New PriceLabs research reveals why independent hotels are competing with vacation rentals for the same guests, and why lowering room rates may not be the answer.
Imagine running a charming boutique hotel. You have beautiful rooms, thoughtful service, a fantastic breakfast, and a team that remembers guests by name. You check your competitors' rates. The hotel down the street is charging $180. The one around the corner is at $195. You adjust your pricing accordingly.
Everything looks competitive.
Except your potential guest is also comparing your room with a $175 vacation apartment that has a kitchen, a washing machine, and enough space to spread out. And just like that, your competitive landscape looks very different.
For years, hotels and short-term rentals were treated as separate accommodation categories. Hotels offered service, convenience, and consistency. Vacation rentals offered space, independence, and a more residential experience. Travelers, however, are increasingly refusing to play by those traditional rules.
New research from PriceLabs suggests that the distinction between independent hotels and short-term rentals is becoming less important when guests decide where to stay. For smaller hotels, that is not simply another hospitality trend. It is a reason to reconsider how they compete.
82% Would Consider a Vacation Rental Instead
The numbers are difficult to ignore.
PriceLabs surveyed 1,082 travelers across the United States, United Kingdom, France, Spain, and Portugal for its October 2026 report, Who Do Independent Hotels Really Compete With? Among travelers who had stayed at a B&B, inn, or small hotel during the previous year, 82% said they would consider a short-term rental instead if it were available at the same or a slightly lower price.
Even more revealing, 48% said they would consider switching at exactly the same price. Only 18% ruled out a short-term rental altogether. That does not mean 82% of hotel guests are abandoning hotels. The research measures willingness to consider an alternative, not completed switching behavior. But it does reveal something important: for many travelers, the hotel-versus-rental decision is still open when they begin comparing options.
The question is no longer necessarily, "Which hotel should I book?" It may be, "What is the best place to stay for my money?"
Independent Hotels Face a Different Competitive Reality
The pressure is not distributed equally across the hospitality industry. According to the PriceLabs findings, 30% of travelers who booked a B&B, inn, or small hotel also considered a short-term rental for the same trip. Among guests who booked a large hotel, that figure was 16%.
In other words, guests choosing smaller properties were almost twice as likely to compare them with vacation rentals. Why?
One possible explanation is that independent hotels and vacation rentals often appeal to similar travelers.
Someone looking for a neighborhood experience, distinctive design, a quieter atmosphere, or a more personal stay might find those qualities in either category.
A charming guesthouse in Lisbon and a beautifully furnished apartment nearby can appeal to the same traveler, even though their operating models are entirely different. For independent hotels, this creates a challenge that traditional competitor analysis may . A property's most relevant competitor may not have a reception desk, a hotel license, or even a recognizable brand. It might be a two-bedroom apartment three streets away.
Booking Platforms Are Changing the Comparison
The way travelers search for accommodation also matters.
PriceLabs found that 45% of travelers searching through Booking.com compared hotels and short-term rentals. Among travelers, this is significant, although the survey does not establish that the booking platform itself caused the higher comparison rate. Still, the commercial implications are clear.
When hotels, apartments, guesthouses, and vacation homes appear within the same search experience, travelers can compare them without switching websites. Price, location, photographs, reviews, amenities, and cancellation policies all become part of the same decision. And this increasingly works in both directions.
Airbnb now features hotel listings, allowing travelers who begin their search on a platform associated with vacation rentals to discover traditional hospitality properties as well.
For hoteliers, that presents both competition and opportunity. A boutique hotel might lose a booking to an apartment. But a traveler initially searching for a vacation rental might discover that a hotel offers better service, more convenience, or a more attractive overall package. Visibility is important. What the guest sees once the property appears in search results is even more important.
The Price Competition Is Already Happening
Perhaps one of the most interesting findings concerns how accommodation prices move.
PriceLabs compared daily median hotel and short-term rental rates over a 12-month period in two popular Spanish destinations.
In Mallorca, the two categories showed a 94% price correlation. In Barcelona, the correlation was 84%.
That means their rates tended to rise and fall in similar patterns, particularly around seasonal demand and busy travel periods. A correlation does not mean hotels and rentals charge identical prices, or that one category determines the other's rates. But it suggests that both are responding to many of the same market conditions. Think about a major holiday weekend. Hotels raise rates because demand is strong.
Vacation rental hosts notice the same demand and adjust their prices. Travelers then compare both options, often within a similar price range. For revenue managers, this creates a compelling question: If vacation rentals respond to the same demand patterns as hotels, why would a hotel's competitive pricing strategy ignore them?
Longer Stays Make the Choice Even More Interesting
The research also identifies situations in which travelers are particularly likely to compare accommodation categories.
