AIRBNB – a threat to the hospitality industry?
HospitalityNET World Panel Topic
Airbnb is expected to complete its much anticipated IPO before the end of 2020 and Wall Street analysts are understandably excited, while hospitality industry experts worry that access to cheaper capital would allow Airbnb to increase its share of the current ultra-weak travel demand at the expense of hotels. This year Airbnb’s US adult user base is expected to fall 60.0% to 17.0 million, the first time of negative user growth (eMarketer). No wonder, the company’s valuation plummeted by 58% to $18 billion in a desperate coronavirus-driven fundraising in April 2020 from its previous high of $31 billion. Due to increased competition, its market share in the U.S. is expected to decrease to under 70% by 2022 from the current level of nearly 73% (eMarketer).
The question is, how big of a threat to the hospitality industry, if at all, is Airbnb’s upcoming IPO?
AirBNB – An opportunity and a threat.
AirBNB is a distribution platform which is for the most part specific to a particular type of accommodation product in terms of AirBNB’s core inventory.
Naturally, as a distribution platform for inventory the company is both an opportunity and a threat to the hotel sector of the hospitality industry.
An opportunity because for those players that provide that type of accommodation product, it represents another distribution channel, with better or worse commercial models and a nuanced target audience. If AirBNB elect to continue moving toward traditional hotel inventory, then a more main stream distribution channel for existing inventory. The opportunity being another channel, competition against some of the other larger incumbent players in the market and perhaps a better commercial model and relationship compared to the incumbents, although no guarantees there.
A threat because any distribution platform is a direct competition to hoteliers own direct distribution channels diluting the direct relationship with the company. If AirBNB do move further into mainstream hotel style accommodation, then further dilution, customer ownership and increase in costs over and above direct bookings.
Based upon what we are hearing about the prospective value it seems that AirBNB should be cashed up as a result of the IPO. That will translate into more effort on the main product, being the distribution platform and perhaps moves back toward broadening their market appeal from a product range as they had started to before the downturn.
As we look at the homestay market the environment is almost becoming like the hospitality market where there are ‘brands’ representing bodies of inventory on the AirBNB platform. While it is not a full franchising or hotel management model there are interesting similarities in terms of operations and distribution and even revenue management. There is a whole industry of technology platforms for the homestay market crossing everything from marketing, to operations and guest communication platforms as well as revenue management and content marketing and distribution. Also more layers of costs in the middle for the ‘hotel’ or in this case property owner. It’s all the same at the end of the day. Also further and further away from a consolidated short term home rental product direct to the owner, which was the genesis of AirBNB. It’s for that reason that there is a lot of logic in seeing hospitality brands branch toward homestay product as the business model and disciplines are very similar.
An opportunity and a threat. Depending upon how AirBNB moves with inventory it may result in being another place where hoteliers really do need to have inventory to be visible and relevant to a particular customer type.
TRAVHOTECH reviews a year of dialogue and opinion through contributions to HospitalityNET’s World Panel topics in 2020. We’ve been pleased to able to offer our thoughts and experience on several important topics through our participation in the World Panel in 2020. Viewpoint first published on HospitalityNET Worldpanel for Digital Marketing in November 2020.