It is going to be a tough fight, but competition only means more choices for travellers. To keep up with competitors, hotel room prices may be lowered, but not significantly, experts say. This is because home rentals will usually still be cheaper.
The most successful player in the home-sharing market seems to be holiday home rental website Airbnb.
Founded in 2008, it is available in more than 190 countries, 34,000 cities. Airbnb hosts have welcomed more than 140 million guest arrivals.
Last year, several news sources reported the company to be valued at US$30 billion (S$43 billion).
As of 2015, Airbnb occupied the second-largest brand share in terms of global lodging - at 1.5 per cent - just behind the Hilton brand - at 1.9 per cent - according to market research firm Euromonitor.
Among Airbnb's strengths are its low prices, experts say. A 2015 study by Carlson Wagonlit Travel, which manages travel for corporate clients, found that the average paid rates on Airbnb lodging were 37 per cent lower than traditional lodging.
Ms Shirley Tee, course manager of Nanyang Polytechnic's diploma in hospitality and tourism management, says: "Airbnb works for people who are looking to save on accommodation costs and for those with flexible expectations. The hotels will have to work harder at delivering a greater experience to retain market share."
While there are mixed reports as to how the alternative accommodation sector has affected the traditional hotel industry, hotels are doing what they can to win back guests. One approach has been to leverage on technology to offer guests a better experience.
Guests at several local hotels - such as W Singapore, Orchard Hotel, Hotel Vagabond and Dorsett Singapore - get to use the hotels' mobile phones on which they can make free local calls and surf the Internet.
The Pan Pacific Singapore hotel, for example, has been providing this service to guests in several of its room categories since last August. Its mobile phone features unlimited mobile data and lets guests make free overseas calls to 15 countries.
The hotel's general manager, Mr Gino Tan, 50, says its guests are happy with the phone service as it saves them from having to rent a portable Wi-Fi device or buy a local data phone plan.
Other hotels, such as Singapore Marriott Tang Plaza Hotel, have introduced a mobile app. Its app, launched in December 2015, allows guests to check in and out seamlessly using their smartphones and chat with hotel staff or request services.
More than half of its guests now use the app to check in, says Mr Alvin Lim, 38, the hotel's director of marketing.
Parkroyal Hotels & Resorts also launched an app last November that offers guests access to more than 1,000 curated guides in cities such as Penang, Sydney and Singapore - where the brand has properties.
A second approach has been to offer better value to guests through tie-ups with other organisations, such as attractions and tour companies.
The QT Sydney hotel in Australia, for example, teamed up with the Sydney Opera House last year to offer bespoke options, such as a VIP experience that includes accommodation at the hotel, exclusive backstage access and a tour of the Opera House, followed by cocktails enjoyed with evening views of the arts centre's illuminated sails.
Last June, the hotel also partnered tour company My Detour Sydney to offer guests tailor-made tours from the hotel to the streets of Sydney, bypassing the tired tourist spots.
In Siem Reap, Cambodia, the Shinta Mani Club boutique hotel has partnered tour companies since last year to offer "alternative" activities, such as a visit to a monk blessing ceremony and tickets to a Cambodian circus performance at discounted rates.
Closer to home, the Four Seasons Hotel Singapore has also teamed up with L'Occitane to launch the French skincare brand's first spa in Singapore last year at the hotel. Some promotional rates to the spa are offered to hotel guests.
A third approach by hotels is to cater to niche groups, such as families and Muslim travellers.
Furama RiverFront Singapore introduced both theme rooms and family rooms last year.
The Radisson Golf & Convention Center Batam hotel in Indonesia introduced Segway and hoverboard activities last September as a fun way for guests to get from one outdoor area to another in the hotel.
To woo Muslim tourists, Orchard Hotel provides halal breakfasts served in bento boxes upon request and has had halal-certified selections in its in-room dining menu since 2014.
Although most hotels do not seem to be competing with the low prices offered by new players, at least one hostel plans to play that game.
Adler Luxury Hostel in South Bridge Road will launch a lower- priced, no-frills accommodation later this year called Adler Hostel. Here, guests can get a bed for $30 a night, which is more than 30 per cent cheaper than at Adler Luxury Hostel.
The hostel's owner, Mr Adler Poh, 29, says: "In this new economy, it is all about providing travellers with options at difference price points."
It will be a tough fight to win back guests, note some experts.
Dr Michael Chiam, 55, a senior tourism lecturer at Ngee Ann Polytechnic, says: "The hotels can win part of the market back by providing more personalised and authentic experiences. But they may not be able to win back everyone, especially those who want a high degree of interaction with the host."
But professor of marketing Jochen Wirtz, 54, from the National University of Singapore, says the travel industry is growing, so the new travel accommodation options are largely expanding the market rather than cannibalising existing options.
"Competition is good for all involved - it keeps providers on their toes so they innovate. Guests have more options and better choices. And cities benefit as they can accommodate more guests without having to build new hotels."