups, and affluent families on vacation make up a greater share of the sector’s consumer base.
Do you see alternative accommodations fragmenting, like the traditional hotel sector?
Yes, and in the report we identified several sub-sectors:
Short-term rentals (STR), such as Sonder, Casai and Mint House, are typically the rental of an entire furnished home, accessory dwelling or room for a short period of time, generally less than 30 days.
Distribution platforms, such as Booking.com, Airbnb and Expedia/ Vrbo, act strictly as distribution intermediaries and often feature companies from across all other sub-sectors.
Branded home property managers, such as Vacasa, Avant Stay and VTrips, focus on managing the rental, maintenance and design of luxury vacation homes.
Branded multi-housing alternatives, such as Zeus, Sentral, Edyn and Kasa, closely align with traditional multi-housing units but feature short-term leases, furnished units, tech enabled operation solutions and consumer interfaces.
Membership programs, such as Soho House, Inspirato and Pacaso, require guests to pay a monthly or annual fee to access an exclusive club/accommodation experience, discounted hotel deals or unlimited travel.
Shared accommodations, such as Selina, Generator, Freehand and Found, offer rooms or apartment units where multiple guests, who are not traveling together, stay and pay for their bed, while sharing restrooms, common areas, and other amenities.
How big is the alternative accommodations sector?
The term “alternative” fails to capture the size and scope of the sector. Given that the alternative accommodations sector comprised 20% of the roughly $300 billion in global lodging revenue generated in 2021, it should be thought of as part of the global lodging industry and not simply an “alternative.” With more than $60 billion of revenue opportunity, relatively high investment yields, and a growing consumer base, it's only a matter of time before institutional capital, lodging brands, and distribution companies aggressively enter the sector.
Wow, so you think institutional investors will start getting into this space?
Yes, it is ripe for investment and consolidation. There are 5 million active listings now and 4 million of those are individual owners, there is a tremendous opportunity for combining properties to create more economy of scale.
Thanks for explaining alternative accommodations, Ophelia, we will be watching this space!