When I first explained the concept of Airbnb to my mother, her reaction was “Why would you stay in a stranger’s house?” A friend gasped “What if the host is a kidnapper who will keep you in her basement forever?!”
Both diverse yet fair line of questioning. Forget the extreme scenarios, but hosts and guests can both be unpleasant or rude or worse of all…unhygienic.
Airbnb grappled with these and many other such dilemmas in their early years. What they had going for them was the growth in the sharing economy and people’s willingness to try new ways of doing the old things. Not to mention the price point. Airbnb was offering cheaper alternatives for the price conscious consumer. Their offering was appealing to families who usually need to take a suite or 2 rooms, and now could rent a full house for less or Millennials who crave unique experiences and are generally more “anti-establishment”.
Soon it moved to promoting its “live like a local” experience and recently launched Airbnb Experiences and Airbnb for Business. The most recent statistics show that Airbnb now has over 2 million listings in over 190 countries. The company is worth an estimated 25.5 billion, based on the latest round of funding of 1.5 billion.
A new Consumer Reports survey shows that 70% of people who have used Airbnb or similar competitors chose it to save money, and more than 50% cited “unique accommodations” or “availability of kitchens” as relevant to their decision. 90% of those people rated their experience either “good” or “very good.”
In a recent R3 survey, customer experience and engagement came up as the factor that will be most important in driving brand growth in the next 3-5 years. With Airbnb trying to lay claim on ‘experiences’, hotels need to fight harder to survive.
So how can hotels stake their claim on the throne? This Hotel vs. Airbnb war is being fought on two fronts.
Protecting the wall
1. While safety is an aspect that all travellers need and can be leveraged easily by hotels, these two target audiences are the ones that Airbnb would find most difficult to expand into:
The Business Traveller: Who requires end-to-end experience starting from flexible check-in time to uninterrupted Wi-Fi and privileges like gym, business centre and even a spa thrown in. Also, this group is a creature of habit and hungry for those loyalty programme points earned with business travel which goes towards the family holiday. This segment needs someone who they can reach 24/7 and who is 100% accountable for their experience. Airbnb hosts are proxies for the company and this is a pain point that is tough to relieve.
After the acquisition of Starwood, Marriott has become the world’s largest hotel chain with 30 hotel brands, 5,800 properties, 1.1 million rooms in more than 110 countries and with 85 million Loyalty Programme Members. This is a core strength that Airbnb will find difficult to replicate.
Hotels should look to re-hauling their loyalty programme to offer better financial benefits and highly personalised services.
2. The Luxury Traveller: With Airbnb already eyeing this segment, hotels will need to increase their ‘Night Watch’. It appears that Airbnb is interested in acquiring Luxury Retreats because of their extremely talented team with deep experience in the luxury segment.
Homes on their platform include a villa owned by Francis Ford-Coppola in Puglia, Italy and Richard Branson’s Necker Island. Hotels need to pay special emphasis on this consumer segment which has deeper pockets and is not easy to please. They dislike uncertainty that is inherent in Airbnb, are used to personal attention and require their ‘hygiene’ services like pools, spas, room service, etc. Building more personalised experiences to pamper (and even pander) to this group will be the need of the hour.
Bringing out the dragons
1. The money to acquire: Large hotel chains are looking at previously-not considered kind of acquisition. Wyndham Worldwide, famous for hotel chains like Travelodge and Ramada has acquired Love Home Swap, a start-up out of London that lets people book time to stay in other people’s homes. The deal may not show strength in numbers that Airbnb boasts of but depicts a trend where the giants that control the vast amount of hotel bookings online will be acquiring smaller start-ups. AccorHotels also acquired Onefinestay, a venture that provides high-end homes combined with a hotel-like services.
2. Using policy to arm-twist: Time is ripe to for hotels together to lobby the authorities to get Airbnb on equal footing as hotels with respect to taxation and property laws.
In recent news, caretakers in Dublin apartment blocks were told to act as spotters this summer to catch Airbnb guests. The move was part of a crackdown on tenants who are ignoring bans on offering their apartments as short-term sub-lets.
At a government level, Barcelona’s city government has opened nearly 6,000 disciplinary cases against illegal tourist apartments in the past 16 months — signs of a continuing conflict that pits the city’s booming tourism industry against local regulators and many residents.
The operators of a luxury high-rise apartment building in Chicago’s Theater District have slapped Airbnb with a lawsuit, arguing the online lister of short-term or vacation rentals should be made to pay for disrupting life in the building. As tenants continue to list rentals, even though their leases and building rules prohibit them from renting their apartments through such services.
3. Building an ecosystem of partners: Corporates are slowly coming to grips with the fact that they need new blood to combat disruption. Marriott is going to kick off a start-ups program called Travel Experience Incubator. They have already received 165 applications from entrepreneurs in recent weeks and this 12-week program leads up to a demo day, when the start-ups pitch their products to the judges.
The hotel industry today is well placed to disrupt its disrupter. A coordinated attack on all fronts- price, positioning and policy will be essential.
The writer is Seema Punwani, partner at R3.
(Image courtesy: 123rf)