70cc710850b21f2cd1027a96d266b2e7aaf4081a

Don’t Forget About How the Airbnb IPO Will Affect Your Operations

Don’t Forget About How the Airbnb IPO Will Affect Your Operations

 

Don’t Forget About How the Airbnb IPO Will Affect Your Operations

By Larry Mogelonsky, MBA, P. Eng. (www.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. As COVID-19 has demonstrated that making five-year-out or even six-month-out plans can be fruitless, we nevertheless embark on a quest to explain how the Airbnb IPO will play out for the calendar year of 2021.

Foremost to consider is that taking a private firm into the public sphere puts a metaphorical gun to the senior team’s collective head to perform – to produce stable growth quarter over quarter through healthy indicators such as common stock share price, possible future dividend yields or plain old profits. Combined with the influx of capital from the public offering, this means that Airbnb will need to ramp up new verticals and further pilfer the customer bases of traditional hotels in order to satisfy shareholders’ perpetual desire for positive news, bigger dividends and expansion.

How the IPO Affects Channel Distribution
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 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.

Statistics-Based Loyalty
One good resource to peruse which backs up our trepidation over direct channel conversions and the need for further evolution in traditional hotels is Transparent which has done several thorough analyses on Airbnb’s IPO prospects, such as the one here. Some of the inferences can be used to guide future updates to the user interface on a brand.com or booking engine as well as for new technologies deployed onsite to heighten guest satisfaction.

One broad conclusion that should be apparent is that Airbnb users are disproportionately more loyal than those using other channels, brand-affiliated or otherwise. This is best substantiated by looking at the web traffic data for the summer of 2020 during the partial (and regionally short-lived) recovery from global lockdowns in the spring.

Take the month of July 2020, for example. During this stretch, Booking received 397 million visits versus Airbnb’s 69 million, but direct traffic comprised 65% of those arriving at the latter entity (for comparison, Booking’s was 39%). Compounding this, Transparent cites that, by this same month, only 35% of trips reserved via Airbnb were from first-time users. These two statistics suggest that by now Airbnb has a profound ‘platform of choice’ utility for hundreds of millions of travelers around the globe.

What you must also take into account from the direct traffic metric is that organic throughput to Airbnb does not typically comprise any cost-per-click advertising, unlike those total visits to an OTA which often involve hefty paid search expenses to appear in the first position of a broad Google travel inquiry.

In the early stages of the pandemic, Airbnb gutted its marketing department and advertising budget, but it may not need to revert to its antecovidian playbook in order to drive new revenues during the forecasted 2021 recovery because the platform already has outsized brand loyalty. Instead, it can redeploy those marketing dollars to capture new accommodations customers and to boost awareness for its emerging products – perhaps including a relaunch of its Experiences banner following its rather ho-hum results thus far.

Influencing All Travelers
Before we go too far on a tangent, 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.

As a note on that last point, 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 their 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 in order to make this a reality. No doubt you’ve already done 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 can 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 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 them, join them, or at the very least copy what they do best.

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­________________________________________________________________________________________________________

 

Larry Mogelonsky
About Larry Mogelsonsky

One of the world’s most published writers in hospitality, Larry Mogelonsky is the principal of Hotel Mogel Consulting Limited, a Toronto-based consulting practice. His experience encompasses hotel properties around the world, both branded and independent, and ranging from luxury and boutique to select-service. Larry is also on several boards for companies focused on hotel technology. His work includes five books “Are You an Ostrich or a Llama?” (2012), “Llamas Rule” (2013), “Hotel Llama” (2015), “The Llama is Inn” (2017) and “The Hotel Mogel” (2018). You can reach Larry at larry@hotelmogel.com to discuss hotel business challenges or to book speaking engagements.

 

 

Media Contact:

Larry Mogelonsky

HotelMogel Consulting Limited

Email: larry@hotelmogel.com

 

Website: http://hotelmogel.com/

Post a Comment

0 Comments