The alternative accommodation market is estimated to be valued at USD 200.4 Bn in 2024 and is expected to reach USD 585.1 Bn by 2031, growing at a compound annual growth rate (CAGR) of 16.54% from 2024 to 2031. The alternative accommodation market is experiencing strong growth driven by increasing preference of travelers towards unique accommodations such as homestays, villas, and cabins over conventional hotels.

Market Driver - Growing Disposable Income and Preference for Travel

Alternative accommodations have filled an important niche by offering lower nightly rates and sometimes overall travel costs. Young professionals and families in particular are gravitating towards alternative accommodations that allow them to enjoy unique, local experiences without breaking the bank.

Students and backpackers have long favored hostels for their social atmosphere and value. But now even couples and groups of friends are choosing vacation rentals and homestays to enjoy like a local on their trip. The convenience of often being located in residential neighborhoods surrounded by cafes, parks and local shops adds to the appeal.

Travelers now want accommodations that offer more than just a bed, and desire engaging with local communities. Interacting with local residents and having an authentic experience of daily life in that destination differentiates alternative accommodations.

With rising interest in slower, experiential and niche types of travel, alternative accommodations are anticipated to climb in popularity. This is expected to contribute to the growth of the alternative accommodation market in the coming years.

Market Driver - Technological Advancements in Online Booking

Technology has radically transformed the travel and tourism industry in recent decades. Online travel agencies and accommodation booking sites have made researching and planning trips tremendously easier. A major boost for alternative accommodation types has been their ability to leverage digital platforms to reach a global customer base.

Whether listing directly on their own website or appearing on aggregator sites, alternative accommodations of all types can now promote their unique properties to travelers worldwide with just a few clicks. Detailed high resolution property photos, calendars indicating real-time availability, and direct instant booking creates a hassle-free user experience.

Communication technologies have further supported alternative accommodation providers. Mobile check-in options allow travelers flexibility without fixed reception times. Positive online reviews have become the new word-of-mouth promotion for alternative accommodation listings. This helps build trust for future guests and increase bookings.

Analytical tools also provide operators valuable market insights to optimize operations. Digitization of the alternative accommodation market has leveled the playing field, allowing players to flourish by connecting with new audiences through online distribution in a cost-effective manner.

Market Challenge - Safety Concerns Due to Lack of Direct Interaction Between Host and Customer

One of the major challenges facing the alternative accommodations market is safety concerns arising from the lack of direct interaction between hosts and customers. Both hosts and guests have expressed worries about personal safety, theft, property damage, and other issues when staying with an unknown party.

While many hosts and guests have positive experiences using alternative accommodation services, negative instances that receive media attention have raised questions about adequate safeguards. Screening of users and reviews/ratings systems can only mitigate risk to a certain extent.

Ensuring robust identity verification of users and emergency response protocols are important to address this challenge and boost confidence in the overall safety and security standards of the sharing platform. More also needs to be done to educate both host and guest communities about respecting each other's privacy and property.

Market Opportunity - Major Hotel Chains Diversifying Portfolios by Including Alternative Accommodations

One significant opportunity for the further growth of the alternative accommodations market is major hotel chains beginning to diversify their portfolios by including alternative accommodation properties.

Recognizing the rising popularity of shared homes and unique venues among certain traveler segments, brands like Marriott, Hilton, and Hyatt have started experimenting with partnership models to list alternative properties on their platforms and apps. This allows them to participate in the fast-growing alternate accommodations space while leveraging their existing customer loyalty programs, reservation systems, and hospitality service standards.

Integrating options like homes, apartments, and hostels alongside traditional hotels gives these large chains a more complete offering for different traveler missions and budgets. It also enables property hosts to gain access to the huge corporate and leisure customer bases of leading hotel companies. As major players increasingly embrace the alternative accommodations sector, its viability and acceptance are poised to reach new heights.

Strategic expansion through acquisitions: In 2017, Airbnb acquired Luxury Retreats, a boutique vacation rental management company, to expand into the luxury segment.

Focus on experiential stays: Vacasa launched "Experiences" in 2018 that allows guests to book local activities like cooking classes, hiking tours, etc. run by local experts. This made stays more memorable and engaging, helping Vacasa attract more repeat customers.

Specialized product offerings: Sonder focuses only on building a network of well-designed apartment hotels. The strategic focus helped Sonder become a leader in the apartment hotel category.

Leveraging technology: Booking.com introduced AI-powered personalized recommendations in 2019 that analyze customer profiles and preferences to suggest highly relevant properties.

These strategies have helped key players significantly scale their operations, drive higher customer retention rates, and gain revenue share in the fast-growing, alternative accommodation market.

