Hospitality Shake-Up

When Airbnb turned spare bedrooms into a global room-type, many predicted the end of the hotel as we knew it. A decade later, hotels aren’t just alive—they’ve adapted, specialized, and learned to fight on new terrain: price transparency, loyalty, distribution, and design. This is the inside story of how legacy brands and asset-light platforms are rewriting the rules of where—and why—we stay.

The New Lodging Map

By the end of 2024, global travel had largely recovered and then some, with consumers prioritizing trips and experiences—even amid uneven macro conditions. McKinsey’s most recent global survey of 5,000 travelers found strong intent and spend, with domestic and intra-regional travel driving the engine and a premium tilt toward “experiential” and luxury segments. Travel demand is broader, more digital, and more personalized than it was pre-pandemic.

That rising tide lifted both hotels and short-term rentals (STRs), but not equally and not everywhere. In hotels, U.S. occupancy sat near the mid-60s percent range through 2024 and into 2025 (with ADR and RevPAR supported by constrained new supply), while global occupancy hovered around ~60% mid-2024 before climbing with the recovery. On the rentals side, AirDNA’s 2025 outlook reported record demand and higher average rates in 2024; occupancy varied by market but generally settled in the high-50s percent range for the U.S., with peak-season swings.

Meanwhile, the platform giants have scaled into true distribution utilities. Booking Holdings ended 2024 with roughly 4.0 million properties on Booking.com—about 3.5 million of them homes, apartments and “unique places,” and ~500,000 hotels, motels and resorts. In early 2025, about 37% of Booking’s room nights were already in alternative accommodations, underscoring how mainstream the category has become. Expedia Group unified Expedia, Hotels.com and Vrbo under One Key, a cross-brand loyalty platform that lets travelers earn and spend across hotels and vacation rentals—cementing OTA loyalty as a competitive lever. Airbnb, for its part, closed 2024 with $11.1B in revenue (+12% YoY) and continued gains in nights and gross booking value, while guiding to slight ADR pressure from FX in early 2025.

Bottom line: the lodging landscape is now a mixed ecosystem where hotels, professional rental operators, and peer-to-peer hosts all compete—and often cooperate—through a handful of powerful distribution and loyalty pipes.

Business Models: Property vs. Platform (and the Hybrids in Between)

Hotels are increasingly asset-light brand systems. The largest groups (Marriott, Hilton, IHG, Accor, Hyatt) predominantly franchise or manage hotels rather than own real estate. Their P&L is fueled by franchise and management fees, co-branded credit cards and fast-scaling loyalty programs (Marriott Bonvoy ~228M members; Hilton Honors 180M+; IHG One Rewards 145M+). Scale enables better distribution bargaining power, procurement, revenue management, and guest recognition.

Airbnb is a two-sided marketplace that earns take-rate economics on bookings. It invests in search, trust/safety, payments, and merchandising while adding features (e.g., category browsing, “Guest Favorites”) and policy changes to nudge quality and pricing transparency. The marketplace throws off significant operating leverage; Airbnb posted $2.5B in Q4 2024 revenue (+12% YoY) and remains highly profitable.

OTAs (Booking, Expedia/Vrbo) straddle both worlds. They’re distribution rails for hotels and alternative accommodations, and they increasingly use loyalty to reduce meta/search dependency and drive direct-to-app traffic. Booking’s alt-accommodations now represent more than a third of its room nights; Expedia’s One Key integrates rental inventory into a single rewards currency—a first at this scale.

Hybrids are rising: Marriott’s Homes & Villas by Marriott Bonvoy (HVMB) grew to ~160,000 curated homes globally by mid-2024, with AI-powered natural-language search to improve discovery. Accor’s onefinestay and Apartments & Villas expand its reach from hotels to professionally managed homes. These extensions let hotel groups meet guest demand for “home-like” stays without owning the underlying inventory—while still pulling everything into their loyalty ecosystems.

