Industry Update
Opinion Article17 October 2019

Airbnb Morphing Into The Amazon For Accommodations

By Larry Mogelonsky, Managing Director Hotel Mogel Consulting Limited

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We've all witnessed Airbnb's dramatic growth over the past dozen or so years. Rising from a backpacker's way to secure a cheap room, this distribution behemoth recently introduced its Luxe product line. Ranging from private Pacific Atolls to elegant French Chateaux, the offerings are a far cry from their original couch-surfing roots. Airbnb's incredible brand expansion has translated into a market valuation of over $30 billion or roughly two-thirds that of Marriott, the traditional accommodation segment leader.

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Airbnb's strategy appears to be straightforward; if there is an accommodation need, it will deliver a solution, no matter the guest type or eccentricity of the preference. This versatility puts them on parallel with Amazon.com which follows the same basic approach for retailing goods. Of note, with Amazon's market cap approaches one trillion dollars, Airbnb's upcoming IPO looks like it just might be a runaway winner.

Airbnb's success lies in a combination of both product acquisition and development. Its purchase of BEYOND in 2017 was rebranded to become the aforementioned Luxe product - a move helped in large part by the efforts put in to build the Airbnb Plus brand a couple years prior. Its more recent acquisition of HotelTonight will no doubt be folded into some new sub-brand or augmented functionality within the core platform. Just think of some of the other brand extensions over the past few years: Airbnb for Work, Airbnb Experiences and Airbnb Adventures all represent solid verticals for continued growth.

Now compare this level of true segment diversification with any of the traditional hotel companies. Rather than create meaningful product extensions, their focus has been to diversify their traditional brand offerings, with differentiation based primarily upon nuances of décor and service levels. We have yet to witness any true large-scale movements in the industry, such as hotels that cater to families with multibedroom suites or 'capsule-like' hotels which target the super-econo-traveler.

Building upon its brilliant strategic expansion, Airbnb's true strength lies in its brand awareness. Among the numerous brand rankings, it is already registered in the Brand Finance Top 100 (current rank 96) and is considered among Fast Company's World's Most Innovative Brands (current rank 31).

But what is more interesting is how this all relates back to the consumer. Airbnb has entered the worldwide vernacular as synonymous with home sharing. A parallel might be someone asks for a Coke when they mean carbonated cola, Kleenex when they want a facial tissues or Band-Aid when they need an adhesive bandage.

This fundamental and deeply ingrained consumer recognition is the most valuable marketing tool available. At this point, you're no longer just a market leader but a worldwide industry and consumer influencer, helping to shape the very essence of how people behave and our societies function. If you need proof of this, just look at how online shopping, as led by Amazon, has decapitated traffic to retail malls or how home sharing, as led by Airbnb, has sent drastic shockwaves through the real estate market.

What does this mean for you as a hotelier? Airbnb is not a passing fad. Regardless of what style or quality level of property you operate, you must consider it as a key competitor as well as a primary distribution channel. Examine your guest demographics. Now, try to imagine how this will change over the next five to ten years as millennials with lower brand loyalty for traditional hotels continue to usurp the older generations.

Understand what you will need to attract younger guests and any changes that will be necessary. Continue your research of Airbnb. Keep up to date on home sharing news reports and consider adding Airbnb to your competitive set analysis (yes, it is now fully tracked).

In order for Airbnb to sustain its current revenue growth structure, it will need to continue building inventory. With alternate accommodation opportunities showing signs of saturation in key territories, the logical next step is to harness the rooms available within the traditional hotel sector.

My prediction is that Airbnb will become the platform for all accommodations, both alternate and traditional; call it 'The Everything (Hotel) Store'. After all, they have the eyeballs of your customers, so perhaps you should get those eyeballs staring at your product.

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Larry Mogelonsky

The world’s most published writers in hospitality, Larry Mogelonsky is the managing director of Hotel Mogel Consulting Limited. His experience encompasses hotel properties around the world, both branded and independent, and ranging from luxury and boutique to select-service. Larry also sits on several boards for companies focused on hotel technology.

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