Industry Update
Opinion Article30 November 2020

How big of a threat to the hospitality industry, if at all, is Airbnb's upcoming IPO?

By Dori Stein, Chief Executive Officer, Fornova

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The imminent IPO of Airbnb can be seen as both a threat and an opportunity for the hospitality industry. The prospect of its continued expansion is a timely warning to hotels that there's no room for complacency when it comes to monitoring all competitors and responding to threats.

Airbnb can already be considered to be the largest hotel chain in the world by room count. With more than 7.4 million rooms worldwide and 247 million guest arrivals during 2019, they are effectively competing with every hotel in the world and covering all tiers. Now,with access to a billion-dollar investment, there's no doubt Airbnb's dominance will grow, attracting a greater share of flight visitors to its platform and potentially putting it on an even footing with rivals Booking and Expedia.

But, while the rise of Airbnb can be seen as more bad news for hotel chains who risk losing their share of vital business travelers to the vacation rental giant, the IPO could be a welcome boost for boutique hotels who will be eligible to list their inventory on the site and improve their visibility.

Don't underestimate the size and reach of Airbnb

Airbnb is already the largest chain in the world, which competes with every hotel in the world. When the IPO goes ahead, its dominance is likely to only grow further.

  • 54 million active bookers
  • 247 million guest arrivals
  • 100,000 cities across 220 countries.

It's breadth of rooms cover every traveller type and include:

  • 90,000 cabins
  • 40,000 farms
  • 24,000 tiny homes
  • 5,600 boats
  • 3,500 castles
  • 2,800 yurts
  • 140 igloos!

What are the main threats?

Airbnb has long dominated non-hotel accommodation bookings yet there has tended to be a clear segmentation of guests who were open to staying in a vacation rental and those who would only consider a hotel stay. The Covid pandemic has altered that. Travelers' concerns regarding social distancing in hotels have played to Airbnb's favor.

Now, with the IPO, Airbnb is set to become an even more mainstream option. Airbnb is already a brand to be reckoned with - the amount of direct traffic it attracts stands at an impressive 91%. Now, is doubling down on its efforts to attract the business travel market - a major revenue generator for hotels. To its advantage are safety concerns, lower rates, and changes to workplace behavior. Airbnb sees an opportunity to capitalize on the growing bleisure market with business travelers tagging on a leisure break to the end of their visit.

With access to a huge marketing budget, Airbnb will be able to ensure it is front of mind for guests considering where to book their next stay. This could cost hotels dearly as their share of the business travel market dwindles.

Where do the opportunities lie?

For unique hotels and bed and breakfasts, the rise of Airbnb could provide an opportunity to capture demand, when leisure gets back to some kind of normality.

Boutique hotels often overlook Airbnb, in their channel marketing in favor of online travel agencies (OTAs) and metasearch engines such as Google, but it's the third major player, and its commission fees are lower than the likes of Booking and Expedia. Not only will listing on Airbnb help properties raise their visibility to a potentially new audience but as Airbnb continues to grow, competition with other OTAs could potentially force down commission fees.

What's more, Airbnb has signaled its intention to expand further into the hotel industry - becoming a hybrid platform. It has already opened branded apartment towers in the likes of Austin, Nashville, and Orlando which come at a premium rate, and has added a 'hotel room' filter to its search options. Again, increasing the choice for visitors.

More than 90% of traffic to Airbnb properties is organic - through direct or unpaid channels this opens up an opportunity for hotels that are listed on the platform to tap into guests that they might not ordinarily reach through their usual OTA channels, which tend to attract around 50% of direct traffic.

Hotels must raise their game if they are to avoid losing market share to Airbnb unnecessarily. They are no longer only competing against their traditional compset. They need to understand the demand across accommodation types and monitor both hotels and vacation rental brands. Continuously tracking rates (at the correct point of sale), visibility, and reviews.

While I don't believe Airbnb's upcoming IPO poses a major threat to the hospitality industry it does serve as a timely wake-up call to the sector to review its revenue, distribution, and marketing strategies to ensure they are addressing head-on the risks of this sector that seems to be making a come back and taking decisive steps in the fight to win demand. And, for those unique hotels that can be listed on Airbnb, there is a major opportunity to capitalize on the increased exposure.

Summary

The IPO of Airbnb can be seen both as a threat and an opportunity for the hospitality industry. It's a timely warning to hotels that there's no room for complacency when it comes to monitoring all competitors and responding to threats. With access to a billion-dollar investment, there's no doubt Airbnb's dominance will grow, attracting a greater share of flight visitors and potentially winning all-important business guests. Yet, for boutique hotels, there could be an opportunity to increase visibility and win demand from new markets.

Related Viewpoint

How big of a threat to the hospitality industry is Airbnb’s upcoming IPO?

Airbnb is expected to complete its much anticipated IPO before the end of 2020 and Wall Street analysts are understandably excited, while hospitality industry experts worry that access to cheaper capital would allow Airbnb to increase its share of the current ultra-weak travel demand at the expense of hotels.
View Viewpoint

Dori Stein

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    About Fornova

    Fornova empowers the global travel and hospitality industry to optimize distribution, generate demand and maximize revenue by delivering best-in-class, data-driven Business Intelligence solutions. Our clients include most of the world's top 10 largest hotel groups, the biggest global OTAs, hundreds of smaller brands and independent hotels, as well as car rental companies and booking sites. Our solutions enable their entire organization (from revenue and distribution to sales, e-Commerce and operations) to make better decisions faster, navigate through changing market environments and stay ahead of the competition. We track 100,000 hotel brand.com, OTA, metasearch & car rental websites every day, and using our patented technology we monitor 1.25 Billion rates from over 70 different countries (Points of Sale) every month. In 2020 we celebrate 10 years in business, having grown to 200 team members based in 10 countries across 4 continents.

    Website https://www.fornova.com/.

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