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How Will the Airbnb IPO Affect Your Operations?

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April 19, 2021
Distribution | Channels
Larry Mogelonsky - larry@hotelmogel.com
Adam Mogelonsky- adam@hotelmogel.com

While there was a surge in news about the implications of the Airbnb IPO back in December 2020, this development should still be top of mind for hoteliers because it will affect the long-term forecast and vision for every property worldwide. COVID-19 demonstrated that making five-year – or even six-month – plans can be fruitless. Still, it’s good to understand how the Airbnb IPO will play out for calendar year 2021.

First, taking a private firm public forces the senior team to perform. They’ll have to produce stable growth quarter over quarter as demonstrated by common stock share price, possible future dividend yields or plain old profits. This means that Airbnb will need to ramp up new verticals and further pilfer traditional hotels’ customer bases in order to satisfy shareholders’ perpetual desire for positive news, bigger dividends and expansion.

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Remember the adage, “If you can’t beat them, join them?” Airbnb may soon evolve into a direct competitor for online travel agencies by incentivizing hotels to use its platform as yet another third-party inventory channel. You’ll have to adjust any software you use to manage channel distribution and rate parity schemes accordingly if this happens.
   As of the first quarter of 2021, roughly 5% of Airbnb inventory is considered ”branded bedrooms.” This means there’s an opportunity for this platform to grow by going head-to-head with OTAs. Further, much of Airbnb’s unbranded stock no longer lists exclusively. This makes a deepening of the fight between it and OTAs practically inevitable. But consumers choose home sharing platforms because of the professed uniqueness of each room up for rent. So using this channel may only be meaningful for hotel properties with a diversity of room types, suites, penthouses or private villas.
   Before you go about treating Airbnb like any other OTA, ask yourself whether its users are likely to become your customers. Or are they home sharing advocates who just happened to select a room at your property? It’s a bit different than inviting the same comparison between OTAs and booking direct on a booking website. Customers go with the intent of buying a guestroom. Airbnb users are searching for an accommodations product, which isn’t always the same thing as a hotel room. You can’t expect to convert these users into brand advocates as efficiently as those who arrive via an OTA.
Statistics-Based Loyalty

Transparent has done several thorough analyses on Airbnb’s IPO prospects, such as the one here. Their findings back up our concern about direct channel conversions and the need for further evolution in traditional hotels. You can use some of their learnings to guide future updates to your user interface on a brand.com site, a booking engine, or in new technologies deployed on-site to heighten guest satisfaction.
   Airbnb users are disproportionately more loyal than those using other channels, brand-affiliated or otherwise. Web traffic data for the summer of 2020 during the partial (and regionally short-lived) recovery from global lockdowns in the spring bears this out.
   Take the month of July 2020. During this stretch, Booking received 397 million visits versus Airbnb’s 69 million. But direct traffic comprised 65% of those arriving at Airbnb (for comparison, Booking’s was 39%). Compounding this, Transparent says that, by this same month, only 35% of trips reserved via Airbnb were from first-time users. These two statistics suggest that Airbnb has become a “platform of choice” for millions of travelers around the globe.
   The direct traffic metric also shows that organic throughput to Airbnb doesn’t typically comprise any cost-per-click advertising. That differs from total OTA visits, which often require hefty paid search fees to win the top spot on a broad Google travel inquiry.
   Early in the pandemic, Airbnb gutted its marketing department and advertising budget. But it may not need to revert to pre-COVID levels to drive new revenue during the forecasted 2021 recovery. The platform already has outsized brand loyalty. Instead, it can redeploy those marketing dollars to capture new customers and to boost awareness for emerging products. This could include a relaunch of its Experiences banner following rather ho-hum results thus far.
Influencing All Travelers
Hoteliers must understand that Airbnb had fantastic customer loyalty and market share before the pandemic. That brand advocacy is bound to increase during a 2021 recovery as the company leverages new capital to reinforce both its leadership position and its value proposition in light of COVID-specific traveler concerns.
   A note on that last point – COVID has almost irreversibly changed travelers’ motivations. Most now place privacy among their top booking criteria. Traditional hotels are at a disadvantage. Their properties are seen as highly trafficked places requiring some degree of close physical contact. On the other hand, Airbnb accommodations are viewed as safer and more anonymous. The guest doesn’t have to interact with a front desk agent, cross a lobby or, in many cases, even meet their host at all.
   This alone has profound technological and product messaging implications. This year’s marketing efforts should emphasize your ability to offer a contactless guest experience. You’ll need a strong software and hardware backbone to make this happen. No doubt you’ve already jumped through numerous hoops to make the on-site experience as touchless as possible. We implore you to investigate your options – new innovations are still being unveiled.
   Thanks to its considerable market share, Airbnb is poised to further influence what the average consumer wants from their travels, be it a leisure vacation, corporate midweek stopover, group room block or otherwise. Just as the iPhone launch created a new market for cellphones with touchscreens and a cottage industry of third-party app developers, so too will Airbnb’s sheer size persuade hotel guests to seek more exceptional and more contactless accommodations.
   Thus, a strategic question for 2021 and the coming decade should not be how we can make gains relative to our hotel comp set. Instead, you must ask how your property can compete with units on Airbnb. By extension, how can your hotel or resort better intimate qualities that home sharing inventory already offers in order to adapt to these shifts in traveler behavior?
   Maybe it’s keyless entry and an app-agnostic guest messaging system. Or perhaps it’s something requiring some serious capex and a total repositioning, like installing kitchenettes and focusing on extended stays. Determining what to do requires many conversations. There’s no one-size-fits-all solution for putting your hotel on a path to profitability.
   Knowing that Airbnb will be a juggernaut going forward, you can’t expect things to return to 2019 levels of normal. No guest – corporate, transient or group – wants cookie-cutter, big box hotels anymore. They want to feel special. They want their accommodations to inspire them. They want personalization as enabled by a great CRM and other technologies.
   If you want to prosper in the next normal, you must start to incorporate features that are conventionally only offered by vacation rental and home sharing platforms. If you can’t beat them, join them. Or at the very least, copy what they do best.

©2021 Hospitality Upgrade
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