There has been much speculation on Airbnb's potential impact on the global hotel market. While there is certainly a need for a level playing field in which the regulations levied against the hotel sector are applied in some shape or form against the informal accommodation sector, it is perhaps not the threat it was first considered to be.

Looking more closely at the London hotel market, Airbnb does not currently pose a significant threat. In fact, its penetration of the capital’s residential supply at just 0.5 per cent is one of the lowest when compared to other key global tourist markets. By contrast, Paris has one of the highest estimated penetrations at 2.4 per cent (see graph below).

This would suggest that the London hotel market is perhaps more insulated from the effects of Airbnb than cities like Paris where hotels are already feeling the impact of the relatively higher proportional supply. This may well have been exacerbated by the fact that Central Paris is far more residential than Central London, meaning that more supply comes into direct competition with hotels.

According to a recent note from Citibank, global Airbnb supply is forecast to expand 1 per cent per annum over the next five years. However, listing growth in London and other major European cities is already slowing which points to some maturity in these markets. Additionally, a number of US studies have found that approximately 40 per cent of Airbnb supply was existing commercial stock, suggesting that it is seeking more efficient distribution channels. This too would hint at a relatively minimal future impact on the wider London hotel market.

Having said that, Airbnb’s lower price point suggests that its impact is magnified as you move down the price tiers. It could therefore have a more significant impact on the budget traveller sector, such as budget hotels, hostels and serviced apartments, particularly in those peripheral locations where Airbnb supply is more prevalent.

It is perhaps too early to say what the full impact of the growth in Airbnb supply may have on London’s hotel market. However, what is clear is that its impact will not be universal across the sector. In light of the continued growth in overseas visitor numbers and London’s relatively constrained hotel supply, combined with the current low penetration of Airbnb supply, the city’s hotel market may remain relatively insulated.     

Further information

Contact Savills Hotels team.