Who’s Winning Which Guest (and When)

Trip purpose and party size still shape the battleground:

• Urban, short stays, solo/business: Hotels retain an edge on location density, 24/7 service, consistency, on-property amenities, and corporate programs—especially midweek.

• Leisure, families, groups, longer stays: Rentals are often cheaper per bedroom, with kitchens and living space—especially in drive-to and resort markets.

• Bleisure and “work-from-anywhere”: Both sides compete: hotels with co-working nooks, reliable Wi-Fi and elite perks; rentals with space, privacy, and weekly/monthly discounts. McKinsey’s 2024 read on traveler preferences shows more segmentation and desire for personalization than ever.

Seasonality amplifies these differences. During peak leisure windows, STR occupancy can spike while hotels lean on rate. Off-peak, hotels’ corporate base and group business help cushion demand; STRs flex with lower rates, fewer minimum-night rules, and last-minute discounts—especially across professionalized portfolios that now operate with hotel-caliber revenue management.

Price, Fees, and the Great Transparency Race

Hotels price nightly and layer in taxes and (sometimes controversial) resort/destination fees. After state attorney-general actions and years of consumer pressure, disclosures became clearer. The U.S. Federal Trade Commission’s proposed junk-fee rule pushed the issue into the national spotlight; Marriott reached a 2021 settlement on resort-fee transparency and others followed with clearer displays. Expect continued compliance pressure on “what’s the real total price?”

Airbnb/STRs dynamically price nights and often add cleaning and service fees, plus security deposits. Perceived “fee fatigue” has been one of the biggest consumer complaints—especially on short stays where cleaning fees loom large. Airbnb’s product updates in 2023–24 emphasized more transparent total-price displays and quality markers (e.g., “Guest Favorites”), coupled with tools that encourage hosts to right-size fees. Airbnb’s 2024 results show strong demand momentum even as ADR growth moderated on mix and FX.

Net effect: both sides are converging toward total-cost clarity and value-per-stay storytelling. That puts a premium on bundled benefits (breakfast, elite upgrades, late checkout) for hotels and space/amenities (kitchens, yards, multi-bedroom value) for rentals.

Distribution: From Meta Wars to Loyalty Wars

Hotels used to frame OTA commissions as a necessary evil. Today, distribution strategy is a portfolio decision:

• Direct (brand.com/app) is the most profitable channel. McKinsey details the playbook—best-rate guarantees, member-only discounts, better earn/burn rates, mobile-first UX—and the industry has executed.

• OTAs are indispensable for reach, especially in long-tail demand and international source markets. Booking.com’s alternative accommodation share (≈37% of room nights in Q1 2025) shows how much consumer choice sits in OTA apps.

• Meta (Google Hotels) and loyalty re-shaped the funnel. Expedia’s One Key brought Vrbo into the same currency as hotels—rewarding cross-category behavior and insulating Expedia from paid search volatility. (Not everyone cheered: the switch reduced rich “free night” rewards on Hotels.com, reflecting a broader loyalty devaluation trend highlighted by WSJ.)

For hotel groups, loyalty has become an acquisition channel. Bonvoy’s ~228M members, Hilton’s 180M+, and IHG’s 145M+ create massive first-party data lakes to power personalization, direct offers, and co-branded card economics that rival, or even exceed, property-level margins.

Product: Boutique, Extended-Stay, and “Home-Like” Rooms

If Airbnb normalized “living in the destination,” hotels replied by re-segmenting the product:

• Lifestyle & Boutique: Soft brands (Marriott’s Autograph/Tribute; Hilton’s Curio/Tapestry; IHG’s Vignette) let owners keep local personality while plugging into global loyalty and standards. Hilton’s 2024 partnership with Small Luxury Hotels of the World instantly surfaced ~400 boutique properties inside Honors.

