Airbnb’s eyeing your wallet

While Airbnb’s currently just offering you cheap (or more unique) housing options for your last-minute travel plans, they’ve got a long-term plan of digging much deeper into your pocket than you’d think. In fact, in the next few years it’s planning on being more than just your first go-to when booking for accommodation…nah, they’ve got bigger dreams of being your ultimate full fledged, on-the-go, handy-dandy, all-encompassing travel agent.

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How Airbnb Uses Big Data

Of course Airbnb is still constantly looking to improve its current services with housing and apartment bookings. While it’s intuitive that Airbnb would focus on creating better guest experience, the company also recognizes the importance of a 2 sided-market and has really dedicated time into improving host experiences.

It’s used its warehouse of consumer data to roll out its Price Tips program, which is a constantly updating guide that tells hosts (for each day of the year), about how likely it is for them to get a booking at the price he/she has chosen along with Airbnb’s own price suggestion for the host. Price Tips takes into consideration a number of different factors such as popular neighborhoods, surface patterns between latitude and longitude, specific days of the week, holiday dates and even trending key word searches like “beach” before generating a general price suggestion. This tool helps hosts maximize their profits and days of rent so they are less likely to over or under price according to current market demand.

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Airbnb has also analyzed host data to determine what factors tend to affect hosts’ decisions to accept guest accommodation requests. I found the results actually quite interesting – it turns out that hosts in big markets (like New York City, LA, SF) care more about minimizing gaps (so having longer guest stays) while hosts in smaller markets like short stays with gaps of vacancy in between. With this knowledge in hand, Airbnb is better able to personalize accommodation request search results for hosts, so that they would have a higher chance of accepting requests, improving both guest and host experiences.

So whatdayamean Airbnb’s eyeing my wallet?

Well, besides updating its current business, Airbnb’s got their eyes set on an even bigger goal. Not only does it want to replace hotels, but now it’s looking to disrupt the entire tourism industry. Like we discussed in class, the sharing econ04GETAWAY2-master675.jpgomy has created an entirely new ecosystem ripe for business opportunities.

Airbnb Trips is the next biggest project and once it’s officially rolled out, I think it will be interesting to see how the market as well as its competitors will react.

 

Experiences

Under Airbnb Trips, users can now purchase package experiences like “Biking Hidden Tokyo”, “Learn to Cook Tuscan Food” or “Exclarge.jpglusive Wine Tasting in Bordeaux”. With this tab, you no longer have the hassle of searching and scheduling activities yourself, but you can book activities led by locals prior to your travel destination arrival. While this could really help local businesses gain traction, what will it mean for companies like TripAdvisor that also offer package deals from 3rd party vendors?

Places

Airbnb is partnering with Detour (company that creates GPS tours for different cities) to offer audio walking touDetour-Audio-Walking-Tours.pngrs and Resy (a restaurant booking platform) to offer easy access to local restaurant reservations. This could potentially threaten traditional tour guiding companies and existing platforms like OpenTable and Reserve. Additionally, they are looking to create their own “Meetup” tab, in which free get-togethers are offered to encourage local businesses and traveling users to interact.

Homes

And of course, Airbnb wouldn’t be the company it is today without its Airbnb rentals. Except now under this tab it will be looking to add grocery delivery, car rentals and flight search. Any of these services sound familiar to you? Looks like they are planning to step onto Amazon, Hertz/Uber and Expedia’s territory…

So all this is do-able or nah?

While Airbnb’s ambitions sound fine and dandy, I don’t think this process in transition will come easy. It has already run into problems with growth in terms of its current business. The city SF recently ruled that Airbnb hosts can only put up houses and apartments on the rental marketplace for 60 days or less every year. This is mainly to prevent people from running different listings at the same time and attempting to violate housing regulations.

I think it will also run into issues with trying to poach Uber’s territory. Uber is better able to fight lawsuits armed with its large cash reserve due to the fact it’s used more on a day to day basis whereas Airbnb rentals are more week to week basis. Thus, Uber has been able to battle the current New York City lawsuit whereas Airbnb has had to fold to SF’s court ruling. But despite these difficulties, I do think Airbnb is heading the right direction with leveraging people’s willingness to participate in the sharing economy. While Airbnb may triumph in some sectors (I’m predicting the experience packages and audio walking tours/restaurant reservation service will do well), it may have to accept defeat in other sectors where competitors have already tipped the market in terms of network effects such as ride-sharing and grocery delivery. I’m curious to see what you guys think – where do you think Airbnb will win and what other new markets could they expand into?