For trips combining work and leisure, 30% of travelers considered both hotels and short-term rentals. For stays lasting one to two weeks, the figure was 25%. These trips create different expectations from a traditional weekend getaway. A guest staying for ten nights might value a washing machine more than daily housekeeping. Someone working remotely may prioritize a comfortable desk, reliable Wi-Fi, and a quiet environment. A family may prefer separate bedrooms and a kitchen, while another may happily choose a hotel because nobody wants to cook or clean during vacation. Neither accommodation model automatically wins. The advantage goes to the property that understands what matters most for that particular trip.
This is especially relevant as extended-stay demand develops. In its 2026 State of Independent Hotels Report, Cloudbeds found that bookings lasting seven to thirteen nights increased 25% year over year in its dataset. For independent hotels, longer stays could represent an opportunity to rethink room configurations, amenities, packages, and pricing rather than automatically surrendering that segment to vacation rentals.
Should Hotels Lower Their Prices to Compete?
Not necessarily.
And this is where the conversation becomes especially interesting. When 48% of surveyed guests say they would consider a vacation rental at exactly the same price, it is tempting to assume hotels must become cheaper. But matching a competitor's price does not automatically make two experiences equally valuable. A vacation rental may offer more space.
A hotel may offer daily housekeeping, professional staff, luggage storage, breakfast, security, and immediate assistance when something goes wrong. Those services have value, even when travelers do not initially include them in a price comparison.
The challenge is making that value visible before the booking decision. Consider two accommodation options advertised at $200 per night. One is a private apartment with a kitchen and self-check-in. The other is a boutique hotel with breakfast, flexible luggage storage, a rooftop pool, and a concierge who can help organize local experiences.
For some guests, the apartment will be the obvious choice. For others, the hotel will deliver a better vacation. But if the hotel communicates nothing beyond its room size and nightly rate, it may struggle to explain why travelers should choose it. That is why differentiation matters more than simply joining a race to the lowest price.
Five Ways Independent Hotels Can Respond
The findings point toward several practical opportunities for independent hoteliers.
1. Expand the competitive set. Track comparable vacation rentals alongside nearby hotels, especially properties with similar locations, capacities, and guest profiles. Compare total stay costs, not just advertised nightly rates.
2. Make the experience visible. Highlight what guests receive beyond the room: breakfast, service, local expertise, housekeeping, amenities, flexibility, and support.
3. Build offers around travel purpose. A remote worker, family, couple, and solo traveler may each value different inclusions. Packages should reflect those differences rather than offer everyone the same promotion.
4. Strengthen direct booking. Make the property's website easy to navigate, transparent about total pricing, and clear about benefits guests may not receive through third-party channels.
5. Protect value before cutting rates. A complimentary breakfast, flexible checkout, or curated local experience may create more perceived value than a discount, depending on the property's costs and guest segment.
These strategies also fit a broader commercial challenge. Cloudbeds reported that online travel agencies accounted for 63.4% of independent-hotel bookings in its 2025 dataset, underscoring the importance of distribution strategy and direct relationships with guests.
The objective is not to convince every vacation-rental customer to book a hotel. It is to make sure travelers who would genuinely prefer a hotel can recognize its advantages.
What This Means for Destinations Like Mexico
Although the PriceLabs survey covers five countries and should not be treated as representative of all travelers worldwide, its findings raise relevant questions for tourism destinations with a diverse accommodation supply.
Consider the Riviera Maya. Travelers can choose from beachfront resorts, boutique hotels, family-owned inns, vacation condominiums, private villas, and serviced apartments. In places such as Playa del Carmen and Tulum, several of these accommodation types may appeal to the same guests. A couple visiting for three nights may prefer a boutique hotel close to restaurants and nightlife. A family staying for two weeks may prioritize a vacation apartment. A group of friends might compare a private villa with multiple hotel rooms before making a decision.
The growing overlap also adds another dimension to the discussion around short-term rental regulation in Mexico, where hotels and alternative accommodations are increasingly part of the same tourism ecosystem. For destination marketers and hospitality operators, understanding demand across accommodation categories may become just as important as tracking traditional hotel occupancy.
The Real Competition Is for the Guest's Trust
The PriceLabs findings challenge a familiar assumption in hospitality: that hotels compete primarily with other hotels.
Travelers do not necessarily think in those categories. They compare experiences, convenience, comfort, location, flexibility, and the total price of their stay. Sometimes a vacation rental wins. Sometimes a hotel does. And sometimes the deciding factor is something as simple as knowing there will be someone at reception when a delayed flight finally lands at midnight.
The opportunity for independent hotels is not to become more like Airbnb.It is to understand why guests consider both options, price intelligently, and communicate the value of hospitality in ways that make the decision easier. Because in a market where travelers have more accommodation choices than ever, the winning strategy may not be offering the cheapest place to sleep, but giving guests the clearest reason to stay.
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Originally published by FerrConn Hospitality Insider