• Extended-Stay & Midscale: A rush of “apartment-like” hotels targets longer stays and price-sensitive workers and families. Hilton launched LivSmart Studios (formerly “Project H3”), Hyatt debuted Hyatt Studios, and Marriott rounded out the spectrum with mid-scale and studio concepts—brands that promise kitchenettes, laundry and flexible furniture at lower build-costs and higher length-of-stay.

• Homes Programs: Marriott’s HVMB (≈160k listings by mid-2024) and Accor’s onefinestay/ Apartments & Villas (from ~3–5k luxury homes to 33k+ broader rentals) let hotel guests “stay in a home, earn hotel points.” It’s an answer to the “Airbnb for point collectors” and a hedge against share loss in the villa/large-group segments.

Tech & Revenue Science: Advantage, Hotels (For Now)

Both sides price dynamically, but hotels—especially big brands and professional operators—have long run industrial-strength revenue management (IDeaS, Duetto), with length-of-stay controls, fenced offers, and group/BT displacement science. McKinsey argues that AI-driven segmentation and testing are now table stakes, and it sees broad adoption of GenAI/agentic AI across pricing, personalization, and service.

On property, digital keys, mobile check-in, chat, and in-app upgrades are now standard at scale (Hilton highlights this across Honors). The next edge will come from customer-data platforms that unify stay history, spend, and propensity models—automating targeted offers (e.g., 6 p.m. late checkout at 11 a.m.) and monetizing micro-inventory (views, floors, room attributes).

Airbnb has likewise advanced host-side tooling and platform-level quality signaling, but its challenge is heterogeneity: a global long-tail of hosts with uneven professionalization. That’s changing as more pro managers enter and as Airbnb builds co-host networks and AI-powered support. Financially, 2024’s double-digit revenue growth shows there’s ample runway to invest in product and pricing innovation.

Regulation: From Party Houses to City-Wide Bans

Regulation shapes local supply—and therefore pricing and availability—more than any single corporate strategy.

• New York City’s Local Law 18 enforcement (effective Sept. 2023) essentially banned most short stays in unregistered apartments and required host presence—dramatically reducing STR supply and shifting demand back toward hotels in many Manhattan districts.

• Barcelona announced plans in June 2024 to phase out all tourist apartment licenses by 2028, citing housing pressures. It’s the boldest European move yet in a city that already imposed tough caps and enforcement.

• Across Europe and North America, cities are testing registration, night caps, and tax equalization. The policy arc is toward data-sharing, enforcement, and parity—not outright bans—though headline cities will continue to experiment at the extremes.

Policy outcomes are messy. Restrictions can improve neighborhood feel and housing affordability at the margin; they can also create supply shocks that push visitors into hotels (raising prices), or into nearby jurisdictions. Expect a cycle of regulate → adapt → regulate as markets calibrate.

Consumer Behavior: Choice Architecture and the Trust Dividend

Surveys throughout 2024–25 show travelers split by use case: many prefer hotels for short urban trips (service, predictability), and rentals for family/group value and “live local” space. Skift’s research finds no “Airbnb fatigue” at the macro level—just a savvier consumer who shops across channels and expects clarity on fees and quality. Meanwhile, loyalty memberships are ballooning, though redemption value has often been diluted with dynamic award pricing—forcing programs to compete on recognition and experiences.

Trust is still the currency. Hotels trade on brand standards and service recovery; rentals gain trust through reviews, Superhost/Plus-style markers, professional management, and platform resolution policies. Booking’s and Expedia’s emphasis on payments, protections, and loyalty in alt-accommodations aims to reduce friction and make rentals “feel” as safe to book as a hotel.

Competitive Playbooks: How Hotels Are Fighting Back

1. Loyalty as Growth Engine
   Hotel groups are aggressively moving travelers into membership (often at booking), then using targeted perks to keep them direct. With Bonvoy (~228M), Honors (180M+), and IHG One (145M+), the data edge is real—supporting better upsell, attribute-based selling, and dynamic offers that OTAs and marketplaces struggle to replicate at the same intimacy.

