Move by move, Airbnb is entering into the traditional hospitality space, and this latest partnership is part of a larger strategy to expand and evolve its business. Airbnb
Airbnb isn’t interested, at least for the moment, in putting “mass-produced” hotel rooms on its platform, but it is expanding its accommodation choices through a new partnership.
The company has partnered with the Association of Independent Hospitality Professionals and ThinkReservations to make it easier for bed-and-breakfast owners to advertise their rooms on Airbnb, a sign of the company’s bigger ambitions to grow its already large portfolio of more than 4 million listings worldwide.
Airbnb CEO Brian Chesky has hinted that he sees more professionally managed properties joining the Airbnb community in the years to come. On November 29, during Airbnb’s first Global Host Q&A session, he answered a litany of questions from thousands of Airbnb hosts around the world. The very first question in the hour-long session, in fact, perfectly aligned with the company’s news about ThinkReservations today.
Chesky was asked why Airbnb is allowing commercial property agents on its site.
He said hotels, bed-and-breakfasts, and other more traditional hospitality businesses shouldn’t be excluded from Airbnb. However, those proprietors of “mass-produced hospitality” aren’t welcome.
“We have to be more inclusive of who belong on Airbnb but there’s also a flip side: Not everyone belongs on Airbnb,” Chesky said. He later continued, saying, “We want to have tighter host standards. Groups that provide mass-produced hospitality, who don’t offer belonging, who don’t’ care about what we care about — they don’t meet our standards, and they find somewhere else to do their business.”
Chesky said that allowing hotels and bed-and-breakfasts into the Airbnb community isn’t a sign that the company is “leaving our roots” or “going commercial” in the pursuit of an initial public offering (IPO).
Instead, he said, “What would help us is to build a bigger stronger community of hosts, and that’s what we are committed to. There’s not some other agenda here. We are not at all leaving our roots. We have more things coming that will hopefully reinforce that.”
With today’s announcement, any bed-and-breakfast that uses the ThinkReservations platform to manage its bookings can sync its inventory onto the Airbnb platform, as well as have access to guest information for any bookings made via Airbnb.
Bed-and-breakfasts and inns represent a $3.4 billion industry, and the Professional Association of Innkeepers International estimates there are 17,000 inns in the U.S. alone. The U.S. hotel industry, by comparison, encompasses more than 52,000 hotel properties.
ThinkReservations is a property management service that currently serves about 650 lodging providers throughout the U.S., and while it represents a very small portion of independent hoteliers, most of whom run inns or bed-and-breakfasts of only 15 to 25 rooms, this partnership with Airbnb highlights a larger strategy, both for smaller independents and for Airbnb itself.
Rob Fulton, CEO of AIHP, an organization of approximately 530 owners of small independent lodging accommodations, said his organization reached out to Airbnb three years ago when the association launched in the hopes of collaborating with the company. This partnership was a result of those conversations.
“Airbnb has had a pretty significant impact on the lodging industry, and our piece of it,” Fulton said. “To the credit of my board, they reached out to Airbnb and started to have conversations about what’s important to us and potential ways we could work together, and that’s evolved over the last three years. We want our members to be educated. We want Airbnb to be educated about what we’re doing, too. Understanding the Airbnb marketing channel and how to be successful on it is important to us.”
A direct relationship with Airbnb will also benefit ThinkReservations clients.
ThinkReservations CEO Richard Aday, added, “Having that direct connection to Airbnb allows our customers to put their properties on Airbnb and get the inquiries and reservations that can help their business, in a way that’s completely automatic because all reservations are automatically synced with ThinkReservations. They’re able to manage their Airbnb reservations using software they’re already used to.”
Why Would B&B Owners Want This?
Fulton said that, as of six months ago, approximately 40 percent of his AIHP members already marketed their rooms on Airbnb.
“We’re trying to get a handle on our members using Airbnb as an avenue to book guests,” Fulton said. “That’s where the partnership has helped us — to help us identify what our members need to be successful, and reservations play a huge part of that.”
For small independent inns and bed-and-breakfasts, there’s real value in getting bookings via Airbnb versus an online travel agency such as an Expedia or a Priceline, where commissions average 15 percent of every booking and can even be as high as 35 percent for some hotels. With Airbnb, the commission charge is only 3 percent; Airbnb also collects a booking fee that it applies to the guest, not the host.
“From a business point of view, this is going to give a lot more control back to these businesses to be able to keep more of the original reservation value,” Aday said. “In a lot of ways, the fact that Airbnb is starting their direct connection program and making it easy for legitimate businesses to connect to Airbnb will add competition to the online travel agency marketplace and one place they are going to add competition is with pricing.”
Bjorn Hanson, clinical professor with the New York University Preston Robert Tisch Center for Hospitality and Tourism, thinks the agreement “makes perfect sense.”
“The core cost — the commission rate — is significantly lower and it significantly reduces the guest acquisition cost when compared to an online travel agency,” Hanson said.
Whether these commission rates remain this low on Airbnb for the foreseeable future, however, has yet to be seen. Booking.com famously undercut its competitors with lower commission rates when it got its start, only to eventually raise them as the company grew.
Another added bonus, at least regarding the synchronization with ThinkReservations, is that the innkeepers and bed-and-breakfasts also receive guest information — something most online travel agencies do not pass along to hotels. Fulton said that was a major objective that AIHP lobbied for in its Airbnb discussions.
Hanson said that hoteliers he has spoken with indicate a reluctance to be associated with Airbnb, primarily because of Airbnb’s prior reputation as a platform for more budget-like accommodations.
