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.
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.
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 economy 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.
Under Airbnb Trips, users can now purchase package experiences like “Biking Hidden Tokyo”, “Learn to Cook Tuscan Food” or “Exclusive 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?
Airbnb is partnering with Detour (company that creates GPS tours for different cities) to offer audio walking tours 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.
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?