Airbnb made a lot of noise at its recent annual conference for hosts and guests. At the event in Los Angeles, the company announced several initiatives and hinted at possible future directions for the leader in the shared economy accommodations sector.
The announcements were made during a period of significant increases in Airbnb’s business, a flood of both positive and negative publicity, and the overhang of potential legislative action that could ultimately flatten Airbnb’s growth curve. In the meantime, Airbnb continues to grow in bookings, marketing presence and as a thorn in the side of hoteliers. According to Hitwise, visits to Airbnb.com are up 70% over the past three years, while traffic to traditional online travel agency and hotel company websites has plateaued and in some cases, declined.Airbnb has announced several initiatives and hinted at possible future directions. Click To Tweet
The announcements by Airbnb affect all hotel operators, marketers and revenue managers and should be the topic of discussion at upcoming marketing and operations strategy sessions:
1. Trips and Places
At its host meeting, the sharing economy site launched two new online products—Trips and Places—aimed at helping guests maximize their travel experiences, or as the company slogan says, “live there.”
Trips is a tours and activities planning function, while Places provides curated recommendations for restaurants, bars, events and meet-up locations near Airbnb host locations. The company also hinted at a future foray into booking of airlines, car rentals, restaurant reservations and more.
The new services cut into what has been a traditional role of hotel concierges: assisting guests in navigating the city or town they find themselves residing in for a day or two. And while Baby Boomer guests might still want real-live concierges to help them, millennials and the young-at-heart are happy to have the kind of digital assistance Airbnb promises.
2. Airbnb goes old-school marketing
Airbnb is a child of the Internet, but one of the company’s latest marketing move is decidedly old school. With the backing of publishing giant Hearst, the company launched Airbnb Magazine, a print publication that in conjunction with its Trips and Places initiatives could further position Airbnb as a lifestyle brand rather than just a website to book alternative accommodations. Revenues from ad sales is another presumed benefit of the venture.
Airbnb CEO Brian Chesky introduced the maiden issue at the company event, with two more planned for publication in 2017. The 32-page debut issue includes insider information curated from Airbnb hosts in southern California.
It’s not the first time Airbnb attempted a print publication. In 2014, it launched Pineapple, a similar magazine-style tool that might have been ahead of its time and was quickly and quietly abandoned.
3. Should hotels join the platform?
A small but growing number of hotels (mainly independent and small properties) have begun to list their inventory on Airbnb. For the most part, these properties aren’t using the site as a primary distribution platform but as a way to supplement their business.
The reasons are obvious: The 3% processing fee Airbnb charges hosts is much lower than any OTA commission; Airbnb continues to grow and is becoming viewed as a legitimate business model; and some hotel industry executives, including Best Western CEO David Kong, see the potential in partnering with the site.
Kong’s philosophy is that Airbnb could soon dominate the accommodations industry so it makes sense to join rather than fight. While he isn’t ready to become bosom buddies with the sharing economy, he believes there might be a first-mover advantage to aligning with this sector, if for no other reason than to blunt the costly relationship the hotel industry has with traditional OTAs.
It might make sense in the future for more hotels to place their inventory on Airbnb instead of OTAs. Someday, Airbnb could become the Walmart of travel, the store in which every retailer wants its inventory to be stocked.
4. An OTA in the making
According to Hitwise data, over the last three years visits to hotel aggregators such as Booking.com and Hotels.com are down 7.9% even as Airbnb visits have soared. The question is what happens to OTAs (and the hotels they represent) if Airbnb continues to surge and demand for all accommodations tumbles.
In that scenario, it’s easy for Airbnb hosts to slash their rates to attract customers. They don’t have the fixed and variable costs that hotels face and could become an even more formidable competitor to hotels, especially in markets like New York City that have high rates and high cost structures.
While Airbnb represents a major challenge for traditional hotels, its expansion into services beyond accommodations makes it more of a competitor to the OTAs and Google, all of which want to be one-stop-shop hubs for travel.
5. The legal environment
It hasn’t been all sunshine and roses for Airbnb, especially on the political and legal fronts. It’s taken local and state governments a number of years to get a handle on how, or even if, they should regulate this new business model. And, of course, the hotel industry—led by the AH&LA—has been prodding political leaders to level the playing fields between the sharing economy and traditional lodging.
One issue has been occupancy taxes, something neither Airbnb nor its hosts paid in the company’s early years. Now, the company says it’s signed agreements in 200 markets to pay taxes and plans to have 700 agreements signed by the end of next year.
In addition, the company has been embroiled in a variety of lawsuits brought by jurisdictions around the world (New York City and New York state are prime examples but not the only ones) that have questioned the legality of the sharing accommodations model. It will take years for those disputes to be settled and perhaps even longer for local and state governments to have mechanisms in place to enforce laws or court rulings.
It’s important for hotel executives, including revenue managers, to stay abreast of legal developments in your markets and to help hotel industry advocates with data and support as they work to make sure Airbnb doesn’t enjoy special privileges.
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