Airbnb Experiences at IPO

Experiences constitute a unique addition to what Airbnb offers consumers. They tempt hosts with additional revenue possibilities. They reinforce Airbnb’s appeal to guests by giving the opportunity to book a local home and a local experience simultaneously. Experiences also offer an additional revenue stream.

The significance of Experiences to the Airbnb IPO

Airbnb need Experiences to remain a successful core to their efforts, and not only to bolster revenue. A point of difference in its inevitable consumer competition with Vrbo and Booking.com, Experiences are a venture Airbnb is keen to highlight and validate ahead of its IPO.

And highlight it does. In their S-1, Airbnb have taken the approach of reporting accommodation nights alongside Experience seats. In fact, ‘Experiences’ are mentioned 252 times, with revenues tied together with ‘nights’ (mentioned 172 times). Despite this attempted equivalence, Experiences and Accommodations are in two different worlds. As mentioned in Arival‘s report on the same,
“Substantially all of the bookings on our platform to date have come from nights.” All of the metrics that matter, such as bookings, revenue and profit, blend with the core homes business. 
Around the end of 2019, active experiences had gathered 1.5M reviews; by the same point in time, all listings had totalled 159M reviews. The total addressable markets as quoted in the Airbnb S-1 are $1.2 trillion for short-term stays and $239 billion for experiences.

Experiences as Airbnb Revenue

Granted, accommodations have been around 4 times longer, but the maths speaks volumes about the contribution of Experiences to Airbnb revenue.

By the end of 2019, we found that the average price for an experience seat was 55 USD; while the ADR for a listing is double that ($110) – see page 11 gross daily rate published by Airbnb. Further, with stays averaging 3.5 days, the price of a stay is around $385 to an Experience’s $55.

Let’s estimate the split of gross booking value using September 2019 as an example:
September 2019 recorded 5.3M ‘Stay’ Reviews. Accounting for the review to booking ratio (0.68) and multiplying for the average length of stay (3.5 days), we reach an estimate almost $3Bn. Further, we see this figure rationalised in Airbnb S1 – with GBV from September 2020.
We could generously assume, based on the ramping up of this sector and the likely reality of a single user reviewing for a booking of multiple seats, that 10% of all Experience reviews were gathered in the month of September 2019, 0.15M reviews were posted. Allowing for the same review to booking ratio means gross booking value at $55 per Experience seat equals ~$12Mn.

This suggests that the Airbnb GBV split between Stays and Experiences is around 99.5% vs. 0.5%. One caveat to consider is that Airbnb have structured their fees differently where Experiences are concerned, so their take-home is slightly better. While commission on Stays varies between 14% and 20% and typically falls around 16%, Experiences generate a static 20%. However, ultimately the revenue contribution from Experiences remains fairly negligible.

Experiences & the Airbnb brand

To quote Arival‘s piece; “Four years later, Airbnb remains an online accommodation marketplace at its core. With some 5.6 million active accommodation listings and just a little over 40,000 Experiences, Experiences have had more impact on the tours and activities industry than on Airbnb’s own business“.

This goes a long way to explaining why Airbnb choose to bunch Stay and Experience verticals under one umbrella when discussing revenue. Their approach surely expresses something more however than making the sums easier; Airbnb are keeping Experiences eminent. Not only are they an attractive extra layer for guests and hosts alike, but Experiences cement the unique vision that Airbnb was built upon – live like a local anywhere. The success of this initiative can only serve to distinguish Airbnb amongst its competition and strengthen the Airbnb brand.