The hospitality industry has seen significant transformations over the past two decades, largely due to the rise of cruise tourism and short-term rental platforms such as Airbnb and Vrbo. While hotels once dominated the market for travelers and tourists, increasing competition from these alternative accommodations has reshaped demand patterns, pricing strategies and occupancy rates. Understanding how these industries influence hotel performance is crucial for hotel operators looking to navigate the evolving travel landscape.
The cruise industry’s influence on hotels
Cruise tourism has expanded dramatically, offering travelers a self-contained vacation experience that minimizes reliance on traditional hotels. However, the relationship between cruise lines and hotels is complex, and their impact varies depending on location.
Positive effects of cruise tourism
Cruisers like pre- and post-cruise stays and book hotel accommodations before departure or after arrival, boosting demand in port cities like Miami, Ft. Lauderdale, Los Angeles, San Diego, Barcelona and Sydney.
Conferences and events onboard cruises often attract corporate travelers who may need hotel lodging before or after their voyage.
Challenges posed by cruise tourism
Cruise travelers often spend fewer nights in hotels, affecting revenue per available room. Seasonal fluctuations will occur because cruise tourism follows peak seasons, leading to inconsistent demand for hotel rooms throughout the year.
Luxury cruise ships offer onboard accommodations that reduce the need for hotel stays. This competes with what is now our strongest market, the luxury leisure traveler.
The short-term rental industry’s disruption
The rapid growth of short-term rental platforms like Airbnb and Vrbo have posed significant challenges for traditional hotel operators, particularly in urban and leisure travel markets. As an industry and as individual operators, we must come up with strategies that both differentiate and outperform these platforms.
Advantages for hotels in a changing market
High-end hotels can attract travelers seeking full-service amenities that short-term rentals often lack, such as concierge service, dining options and daily housekeeping. Corporate travelers often prefer hotels over rentals due to reliability, proximity to business districts and loyalty program benefits. In many cities, local governments have tightened restrictions on short-term rentals, leading to reduced competition in key markets.
Challenges from short-term rentals
Short-term rentals often provide cost-effective lodging options, making hotels less attractive to budget-conscious travelers. The availability of rental properties reduces hotel occupancy rates, particularly in major tourist destinations, and can also reduce the compression that drives hotel rates up.
Rentals appeal to travelers who seek home-like amenities, larger spaces and immersive local experiences.
Strategies for hotels to compete
Hotels can adapt to these industry shifts through innovative strategies that optimize competitiveness:
1. Enhancing guest experiences: Hotels can focus on personalized services, loyalty rewards and unique amenities that short-term rentals and cruises may lack.
2. Revenue diversification: Investing in ancillary services like rooftop bars, spas and partnerships with local attractions can generate additional income.
3. Dynamic pricing models: Hotels can use artificial intelligence with adjustable pricing strategies to compete with cruise promotions and short-term rental rates.
4. Leveraging technology: Smart room features, mobile check-ins and AI-driven customer service improve convenience and attract tech-savvy travelers.
Conclusion
The cruise industry and short-term rental platforms have undeniably reshaped hotel performance. Specifically, short-term rentals impact hotels during their peak periods and can reduce the average rates of hotels in the market. While both industries present challenges, they also create opportunities for hotels to innovate, refine their value propositions and attract travelers in new ways. Success in this evolving hospitality landscape depends on strategic adaptability and a commitment to delivering bespoke, high-quality experiences.
The high-end or luxury traveler is continuing to stay at resorts, but many have been traveling abroad. We have never really been in this situation where the economy is sort of good, the stock market is perhaps a bit frothy and the job market is weak — but there is no recession. This is not a time to panic, but it is a time to tighten controllable expenses such as third-party commissions, insurance costs and payroll. Most likely, interest rates will come down, tariff uncertainty will calm down and we will see revenues meet or exceed expense growth. To a great 2026!
Robert Rauch, CHA, has been an owner-operator of hotels for several decades and is founding chairman of Brick Hospitality, owner of R. A. Rauch & Associates, Inc.The opinions expressed in this column do not necessarily reflect the opinions of CoStar News or CoStar Group and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to contact an editor with any questions or concern.