2. Portfolio Depth
   From luxury lifestyle to premium economy, the majors now offer multiple price-points within a city. Hilton’s exclusive tie-up with Small Luxury Hotels of the World instantly broadened boutique choice for Honors members (and yanked that inventory away from competitors’ redemption charts).

3. Apartment-Style & Extended-Stay
   Brands such as LivSmart Studios by Hilton and Hyatt Studios meet guests where rentals historically won: kitchens, storage, and weekly housekeeping—with the predictability of hotel operations. Marriott’s studio/midscale and Homes & Villas strategy covers both hotel-like and home-like demand from the same loyalty spine.

4. Direct Tech
   Hotels moved fast on mobile keys, messaging, digital F&B, and paid upgrades, turning apps into revenue channels. The next wave—agentic AI for real-time pricing and personalized offers—is already on the roadmap.

5. Distribution Discipline
   Hotels are learning when to “lean into” OTAs (new markets, shoulder dates) and when to redirect to direct. McKinsey’s guidance on segmentation and hypothesis-driven testing is increasingly embedded in commercial teams, not just in the revenue-management silo.

How Airbnb (and Friends) Are Counter-Punching

• Quality Signaling & Search: Airbnb’s product sprints have focused on more transparent pricing and quality surfacing, making it easier to find reliable, well-reviewed homes for specific use cases. Growth in 2024 revenue and nights gives the company cash to invest in co-hosts, pro tools, and support, narrowing the experience gap versus hotels for mainstream travelers.

• Length-of-Stay & Space: STRs still dominate multi-bedroom value, kitchens, and outdoor spaces—pain points for many urban hotels.

• Distribution & Loyalty via OTAs: Booking.com and Expedia now put rentals next to hotels with one search and—in Expedia’s case—one loyalty currency (One Key). That smooths discovery and lowers the “switching cost” of choosing a home over a hotel.

The Numbers That Matter (2024–2025 snapshot)

• Hotels (U.S.): Occupancy ~63% in 2024; ADR and RevPAR supported by limited new supply and strong leisure; 2025 outlook stabilizing.

• Hotels (Global): Mid-2024 global occupancy ~60% and rising as recovery broadened.

• Airbnb: 2024 revenue $11.1B (+12% YoY); strong Q4 2024, with upbeat demand commentary heading into 2025.

• Booking Holdings: ~3.5M alternative accommodation properties; ~4.0M total properties at YE-2024; 37% of room nights from alt-accom in Q1 2025.

• Expedia Group: One Key launched across Expedia, Hotels.com, and Vrbo; lodging gross bookings and room nights grew through 2024 as loyalty took hold.

• Hotels’ Loyalty Scale: Marriott Bonvoy ~228M, Hilton Honors 180M+, IHG One 145M+ members.

Case Study Vignettes

1) Marriott’s “Home-Like” Hedge
HVMB expanded to nearly 160,000 listings by mid-2024, then layered in AI-powered natural-language search to help guests find ideal homes (“a quiet villa near a kid-friendly beach with a workspace”). Marriott leans on Bonvoy to funnel members into homes when a hotel isn’t the right fit—defending share without compromising brands.

2) Hilton’s Midscale & Luxury Barbell
Hilton launched LivSmart Studios to win extended-stay demand at a lower price point—while simultaneously adding Small Luxury Hotels of the World to turbocharge its top-end footprint for Honors members seeking boutique charm.

3) Booking’s Quiet Re-Wiring
By pushing merchant payments and expanding alt-accom listings to >3.5M properties, Booking is reshaping how travelers experience non-hotel stays: same app, same support, same Genius perks—different room type. As of early 2025, 37% of room nights were in alternative accommodations, a share that keeps inching up.