Insights, By Accommodation Type: Popularity of Alternative Choices to Conventional Hotels

In terms of accommodation type, vacation rentals account for 41.3% share of the alternative accommodation market in 2024. This is due to the increasing preference for unique and authentic accommodation options among travelers. Vacation rentals such as homes, apartments, villas offer travelers an experience of living like a local in a new place rather than staying in impersonal hotels. They provide the benefit of more space and amenities than a hotel room at a relatively cheaper price.

Also, vacation rentals allow greater flexibility, intimacy and independence to travelers. The availability of fully-equipped kitchens means travelers can avoid eating out for every meal and opt for self-catering. Moreover, vacation rentals in popular tourist neighborhoods or by the beach provide guests a better location and view compared to chain hotels in crowded areas. This will drive upcoming trends in the alternative accommodation market.

Insights, By Booking Mode: Digital Transformation Driving Shift to Online Bookings

In terms of booking mode, online booking contributes 66.8% share of the alternative accommodation market in 2024, owing to the growing influence of digital channels. The internet and smartphones have transformed the way travelers research and book accommodation instantly. Online travel agencies providing a wide selection of alternative accommodations under one virtual roof coupled with user reviews have made online bookings a more convenient option than offline bookings.

Companies are investing heavily in their websites and apps to provide seamless booking experiences. Rising internet and smartphone penetration especially among millennials and generation Z has prompted a definitive shift towards online bookings. The ease and flexibility of online payments without hassle of cash have further aided online booking popularity.

Insights, By End User: Rise of Experience-Driven Leisure Travel

In terms of end user, leisure travelers contribute the highest share of the alternative accommodation market owing to the increasing demand for unique travel experiences. With greater spending power and travel becoming more affordable, leisure travel is on the rise. Modern day travelers are moving beyond conventional beach vacations and are looking for experiential and authentic ways of immersing themselves in local culture through alternative accommodations.

Staying in accommodation options like homes, villas, and cottages allows leisure travelers to get a true feel of a destination and engage with locals. This satisfies their urge to instill new skills, create lasting memories and stories to share. Alternative accommodations have emerged as the new address for experience-seeking leisure travelers looking for one-of-a-kind cultural interactions compared to large homogenous hotels.

• North America leads with a 37% share of the alternative accommodation market in 2023, attributed to business travelers favoring alternative accommodations for extended stays.
• Asia-Pacific, projected as the fastest-growing region in the global alternative accommodation market, is driven by rising consumer spending on staycations and government initiatives in tourism.
• Online booking channels dominate the alternative accommodation market, attributed to higher internet penetration and the convenience of mobile applications.
• Millennial and Gen Z travelers are the primary demographics driving the demand for alternative accommodations, valuing unique experiences over traditional hotel stays.
• The alternative accommodation market is witnessing a shift towards personalization, with providers offering customized services to meet individual traveler preferences.

The major players operating in the alternative accommodation market include Airbnb Inc., Booking.com, Expedia Group, Trip.com Group Limited, Wyndham Destinations Inc., Agoda Homes, HomeToGo, FlipKey, holidu.co.uk, HomeAway, MakeMyTrip Limited, Onefinestay, Peakah, Plum Guide, Stay Alfred, Sonder, TripAdvisor Inc., and Wimdu.

• In September 2023, TripAdvisor Inc. invested in artificial intelligence to deliver personalized accommodation recommendations, enhancing user engagement and satisfaction through tailored suggestions.
• In July 2023, Expedia Group launched 'One Key,' a unified loyalty program that integrates its primary travel brands—Expedia, Hotels.com, and Vrbo. This unified platform integrating hotel and alternative accommodation bookings, providing a seamless user experience and potentially increasing customer retention.
• In May 2023, Booking Holdings Inc. expanded its alternative accommodation listings by partnering with local homestay providers, increasing its market presence and offering more diverse options to travelers.
• In March 2023, Airbnb Inc. launched new safety features, including enhanced verification processes and 24/7 support, aiming to build trust and safety within the community. This development is expected to attract more users concerned about security.

• By Accommodation Type
  • Vacation Rentals
    • Apartments
    • Villas
    • Cottages
  • Homestays
    • Shared Rooms
    • Private Rooms
  • Hostels
    • Dormitory Rooms
    • Private Rooms
  • Others
    • Treehouses
    • Houseboats
• By Booking Mode
  • Online Booking
    • Company Websites
    • Mobile Apps
    • Online Travel Agencies
  • Offline Booking
    • Travel Agents
    • Direct Reservations
• By End User
  • Leisure Travelers
    • Solo Travelers
    • Families
  • Business Travelers
    • Short-Term Stays
    • Extended Stays