This article originally appeared as part of a series in the September 2017 issue of WiFi HiFi Magazine.
Booking a trip? You're likely to scan various hotel offerings and then check Airbnb. The short-term rental company has flipped the hospitality industry on its head, providing an accessible option to rent a room, home, or apartment from a local, anywhere in the world, at a range of price points - from $50 to more than $1,000 per night. And now, Airbnb is expanding its business to include local tours and experiences.
"Unlike the traditional hospitality industry, Airbnb is a people-to-people platform...that provides economic empowerment by bringing real benefits to those who share their homes, local communities and travellers alike," Aaron Zifkin, Regional Director of the Americas operations at Airbnb tells WiFi HiFi.
History of Airbnb
Airbnb got its start in 2007 when founders Joe Gebbia and Brian Chesky, both 27 at the time and struggling to pay their rent, came up with the idea of renting out air mattresses, and providing breakfast, in their San Francisco apartment during a conference when the city's hotels were fully booked. They recruited Nathan Blecharczyk, a former roommate and computer science graduate, to develop the Website. The company officially launched as Air Bed and Breakfast in 2008, but faced a series of rejections until they finally received VC funding in 2009. And, of course, they shortened the name to Airbnb.
Locals can list a spare room or property on the Airbnb Website and rent it out to travellers by the day, week or month. Travelers can then book a stay in someone's home, anywhere in the world, from the site or app. Airbnb handles the money and provides 24/7 customer support, as well as insurance for the host.
"As we grew, we started adding amenities," says Zifkin, noting that the customer service support centre operates 24/7, and is "staffed with live agents who work with hosts and guests to resolve any issues. With our two-way review system," he continues, "we allow everyone on our platform to provide feedback and reviews so those on Airbnb can get to know their guests and hosts."
Airbnb founders Brian Chesky, Nathan Blecharczyk, and Joe Gebbia
In less than a decade, Airbnb has built up 3 million listings in 65,000 cities and 191+ countries. The company says it has reached 200 million guest stays since its founding, and facilitated as many stays last year as it generated between 2008 to 2015 combined, showcasing the company's fast-paced growth. The top three destinations booked on Airbnb are the U.S., France and Italy; Canada ranks in the top 10 globally.
According to Airbnb's numbers, it has an established Canadian footprint of 60,000+ listings across the country, with more than 2,400,000 inbound guest arrivals in Canada in the past year. The average length of stay per guest in Canada is 3.7 days.
"In the modern economy, supply and demand forces will impact the price of a hotel room or an Airbnb listing, and while price fluctuation is natural, the hotel industry has had the power to raise rates and price gouge consumers at their own will," says Zifkin. "Airbnb gives consumers more affordable accommodation options, and provides an elastic supply during large events. Ultimately, our platform has given consumers more options when they travel."
Airbnb's transparency, and ease of booking, has differentiated it from the typical hotel experience where, for example, it's still not always possible for families to book rooms side-by-side. And that's forcing the industry to make some much-needed changes.
an Airbnb host meets her guest
Value of Airbnb
Airbnb has managed to distinguish itself in the hospitality industry through data, which it uses to refine its technology platform and match the right guests to the right listings/hosts. The platform continues to evolve with Airbnb Trips (launched in November 2016), which rolled out in Toronto in March and Vancouver in July.
"Our vision is to make travel easy and magical by immersing travellers in local communities and providing access to unique and authentic experiences, such as Sake A to Z in Toronto and North Shore Running in Vancouver," says Zifkin. "Like our core Homes business, Trips is powered by people, which allows us to unlock cultures and places through the people that live there."
This isn't just limited to vacationers; even business travellers are embracing the Airbnb experience. More than 10% of all travel that happens on Airbnb is for business, with more than 250,000 companies using Airbnb for that purpose, according to Zifkin. The company has responded with Business Travel Ready listings, which offer amenities tailored for business travellers.
"A recent trend we've seen is that business travel is becoming less about being a road warrior and more about mixing business with leisure," says Zifkin. "Around 60 per cent of business trips booked on Airbnb in the last year included a Saturday or Sunday night because business travellers are looking for opportunities to mix work travel with the chance to explore a city."
Challenges on the Road to Success
The platform has taken off, but the road to success hasn't been without a few potholes. In 2012, Airbnb began offering a $1 million ‘Host Guarantee' insurance coverage policy after receiving complaints from hosts about guests throwing parties and trashing their place.
Due to housing regulations, some cities started to fine or evict hosts who were renting on Airbnb (New York threatened to ban short-term rentals in 2014), kicking off a slew of ongoing regulation headaches for the company. Airbnb is now attempting to work with regulators to collect local hotel taxes.