10 comments

  1. Really good, informative and easy to read blog post! You made it really engaging but captured so much info. I think you’re right – I think AirBnB will face a lot of trouble trying to encroach on Uber’s territory and I don’t really see them breaking into that space. I do see the benefits to the add ons for the travel industry like the guided tours or package deal trips. As someone who helped organized the senior spring break trip, I bet they could eliminate a lot of college student’s headaches with planned all-inclusive spring break trips. AirBnb certainly has room to grow – and I think the first few ideas you mentioned are a great place to start!

  2. Thanks for writing such an informative blog post! I definitely learned a lot of information. In my opinion, it kind of seems like Airbnb is trying to do a lot of different things at once — maybe it could be better for them to focus on just a couple of the expansion ideas you wrote about?

  3. It makes sense for Airbnb to attempt to disrupt the tourism industry. I can see success in selling packages with your home rental. Currently, when I book an airbnb, I then look at yelp and expedia for what to do and where to eat. Airbnb could be the one stop platform for all your travel needs. I think this is ambitious and the right direction.

  4. Very well organized and written post! I 100% agree with you, I do think that Airbnb certainly has room to grow and shouldn’t just be a “discount” hotel for those unwilling to pay the full hotel price. By expanding fully into the vacation industry, it can almost serve as a travel retailer and organize the entire experience, similar to an excursion organized by a cruise line. That way the Airbnb value isn’t just paying a cheaper price for a room, but is actually a comprehensive platform for travel/vacation. You laid out some very interesting options for Airbnb to expand into, I’m very interested to see how it plays out.

  5. Extremely interesting post! I think Airbnb has a lot of different opportunities that they can capitalize on in order to enter new markets, but I do think they need to be very strategic with this and choose maybe one or two spaces that they can be very strong in. If they try to attack too many different areas, they may become a company that is “stuck in the middle,” and lose any competitive advantage in the market. I really did like the idea about the GPS-guided tours or add-ons to vacations, so maybe they can focus on those two.

  6. Great post! I think a lot about Airbnb and what they will become. I think there is a pretty good chance they could dominate the travel market. I could see a world where Airbnb acquires Yelp and other services, maybe TripAdvisor to continually compete and get stronger in the travel market. Airbnb has a $30 billion evaluation, which makes me believe they will be around for a pretty long time an has potential to be one of the tech giants that make a lot of noise in whichever space they dive into.

  7. I really liked this post! I’ve been seeing this on Airbnb’s website and never knew if it was new or if I had just missed something. I certainly believe it’s a good idea for them because if you are booking your rental on Airbnb, might as well book some activities, cars, etc. as well. Since consumers trust this platform, the platform can use that trust to get more $$ out of consumers, which is what they’re doing!

  8. This was so informative! I think this is a good idea for Airbnb to shift into new markets and growth, but it seems like adding so many services at once in practice will be challenging. I like the idea that all of your travel needs could now be in one spot, but I think the biggest challenge will be changing consumers’ behavior on how they use these services. Because sometimes I find myself subconsciously opening Uber when I have to drive somewhere and more recently OpenTable for restaurant reservations. If Airbnb can offer these same types of sharing services just as effectively and efficiently as the Ubers out there and can convince consumers to change their behavior to use them over others then I think they could be successful. Time will tell, and I’m excited to see what happens!

  9. I’m interested to see how this all plays out. It seems like they will have a hard time accomplishing everything you outlined in numerous competitive markets. I wonder if they may be better off focusing on ways to improve their current product and consumer experience. I had a difficult time booking a place for my family for graduation weekend (obviously a busy time here in Boston) but I made at least five requests for condos that were listed as available only to be told they were unavailable on those dates. My guess is they had forgot it was graduation season and wanted to raise their rates. I also booked another apartment for a different weekend only to have the reservation cancelled two weeks later because the owner decided to renovate (allegedly?). It highlighted for me the biggest flaw of the system is reliance on individuals. If my reservation is cancelled I might be stuck (something even Motel 6 rarely does). Additionally, I’ve had very great experiences, and very poor experiences that failed to live up to what was advertised. Reviews are obviously useful but I’m wondering if Airbnb can do much in terms of providing tips for hosts, boosting/promoting units with the best reviews, etc. Great post.

  10. Great post. It’s nice to get an update on the latest from AirBnB. I really like the price trips program, as that might actually convince me to actually rent out my house while on vacation, if I knew what I’d be likely to get for it at a particular time.

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