America's hotel industry

Hamilton's hostelries
Nov 22nd 2007 | From the print edition
HOTELS are not usually seen as being at the core of a nation's culture. But Andrew Sandoval-
Strausz, an assistant professor at the University of New Mexico, makes two grand claims for the
American hospitality industry: that America made hotels what they are today and, more
startlingly, that hotels helped make America.
The first is easier to establish. In 1838, a visitor dubbed the new Queen's Hotel in Cheltenham
“the finest hotel in Europe”. Yet it was modest compared with large American hotels of the
period. They had 400-500 bedrooms; it had 79.
Americans invented the grand hotel. They also launched the standardised one. E.M. Statler made
his fortune creating hotels for world fairs and other commercial exhibitions in the Midwest: they
were enormous, cheap and flimsy—designed to be used for one year with 100% occupancy
before being pulled down and sold for scrap. Statler's first permanent hotel, in Buffalo, opened
the year the Model T Ford was launched, and, like it, used standardisation and large-scale
production. Statler created the model that Conrad Hilton, J. Willard Marriott and Howard
Deering Johnson (Americans all) used when setting up what were to become typical hotel
businesses, and business hotels.
But Mr Sandoval-Strausz argues that, in their origins, American hotels were never merely
commercial. They were intimately bound up with civic pride and democracy. And that helps
explain both his second claim—that hotels helped make America—and why the modern hotel
developed in America in the first place.
After the revolutionary wars, the first new buildings in America's main cities were almost always
a state house, a governor's mansion—and a hotel, which was frequently larger and more
expensive than the other two. The Union Public Hotel in Washington, DC, was so grandiose it
bankrupted its backer. Boston's Exchange Coffee House was said to be the largest building in the
country when it opened in 1809.
Hotels were also bound up with politics. Tammany Hall—epitome of political corruption—was a
hotel. In the run up to the civil war, hotels became settings for some of the main episodes in the
conflict. The split in the Democratic Party between northerners and southerners in 1860 occurred
at the Charleston Hotel; the Republican Party's decision to unite around Lincoln came at the
Tremont Hotel in Chicago; the peace conference that failed to resolve the gathering crisis took
place at the Willard in Washington, DC.
Such hotels were not just stage sets. Many of them were connected, Mr Sandoval-Strausz shows,
with a particular party, and embodied that party's view of America. Many of the early hotels
were built or sponsored by Federalists—the party of merchants and businessmen founded by
Alexander Hamilton. In a narrow sense, hotels expressed the local power of the commercial elite
that built them.
Federalists had a broader agenda. They were urban and commercially minded, and they believed
in a strong central government. During the 1790s, they wrangled with their opponents, led by
Thomas Jefferson, about the kind of country America should be. The Jeffersonians supported
farmers over monied interests and opposed centralising policies such as creating a national bank.
The Federalists needed to show that they could keep a large republic together without sacrificing
democracy, at a time when many political theorists thought a monarchy was required to keep a
large country united. Commercial links were an essential bit of their case. James Madison
asserted that a central government could indeed rule justly assuming “accommodations for
travellers will be multiplied and meliorated”. Hotels, in other words, were not just places to stay:
they were instruments to help create an urban, commercial democracy. Stretching the argument,
perhaps; but an interesting thought to ponder next time you lie awake in a soulless box near the
airport.

