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How The Airbnb IPO Impacts Hotel Operations

Hotel Brands Need To Provide More Private Experience To Compete With Home Rentals

By Larry and Adam Mogelonsky | June 14, 2021

Since the Airbnb IPO happened in December 2020, this may seem like old news. But let’s reminisce a bit about how an infusion of tens of billions in capital—in tandem with a horde of greedy investors demanding continually increasing profits—will drive this company and ultimately influence what every traveler worldwide expects when choosing their accommodations.

One thought to mull over harks back to the adage, ‘If you can’t beat them, join them,’ where in this case Airbnb may soon evolve into a direct competitor for the online travel agencies (OTAs) by incentivizing hotels to use its platform as yet another third-party channel for their inventory. All software you use to manage channel distribution and rate parity schemes will have to be adjusted accordingly if this happens.

As of Q1 2021, roughly 5% of inventory on Airbnb is considered ‘branded bedrooms,’ indicating that there is an opportunity for this platform to grow by going head-to-head with the OTAs. Further, much of Airbnb’s unbranded stock no longer lists exclusively, indicating that a deepening of the fight between it and the OTAs is practically inevitable. A key reason why consumers choose home sharing platforms, though, is due to 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 users on this website (and mobile app) stand a chance at becoming your customers, rather than them being home sharing advocates who just so happened to select a room at your property. It’s a bit different than inviting the same comparison between the OTAs and booking direct on a brand.com because customers are arriving at, say, Booking or Expedia already with the intent of buying a guestroom product. Users on Airbnb are searching for an ‘accommodations’ product, which isn’t necessarily the same thing as a ‘hotel room,’ and therefore it’s flawed to expect to convert these users into brand advocates with the same efficacy as those arriving via an OTA.

What’s critical for all hoteliers to understand is that, prior to the pandemic, Airbnb had fantastic customer loyalty and market share, as has been substantiated by the statistics. That brand advocacy is bound to increase in a 2021 recovery scenario as the company leverages new capital to reinforce both its leadership position and its value proposition in light of COVID-specific traveler concerns.

The coronavirus has almost irreversibly changed people’s travel motivations, whereby they now place privacy among their top booking criteria. Traditional hotels are disadvantaged in this regard because these properties are seen as highly trafficked places requiring some degree of close physical contact. On the other hand, and whether it pertains to all inventory or not, Airbnb accommodations are generally perceived as safer and having more anonymity because the guest doesn’t necessarily have to deal with a front desk agent, traverse a lobby floor or, in many cases, meet with their host at all.

This alone has profound technological and product messaging implications. For the latter, your marketing this year should emphasize flexibility regarding the ability to facilitate a contactless guest experience. But in order to advertise yourself as such, you need to have a strong backbone of software and hardware. No doubt you’ve already jumped through numerous hoops to make the onsite experience as touchless as possible, but we implore you to continue to investigate your options as new innovations are still being unveiled.

Next, due to Airbnb’s considerable market share, the platform 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 launch of the iPhone 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 want 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 can your property compete with units on Airbnb. As an extension to that, how can your hotel or resort better intimate qualities that home sharing inventory already has in order to adapt to these prevalent 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 such as installing kitchenettes and focusing on extended stays. Determining what to do requires many conversations and there’s no one-size-fits-all solution for putting your hotel on a path to profitability in the next normal.

But knowing that Airbnb will be a juggernaut going forward, you cannot expect things to return to the normal of 2019. No guest—corporate, transient or group—wants the cookie-cutter, big box hotels anymore. They want to feel special; they want their accommodation spaces to inspire them. They want personalization as enabled by a great CRM and other technologies.

If you want to prosper in the next normal, your brand 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.

Credit
Larry and Adam Mogelonsky

Together, Adam and Larry Mogelonsky represent the world’s most published writing teams in hospitality, with over a decade’s worth of material online. As the partners of Hotel Mogel Consulting Ltd. a Toronto-based consulting practice, Larry focuses on hotel strategies and operations while Adam specializes in wellness planning, technology and marketing. Their experience encompasses properties worldwide, with a primary focus on luxury independent properties. Their work includes seven books “Are You an Ostrich or a Llama?” (2012), “Llamas Rule” (2013), “Hotel Llama” (2015), “The Llama is Inn” (2017), “The Hotel Mogel” (2018), “More Hotel Mogel” (2020), and “In Vino Veritas” (2022). You can reach them at adam@hotelmogel.com to discuss how they can help with business challenges.


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