“They were worried that Airbnb would have the risk of looking less professional or be for lower-quality hotels but that is no longer of particular concern,” he said. “Airbnb is being better understood now. There are homes now and host arrangements that are very upscale. Even Carlson Wagonlit Travel and American Express Travel now provide reservations for Airbnb. That, to me, was the biggest stamp of approval from an industry insider’s point of view.”
AIHP’s Fulton added that there’s a “natural synergy” between the types of hospitality experiences provided by small independent hotels, inns, and bed-and-breakfasts that’s in line with the kind of hospitality experience Airbnb has built in its $31 billion business.
“No one inn or bed-and-breakfast is the same,” he said. “Most hosts fall into that same category on Airbnb. There’s a natural synergy, honestly, for us versus maybe other options in the lodging space. The structure of how Airbnb has lent itself to being a good fit for the types of members that we represent.”
Why Is Airbnb Doing This?
This deal is just one of those many “things” Chesky hinted at, which are heralding Airbnb’s more open embrace of professionally managed accommodations, including bed-and breakfasts, as well as vacation rentals, and boutique hotels. And, you can expect more from the company in this realm going forward.
While there have been hotels that have listed themselves on Airbnb previously, it wasn’t until November 2016 that Airbnb made its efforts to bring on boutique hotels more official. Earlier this year, in August, Chesky tweeted that Airbnb now has more than 15,000 boutique hotels on its platform.
We now have 15,000 boutique hotels on Airbnb since allowing them last Nov
— Brian Chesky (@bchesky) August 10, 2017
In October, Airbnb debuted new tools that make it easier for vacation rental property managers to manage their listings on the Airbnb platform.
Also in October, the company revealed its plans to build a hotel-like concept outside of Orlando, Flordia, called Niido Powered by Airbnb.
Airbnb is also a confirmed bidder for Wyndham Worldwide’s European vacation rental business, which would boost its portfolio of vacation rentals. Earlier this year, the company acquired vacation rental company Luxury Retreats.
While Chesky denies that adding more professionally managed, or traditional hospitality products to the Airbnb platform is part of an IPO pursuit, it’s clear that for Airbnb to go through with one, growth will be crucial, especially at a time when reports suggest the company’s expansion is stagnating in the U.S. and Europe.
This partnership, while relatively small, may only be the beginning. Fulton hinted at even deeper collaborations between independent hotels and Airbnb in the future.
“There are other things we are working on with them,” Fulton said. One of those things includes the ability for Airbnb users to be able to know if a particular listing is part of a professionally managed inn, bed-and-breakfast or hotel.
“The hope would be, down the road, that these things would come to fruition,” Fulton said. “Too early to say, but they are open to it — to the ability to have professional lodging and independent lodging be identified on the site and have the tools and resources they need to manage their bookings.”
This is something we suspect is coming soon: That Airbnb will eventually redesign its site to make clearer what types of accommodations you can book, whether a spare bedroom, apartment, boutique hotel, or a massive luxury villa.
Skift also asked Fulton if AIHP wanted professionally managed properties to be rated or reviewed differently or distinctly from Airbnb’s traditional guest/host review system. Would inns prefer to have a different rating system than, say, the rating system that applies to a couch in someone’s bedroom?
Fulton said, “We really haven’t discussed the rating piece of it, but that’s something I would want to bring up. The way Airbnb has allowed guests to rate listings and hosts hasn’t really been addressed, to be honest with you. That’s something I want to discuss with our board.”
Hanson also wondered if AIHP members and other innkeepers are concerned about non-licensed properties being listed on the platform.
Fulton said that’s a topic AIHP has discussed with Airbnb.
“We’ve had these discussions with them where we have said to them we would ideally like to see some sort of process of vetting to make sure there are processes in place to make sure that it’s a professionally run property. Are they following local zoning? Are they adhering to whatever the rules are there to be considered for a lodging property? I don’t know where that will go. There’s got to be some kind of standard; there are standards for a bed-and-breakfast or inn. We want to make sure anyone classified as that keeps to those standards.”
As for Airbnb hosts who may bristle at the notion that professionally managed properties are joining them on the Airbnb platform, Fulton said he sees this addition as just part of the company’s evolution.
“I would say to them it’s an evolution,” he said. “We’ve said the same thing to our members. Technology is changing, especially with reservations. There will be some resistance, just like there’s resistance in our own membership against Airbnb and other short-term rental opportunities. There are some in our industry who are just not thrilled with that change. It’s an evolution, and our hope is that Airbnb evolves as a company and culture and wherever they want to take this, that small independent inns and bed-and-breakfasts are a part of that conversation.
Fulton said bed-and-breakfasts and innkeepers should play a role in Airbnb’s evolution.
“We want to be a part of that change,” he said. “Hopefully, we find a way so that professionally run inns and those creating the experiences that Airbnb was founded on can kind of coexist. I think it’s inevitable that those of us in the business have to be able to continue to evolve. We’re just trying to embrace where we’re going in the future, and that’s about embracing things we maybe didn’t think we would.”
NYU’s Hanson, for one, said he predicted Airbnb would eventually get into the hotel business more than 18 months ago, and today, he said he feels he’s been proven right.
Hanson likened Airbnb’s deepening role in this space as “similar to how Best Western has segmented its members’ properties.”
Hanson added: “Airbnb is definitely going into the hotel business and with this, going back to its roots. After all, ‘B&B’ is part of Airbnb’s name.”