In the last five years, Los Angeles hotel developers have boosted the number of hotel rooms in the city by more than 7%. But demand keeps rising as visitors to the L.A. area last year reached 50 million, up 18% from 2013.
While several dozen new hotels are in the works, the projects skew to the higher end — a consequence of the steep cost of land and development in Southern California.
Industry researchers and real estate groups say that has left an opening for short-term rental services like Airbnb Inc.
Rather than cannibalizing the hotel market — as some observers say Uber Technologies Inc. and Lyft Inc. have done with taxis — Airbnb’s thousands of L.A.-area homes are providing relief for more budget-conscious travelers.
Airbnb is “a huge disruptor in the marketplace,” said Arjun Shokeen, partner of
El Segundo-based Welcome Group Inc., a hotel property group. But Shokeen said the impact on his business has been minimal since he focuses on providing luxury amenities Airbnb can’t — such as event space, a rooftop bar and breakfast.
In L.A. the average nightly hotel rate last year was $180.17, well above the national average of $129.83 despite the influx of new rooms in the local market. Occupancy at L.A. hotels was 79.6%, above the national average of 66.2%.
Nightly rates on home-rental services are often lower than at L.A.’s many luxury hotels, and Airbnb properties are more attractive to long-term visitors seeking kitchens and other home-like amenities.
“Our guests tend to stay a lot longer than traditional hotel guests,” said Connie Llanos, Airbnb’s deputy policy manager for Southern California. “Usually that stay is about 4 nights on average, which is about double the industry standard,” she said.
Airbnb’s rise in L.A. hasn’t been without pain. Residents have argued that properties used exclusively for short-term rentals have driven up rents, disrupted neighborhoods, and worsened traffic and parking.
Last year, L.A. passed new rules that will regulate services like Airbnb. The law allows homeowners to rent out a primary residence for short stays but restricts short-term rentals on secondary or investment properties. The ordinance takes effect July 1.
Airbnb’s niche in the market
Nick Rimedio, general manager at the La Peer Hotel in West Hollywood and chairman of the West Hollywood Chamber of Commerce, said between hotels and short-term rentals, there are a wide range of options for travelers. Short-term rentals cater to “a different kind of guest or a guest with a different kind of need,” he said.
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