Airbnb to Take the Supermarket Approach for Post-COVID Success
By Larry Mogelonsky, Managing Director Hotel Mogel Consulting Limited
As a hugely successful and globally influential accommodations company, it is only natural that the press has zeroed in on this sharing economy juggernaut during the topsy-turvy news cycle of the COVID pandemic. But just because Airbnb had massive layoffs during the spring months and is pivoting towards long-term rentals does not mean that you should count this entity out as a direct competitor for your 'traditional' hotel.
True, the platform is still a bit on the ropes, at least as it concerns our brands. Superhosts and their ghost hotel units were devastated by the lockdown as their high monthly fixed costs forced many of them to shift inventory from short-term rentals into the long-term market; and once it's in this latter pool, a unit is hard to swap back. Many also point to what on paper is the spectacular failure of Airbnb's experiences vertical. Together, this could be seen as less overall competition for hotels moving forward.
But look closer and you'll see that this accommodations juggernaut is setting itself up to become a more versatile platform for just about any form of non-purchasable living space a customer could want. This is why the supermarket model works - in a word, convenience.
Some consumers will want to go to their independent fruit market then to an organic butcher followed by a bakery or fromagerie, likely because the goods are of higher quality, made by niche producers and they can interact with trusted personnel to take advantage of their recommendations. But visiting all these separate entities takes time and there is no guarantee that such specialized shops will have everything that a certain individual needs at that exact moment. So, you go to the supermarket to get your fruits, vegetables, meats, bread, cheese and sauces; and just in case you also need more toilet paper, they have that on aisle three.
In this sense, it's not just about the convenience itself but the guarantee of this convenience. One reason you go to a supermarket is that products that aren't necessary on the weekly shopping list but are nonetheless available will 'halo' back onto whatever items are sought after on that particular shopping day. As 'the everything store', Amazon has also derived much of its success from this model in that you can buy books, gardening tools, dried spices and underwear all at the same time and all without leaving your home.
Applying this psychological foundation to Airbnb, the experiences vertical makes perfect sense even if it's unprofitable on paper for the first few years after launch. The company's core revenue generator is selling the equivalent of hotel rooms - staying to stay in desirable locations - and, like visiting a supermarket, even just the possibility of also purchasing an experience to coincide with a short-term reservation means more customers will be drawn to utilize this platform over others.
Hence, with each new gross functionality added to Airbnb, it has more spokes on its wheel to keep the center cap of short-term accommodations spinning. Therefore, developing a long-term rental platform will benefit the company in the same way as it will mean more eyeballs going to the website and using the app, spurned on by the convenience of 'one stop shopping'. And once people are comfortable with using the interface to find what they want, new habits will be formed and will be ever-harder to break.
Key for traditional hotels to grasp from all this is that a resurgent Airbnb after COVID will mean even more users on its platform than before the pandemic, which will inevitably result in a revived fight against ghost hotel operators, albeit in a few years once their liquidity has stabilized. Hence, we hoteliers must continue to push for a level playing field once the more immediate concerns of reshuffling our operations to meet the demands of the next normal are addressed.
Furthermore, consider how the supermarket analogy can work to your brand's favor. If your primary business is derived from selling rooms product, then what ancillary services can you add to halo back onto this central revenue generator? This will be an interesting question to answer in the immediate pandemic aftermath as many costly operations that would give you this halo in a conventional sense - like a spa or restaurant - may no longer motivate guests, at least in the near-term. Remember to look for features or amenities that are relatively inexpensive, even when poorly utilized by guests, but will help draw people to consider your property in any top-of-funnel search.
All told, Airbnb is here to stay and is working to swiftly adapt to the challenges presented by COVID so that this lodging platform remains a competitor for traditional hotel brands for many years to come. For your hotel, there are many things you can learn from this company so that you are better prepared to capitalize upon the post-pandemic travel surge with the supermarket model being just one of them.