Airbnb at IPO part IV: How well has Airbnb adapted from its sharing economy origins?

A hunger for innovation and growth has driven Airbnb since its inception. Not content with creating a new category of lodging, it has sought to redefine other aspects of travel and the Airbnb experience. The proportion of Airbnb inventory made up of shared homes has fallen to a fifth. And as the distance between Airbnb and its unique origins has grown, so has the hunger, and need, to find new unique strings to its bow. The IPO provides a moment to revisit some of these initiatives.

Airbnb Experiences

Experiences are perhaps the most significant attempt to expand Airbnb’s offering. With Airbnb Experiences, consumers can book unique local activities, in addition to places to stay. Because they are only available on Airbnb, these Experiences provide another way to differentiate the Airbnb brand as other OTAs begin listing short term rental inventory. And Experiences provide hosts with additional sources of income, further cementing their loyalty to the platform.

Experience hosting is a more challenging business than accommodations; although Airbnb Experiences began in 2017, they average only 66 guest reviews per experience across their top 20 locations. In fact, at the end of 2019, 67% of all experiences worldwide had fewer than 10 reviews.

If Experience hosts cannot scale or systematise their operation in the same way as accommodations hosts, it stands to reason that they also churn at a higher rate. Airbnb Experiences are an almost exclusively urban phenomena. With limited exceptions (Bali, Havana), experiences occur in cities.

Airbnb Experiences do not show professionalisation, yet. Unlike accommodation hosting, experiences are largely an individual-driven product. While the majority of Airbnb accommodation listings come from professional managers, individuals dominate Experiences supply. Only 2% of Airbnb Experience hosts have more than 5 total experiences. Experiences are a labor-dependent operation, with diseconomies of scale, meaning that Experiences will grow more slowly. There is potential though, with the average revenue potential for each experience run $615 in the US; the nation where experiences are most established.

Airbnb Plus

Announced at its 10-year anniversary event in 2018, Airbnb Plus sought to reach a broader audience. With Plus, Airbnb developed a brand standard, documented in a 100-point checklist covering amenities, cleanliness, and an Airbnb-approved aesthetic. Like hotel brands, hosts would be vetted for their adherence to these standards. Just as Marriott loyalists know what to expect in a Courtyard, travellers could trust the quality and consistency of these listings.

Two years later, the program has yet to achieve scale. Against a goal of 75,000 listings by year end 2018, Airbnb Plus now has about 20,000 listings. Plus listings account for only 0.6% of US supply in 2020. You can see more in depth analysis of the success and worth of Airbnb Plus here.

Extended Stays

Nomadic Living has become more commonplace thanks to Airbnb. Even prior to COVID, Airbnb recognised the use case of professionals with locational flexibility. In 2019, they acquired Urbandoor, focussing on relocations and longer term stays, and invested in corporate housing brand Zeus Living. 

And COVID has been rocket fuel for the trend of using short term rental inventory for long term stays. The average length of stay for an Airbnb booking has increased by 50% since April 2020, and other short term rental platforms have also shown increases.

In fact, as the decline in booking demand hit, Airbnb built upon its longer stays best, reaching over 5 days on average. Partly as a result of this, it also retained its booked nights best (see 3rd chart). Through 2020, Airbnb went from bottom of the pile year on year, to top. The numbers are not exactly good, but they show something positive for Airbnb.

Driven by greater professional flexibility and the promise of living like a local anywhere in the world, long term stays are poised to drive growth into the future. And Airbnb are well-placed to capitalise.

Conclusions

Airbnb is growing further from its home-sharing roots, and has attempted to branch out into new markets.

Arguably the most major of these branches, Experiences do not lend themselves to the same scale as accommodations. Experiences make a point of difference for the Airbnb brand. However, whilst they are slow-growing, with only a quarter of Experience hosts earning more than 20 reviews, they are also more likely to churn. Airbnb Experiences have yet to find their feet.

Airbnb attempted to speak to a different audience with hotel-standard expectations with their Plus program. Two years after its inception, Plus listings total only a fraction of its initial target, and efforts appear to be evermore passive.

With vacation rental trips 50% longer on average off the back of the pandemic, an opportunity arose. Airbnb have capitalised on their early recognition of remote working and living and pushed extended stays best. Driven by greater professional flexibility and the promise of living like a local anywhere, long term stays are poised to drive growth into the future.

And these situational demands provide as much of an opportunity for adaptation as more self-instigated ventures. Airbnb’s forays into different areas are largely unproven, certainly in term of new revenue streams, yet when under pressure from demand swings, Airbnb has at least proven itself adaptable.