Airbnb versus hotels

Room for all, for now

But there are signs that the sharing site is

starting to threaten budget hotels
Apr 26th 2014 | NEW YORK | From the print edition
EVEN as they lobby regulators to crack down on residential sharing services, hoteliers play
down the threat such companies pose to their industry. The top brass at the Marriott, Four
Seasons and Hilton chains have all said that these firms do not compete for their core market of
accommodating high-end and business travellers; a vice-president of The Ritz-Carlton group
recently claimed she had not even heard of Airbnb. And Airbnb itself agrees, arguing that it does
not displace existing lodging but is creating new demand. “I’m optimistic that there isn’t going to
be a war” with hotels, Brian Chesky, its boss, said in January.
A recent study seems to confirm that, for now at least, Airbnb is only nibbling at the hotel
industry’s lunch rather than eating it whole. A team at Boston University examined hotel
revenues in Texas, where Airbnb has grown much faster in some cities (like quirky, left-wing
Austin) than others (like Fort Worth, more of a cowboy town). They could not find a significant
influence from Airbnb on business and luxury hotels. But in places where it has established a
presence, it cut the revenues of budget hotels by 5% in the two years to December 2013.
If Airbnb were to keep growing at its current rate—its listings are doubling every year—the
Texas study suggests that by 2016 the dent in budget hotels’ takings will be 10%. With their high
fixed costs, that could push many of them into the red. Of course, Airbnb may hit the limits of
either supply or demand before then, but smaller hotels are already blaming it for their woes. “I
see a direct correlation between our revenues going down and [Airbnb’s] going up,” says Vijay
Dandapani, the president of Apple Core Hotels in New York. “We had continued growth until
Airbnb.” The financing round that Airbnb has just closed, valuing it at more than all but the four
largest global hotel groups, suggests that investors agree.
Moreover, Airbnb is beginning to make inroads into business travel. Ever more companies are
letting staff book their own itineraries, and giving them incentives to be thrifty. Google sets a
budget for each trip, and employees who underspend them get credits they can donate to charity
or use for future perks like flight upgrades.
Concur, a travel- and expense-management firm, has seen its corporate clients’ Airbnb bookings
grow from a rounding error at the start of 2012 to more than $1m so far this year. Much of this
comes from groups looking for flats with multiple bedrooms and shared workspace. If Airbnb
can integrate with online travel agencies such as Expedia and increase the share of its hosts that
provide instant booking confirmation, business hotels may find themselves with a surprisingly
unignorable competitor.

The Economist explains

Why London's hotels are booming
Feb 19th 2016, 2:25 by C.R.

LONDON may no longer be the capital city of the world's biggest empire, and it may not be
among the world's foremost financial centres forever. But one area in which it still surpasses its
rivals is the number of international visitors it receives: more than any other in the world in 2015.
And while the city has long been an attractive destination for leisure and business travellers, it is
currently undergoing an almost unprecedented hotel building boom. The number of hotel
rooms has risen from 129,000 in 2013 to 149,000 today, according to PwC, a consultancy, and
may reach as many as 180,000 by 2018. Despite competition from room-sharing sites such as
Airbnb, there is still no sign of over-capacity. Last year occupancy rates reached their highest in
a decade and average daily rates were higher than ever before. Why is there still so much
demand for hotel rooms in London?
One big market for London's hotels is international visitors. But it is one which is running out of
steam. Total spending by overseas visitors was flat in 2015 compared to the previous year,
according to official figures released on February 19th. Whereas the strong pound has convinced
many tourists to divert to cheaper European cities (€1 now buys about 15% fewer Princess Diana
postcards than it did five years ago), business travellers cannot avoid London so easily. So while
tourist spending stagnated in 2015, business folk splashed out 7% more in Britain than the
previous year, according to the Global Business Travel Association, an industry body, which
forecasts further growth of 6% this year. So there are still plenty more business people to
fill London's extra rooms, even if some tourists are staying away.
Hoteliers’ resilience remains surprising given the onslaught from sharing-economy websites and
apps that allow people to rent out their spare rooms to travellers. According to researchers at
Boston University, Airbnb, the biggest such service, has forced down hotel revenues in some
American cities by as much as 10%. By comparison, its impact has been muted in London, says
Marie Hickey at Savills, an estate agent. Only 0.5% of Londoners advertise their properties
on Airbnb, compared with 2.4% of Parisians. One reason is that there is a shortage of reasonably
priced residential stock near London’s main tourist attractions, which are hemmed in by offices
and mansions. A second, according to a recent report by Citi, a bank, the growth of Airbnb
listings in London and other big European cities is already slowing, meaning that Londoners’
spare rooms are unlikely to be able to soak up much more demand.
But the most convincing explanation is that London's business travellers are shunning locals'
spare rooms in favour of comfortable, anonymous hotels. Unlike budget-conscious
holidaymakers, who are willing to book a room in a stranger’s home on Airbnb to save a few
pounds, most business people travel on expense accounts. Their employers, citing a duty to
ensure safety, remain wary of spare-room-booking sites, fearing the possibility of axe murderers,
or at least dodgy wiring or unsafe stairwells. So for now, as long as the City of London continues
to flourish, the capital's hotels will do fine.