Policy Wildcards: Housing, Neighborhoods, and Taxes

NYC’s Local Law 18 and Barcelona’s 2028 phase-out of tourist apartments are bellwethers: in dense cities with tight housing, political momentum favors stricter STR rules. Expect more registration regimes, tax parity, and platform data-sharing (often with severe penalties for non-compliance). For hotels, this is a tailwind in constrained urban cores. For STR platforms, the counterstrategy is to elevate professional hosts, strengthen quality controls, and show clearer economic impact and tax remittance.

What Hotels Have Learned (and What Comes Next)

1. Compete on Membership, Not Just Rates: The most durable advantage isn’t a $10 cheaper nightly rate—it’s a lifetime relationship. That means richer recognition, better mobile experiences, and thoughtful experiential redemptions that rentals can’t easily match. (WSJ notes loyalty devaluations; the winners will be those who re-invest in perceived value.)

2. Build Product for the Job to Be Done: Extended-stay suites, kitchenettes, and apartment-style layouts are not a fad. They’re the hotel industry’s structural answer to multi-night, multi-guest demand—without ceding guests to STRs. Hilton, Hyatt and Marriott have put real capex and development pipelines behind this.

3. Use AI to Personalize at Scale: Hotels now sit on massive first-party data stores. The revenue impact of AI-assisted segmentation, real-time offers, and attribute-based upselling will widen the gap with less-tooled hosts—while pro STR operators will adopt the same playbook.

4. Treat OTAs as Strategic Partners: OTA shelves are where millions start their search—especially cross-border. Winning hotels will master when to bid, what to merchandise, and how to steer repeat bookers into direct channels without a whiplash experience.

What Airbnb/STRs Have Learned (and What Comes Next)

1. Quality and Predictability Pay: Better sorting, guest-favoriting, and host tooling raise the baseline experience. As more inventory professionalizes, rentals look and feel less risky to mainstream travelers—especially when paired with OTA loyalty protections.

2. Price Transparency Is Non-Negotiable: Total-price clarity and sensible cleaning fees are necessary to defend share against hotels that increasingly bundle breakfast, elite late checkout, and upgrades into an easy-to-compare package.

3. Cities Will Keep Testing the Limits: STR growth will rely on showing net community value (tourism spend, tax remittance, flexible housing stock utilization) and on tailoring products to local rules (e.g., longer minimum stays, host-present formats). The Barcelona/NYC cases suggest policy risk remains a structural headwind in certain urban cores.

The Role of Booking.com and Expedia: Referees and Kingmakers

Because OTAs now mediate both hotels and rentals at extraordinary scale, they function as market makers. Booking’s 4.0M properties (including 3.5M alt-accom) and rising AA share, plus Expedia’s One Key spanning Vrbo and hotels, mean millions of travelers aren’t “switching from hotels to Airbnb”—they’re shopping the entire lodging universe in one place and choosing per trip. That puts a premium on content quality, reviews, payments, service recovery, and loyalty—areas where OTAs are investing heavily.

Outlook: Convergence with Edges

The old binary—hotel vs. Airbnb—is giving way to convergence with edges:

• Hotels will own consistency, recognition, and the ability to monetize attributes and experiences at scale.

• STRs will own space, flexibility, and hyper-local immersion, with an expanding professional tier narrowing service gaps.

• OTAs will keep flattening the search experience and redirecting loyalty gravity toward their apps and currencies unless brands make membership meaningfully better.

Winners in the shake-up will do three things exceptionally well:

1. Segment ruthlessly and design product for each job (from 18-hour city sprints to 18-day family escapes).

2. Tell the price story cleanly (total cost up front, obvious value adds).

3. Use data and AI to create momentum across the stay (from pre-arrival nudges to in-stay personalization to post-stay reactivation).

Travel demand is robust, but the battleground has shifted from keys and kitchens to identity and intent: Do you know who that traveler is, what they value right now, and can you prove—in the next 30 seconds—that your stay is the best fit? In 2025’s hospitality market, that’s the difference between being found and being forgotten.