There's also some criticism that Airbnb is pricing renters out of certain markets (in Barcelona, for example), since properties are being used as short-term rentals for tourists. New research from McGill University suggests that a small number of large commercial property owners account for the lion's share of Airbnb revenues in Montreal, Vancouver, and Toronto, and are eating up the local supply of housing. For its part, Airbnb claims the data was manipulated to misrepresent the profile of hosts.
"Roughly three-quarters of our listings are outside the main hotel districts," says Zifkin, "giving millions of everyday people the chance to travel to cities and neighbourhoods they might otherwise miss, all while bringing economic and tourism benefits to communities that may not have benefited from them before. Airbnb also provides hosts the ability to meet people and share their cities."
Travel now accounts for 10% of global GDP, Zifkin adds. "We believe there are ample opportunities for everyone in this landscape. What Airbnb offers travellers is a new, more affordable option. Travellers have become accustomed to paying high rates for hotel rooms when trying to visit a community for a big event, during a popular weekend or a holiday. While some price fluctuation can be attributed to basic supply and demand, there have been examples of hotels engaging in price-gouging. Airbnb has the potential to provide travellers with an alternative to high hotel rates, increase supply, and provide more choice."
Responding to the Disruption
In addition to affordable, short-term accommodations, Airbnb is also disrupting the hospitality industry by offering unique, interesting experiences. And hoteliers are responding. Hotel chains are attempting to make their brands more interesting, offering features such as mobile check-in or customized ‘experiences' for guests.
They're also investing in soft brands, such as unique or quirky properties aimed at niche audiences, often at a lower price point, but with standardized service and booking tools, such as Hilton's Tapestry Collection or Marriott's Autograph Collection. Some of these brands are meant to appeal to Millennial travellers who want less service, but more technology. Hyatt's new Hyatt Centric, for example, is piloting room service options, such as the ability to order food from GrubHub and charge it to the room.
With its acquisition of Starwood, Marriott International now has 30 brands and 6,100 hotels in 124 countries, as well as two experiential platforms (MR Moments and SPG Moments). One brand it's rolling out is Moxy, which offers compact, low-cost hotel rooms, accessed with a smartphone app. The brand offers more communal spaces for guests, 24x7 food and drinks, high-speed Wi-Fi, and plenty of connectivity options, as well as extras like an artist-in-residency program and a cool Instagram feed. Moxy Hotels also collaborated with the company's Content Studio to develop a YouTube Web series hosted by comedian Taryn Southern of Taryn TV. Called Do Not Disturb, it aired weekly on MoxyHotels.com and through the Moxy YouTube channel to serve as a virtual extension of the brand.
Moxy Hotel, Marriott's lifestyle brand
"As a global company, one of our top priorities is innovation in order to build positive customer experiences and strengthen our customer relationships," says Don Cleary, President of Marriott International, Canada. "Some of the innovations we've led in loyalty in recent past include offering our Marriott Rewards and SPG members a slew of benefits such as free Wi-Fi, exclusive room rates, and the ability to use points to pay for experiences like private wine tastings, celebrity meet and greets, and even exclusive concert and sports packages."
The company also launched a redesigned Marriott mobile app in January, which allows guests to communicate directly with hotels about their preferences before and during a stay, and to use their smartphone as a room key at more than 500 of its properties. In 2014, Marriott began offering mobile check-in/check-out and mobile room ready alerts; to date, more than 12 million guests have taken advantage of that feature, according to the company.
A collaboration with Netflix is also meant to build on the customer experience. "Because consumers are choosing to take their streaming content with them when they travel," says Cleary, "Marriott is making it a priority for them to easily access and view their preferred content via their Netflix accounts in their guest rooms."
This August, Marriott confirmed a joint venture with Alibaba Group Holding Ltd. that will serve Chinese consumers traveling abroad and domestically. Through the Fliggy storefront, Alibaba's travel service platform, Chinese travelers can gain access to information and promotions for Marriott hotels, providing a seamless, integrated and personalized experience.
Marriott's strategic efforts to gain traction in a changing market are getting noticed. Forbes recently named the company among 2017's World's Most Innovative Companies, joining the ranks of others like Tesla, Amazon, and Netflix.
In an interview with Fortune, Airbnb co-founder Chesky said the short-term rental company serves a different segment of travellers than hotels: the average Airbnb stay is 2.5 times longer than the average hotel stay. But there's no doubt its business model has disrupted the traditional hotel business, offering another option to short- and long-term travellers, and it's even wooing business travellers.
That's forced the hospitality industry, an industry that has traditionally been slow to evolve and adopt new technologies, to improve the guest experience, from offering niche products to experiential services. And hotels are placing more emphasis on traditional strengths, such as amenities, safety and standardized service.
Hotels aren't disappearing. But they're evolving, thanks to Airbnb. And that adds up to more choice, and better choices, for travellers.
At top: an Airbnb listing from Japan