Airbnb at IPO part I: Who are today’s Airbnb hosts and how loyal are they?

While the precise alchemy of Airbnb’s brand is a mystery, Airbnb’s supply and its host community is surely a huge ingredient. Airbnb hosts are therefore an interesting topic for scrutiny ahead of the Airbnb IPO.

Airbnb’s IPO marks a milestone in the travel industry and beyond. By redefining traveler expectations and establishing a new type of lodging, Airbnb built the second most valuable travel company in the world in just a decade. For us at Transparent, Airbnb serve as a lodestar in our mission to establish the data source of record for short term rentals. Now, as public market investors consider investing in Airbnb, we want to share observations on key questions facing the company. Part I: Who are today’s Airbnb hosts and how loyal are they?

Who are today’s Airbnb hosts?

Airbnb defined the sharing economy, teaching travellers how staying in a stranger’s house could unlock an amazing experience. Instead of settling for a cookie-cutter hotel in a sterile tourist district, travellers could experience real life in any neighborhood, guided by welcoming local hosts. Moveover, these Airbnbs were 30% cheaper than a hotel and came equipped with better space (e.g. living rooms and bedrooms) and amenities (e.g. kitchens, washer / dryers).

For many years, this experience was available exclusively on Airbnb. Hosts effectively operated as Airbnb franchisees. Airbnb served as their sole source of demand. Airbnb provided the tools, software and training to run their business. And these suppliers self-identified as Airbnb hosts.

As Airbnb has catalyzed a revolution within alternative accommodations, the demand it has driven has in turn shaped its own offering and attracted different consumers. This transformation and its trajectory are important to the Airbnb IPO.

Fewer Airbnb hosts are sharing

Today, the vast majority (79%) of Airbnb supply are entire homes and apartments, and this has been the fastest growing component over the past 3 years as Airbnb grows further from its sharing economy roots. Shared accommodations now comprise just 20% of current Airbnb listings. 

Within entire homes, apartments particularly have grown, now making 46% of total stock. The castles and treehouses of Airbnb’s championed ‘Other’ category, is the only entire home grouping to see its share fall.

More Airbnb hosts are professional

Visualising the distribution of listings by how many listings their host manages allows us to see a progression towards professional management.

The majority of Airbnb listings now come from professional managers. Individual hosts have shrunk from 47% of all listings as recently as March 2018, to 37%. Small property managers (between 2 and 20 listings) comprise the largest portion of Airbnb supply, but larger property managers are also growing fast.

Those professionals hosting over 100 listings have grown the most considerably, but the percentage of all hosts with more than 1 listing have grown, eating into the that of the single property hosts.

Guests prefer smaller hosts

Despite single property owners being less common, their share of trips has remained far more stable: while listings fell from 47% to 37%, their trips only dropped from 46% to 44%. By contrast, as hosts with 2-20 properties grew in proportion from 43% to 49%, their trip share remained stable at 51%. These trends hint that individual, non-professional listings are growing in relative demand.

In addition, individual hosts deliver the best guest experience. Single property hosts provide the beating heart of the Airbnb brand. Based on guest reviews, travellers consistently rate these hosts the highest.

This presents a challenge to Airbnb as it professionalises, as its brand is built upon guest experience, yet the larger the host the lower their average review count and rating.

How loyal are Airbnb hosts?

Our analysis has given us an idea of the new Airbnb host profile. The final question is whether this movement towards professional, entire home supply is impacting host loyalty. The exclusivity of Airbnb’s listings is central to the value of their inventory, and therefore to the Airbnb IPO.

The bigger the host, the less exclusive they are

The first observation to make is that Airbnb has a respectable exclusivity ratio in all owner size groups. At least 40% of listings in every category are listed solely on Airbnb.

However, the more listings managed by a host, the more likely they are to list their inventory across multiple channels. 60% of listings managed by a large property manager (e.g. managers more than 100 listings) appear on other platforms in addition to Airbnb. By contrast, less than 20% of listings managed by an individual (i.e. hosts with just one listing) appear on multiple channels.

Airbnb hosts are most loyal

The inventory exclusivity of Airbnb exceeds that of Booking.com and Expedia. In every nation analysed Airbnb controlled more total listings, with a higher percentage of them exclusive. In most countries, Booking.com has the second most listings, but Expedia is very competitive in the US.

Our final chart shows that while exclusivity has not dropped significantly in most countries, there are signs of loyalty wavering in more established markets as inventory professionalises. Meanwhile Mexico, Singapore and Brazil saw Airbnb exclusivity increasing over the last 3 years.

Conclusions

The Airbnb host community and its origins in the sharing economy undoubtedly contribute to its brand. Over time however, the composition of Airbnb hosts has evolved. No longer atypically a local stranger sharing their space and experience, a generation of hospitality entrepreneurs identified the arbitrage between long-term residential leases and the revenue from Airbnb rentals. These operators rapidly increased the stock of professionally managed inventory. They also attracted capital; over the past decade $2B was invested in short term rental property managers.

Viewing themselves differently from “Airbnb Hosts” with a quirky, personal experience, hospitality brands (e.g. Sonder, Vacasa) were established. They brought direct consumer relationships, defined standards, and consistent experience. Rather than relying on Airbnb software, they developed their own systems. And unlike legacy Airbnb hosts, they sought to maximise revenue by distributing inventory as widely as possible. These “Airbnbs” were not just available on Airbnb, but the likes of Booking.com and Expedia, plus direct websites.

For consumers, stays with these hosts have important differences – instant booking (but at the expense of personal host interaction), consistent furnishing and standards (but a more generic, hotel-like environment). For Airbnb, they create some friction with their ideology. Professional managers raise the floor, reducing the frequency of Airbnb horror stories; professional managers also lower the ceiling, eliminating transcendent moments that establish the brand.

This professionalisation may also come to challenge Airbnb’s exclusive stranglehold on vacation rental inventory. For now however, if a host lists on one platform, it is most likely to be Airbnb above all others.

So, how will this transformation of Airbnb hosts continue to affect consumer perception and loyalty? Moreover, what should it mean for the Airbnb IPO?