In the latter half of 2013, Airbnb began making more direct comparisons between itself and the hotel industry.
He was right.
NB: This is an analysis by Douglas Quinby, vice president of research at PhoCusWright.
Intended or not, the direct comparison with two of the world’s largest hotel companies proved to be perfect PR for the fast-growing startup.
Within six months, the company had closed a monster $475 million funding round.
The extensive media coverage in the run-up to the funding couldn’t have hurt. It widely – and almost always superficially – compared the reported $10 billion valuation to the lesser market caps of several hotel companies, including IHG.
The comparisons – both in the number of rooms and in valuation – may have made for great PR, but otherwise don’t make much sense.
Airbnb’s business model shares little in common with that of hotels. It aggregates inventory and charges booking fees.
The company does not own properties, manage inventory and on-property services and facilities, or even have control of its hosts’ availability calendars as many vacation rental management companies do (although Airbnb has taken some interesting and important approaches to these areas with Instant Book and predictive pricing for hosts).
Airbnb, however, has good reason to position itself with hospitality companies rather than with the likes of online travel agencies.
According to PhoCusWright’s Share This! Private Accommodation & the Rise of the New Gen Renter, 22 million adults stayed in private accommodation when traveling for leisure over the past year.
While that number looks big, and it has been growing, it still accounts for just 17% of all US travelers.
Of the remaining 83%, more than four in five of those travelers did not even consider renting a home, apartment or space when traveling.
Three reasons why US travelers don’t consider private rentals
For the market to grow, of course, more travelers need to start considering private accommodation in the first place.
There are three key reasons why travelers do not consider rentals:
One in four of those travelers who did not consider a rental just didn’t think about it. Renting a home or apartment did not occur to them as an option.
Companies such as Airbnb and HomeAway have been investing in building category awareness, and both awareness and bookings have risen.
Another one in four of those travelers who don’t consider renting is uncomfortable staying in a stranger’s home.
This is one of the defining reasons why Airbnb has broken away from the crowd of alternative accommodation startups. It has focused on building not just inventory, but distinctive product.
It has sought to foster not just a marketplace, but a community.
They host member meet-ups around the world, hire photographers for property photos, and have built out a rich two-way system for guest-host communication and reviews (so the host can review the guest, in addition to the guest reviewing the accommodation).
They also coach and incentivize hosts to be responsive to prospective bookers. And whatever you may think about the company’s new logo and all of the commentary that ensued, Airbnb wants to be synonymous with belonging and kill the trust issue once and for all.
3. Hotel services
Perhaps this is of the most importance. The most common reason why travelers do not consider rentals is quite simple: they prefer hotels (36% of travelers who don’t consider renting).
These travelers equally cite preferences for such commonplace hotel services such as a front desk and concierge, in-room features and on-property amenities.
So, what next?
Hotels rattled by the rapid rise of private accommodation may decide to take some comfort in this stark preference for hotel services among a wide swath of travelers.
But they do so at their peril. Airbnb is not only attempting to position itself as a hospitality company, but it is investing in hospitality in numerous ways, such as hiring Chip Conley to head hospitality, introducing Airbnb neighborhoods for local recommendations, and experimenting with tours, activities and a virtual concierge service.
Vacation rental management companies have been moving in this direction for years, investing in more hotel-like features such as front desk services, keyless entry and on-property amenities.
But what distinguishes Airbnb’s approach is the company’s focus on its hosts. From local meet-ups to its first global host event, Airbnb has embraced the idea that it is the local hosts who have the biggest opportunity to influence the traveler’s experience.
I experienced this firsthand this summer: when I inquired with my host about a nearby gym, not only did he provide a recommendation, but he also got me a one-week pass at no charge.
With the majority of travelers not even considering private accommodation for leisure travel and the clear preference for hotel-like services, expect Airbnb and private accommodation providers to introduce only more services and programs (loyalty, anyone?) aimed at improving the guest experience – or enabling hosts to deliver those services.
Hotels should pay no mind to the superficial comparisons with Airbnb around room volume or valuation.
But they should pour over every detail when it comes to hospitality and the guest experience, or Airbnb and its growing legion of hosts may just redefine it for them.
NB2: PhoCusWright’s Share This! Private Accommodation & the Rise of the New Gen Renter provides deep insight into the U.S. rental traveler. The study explains who they are, how they travel, what they want, and how they shop and book.
The report also delves into the competitive overlap with hotels, including the extent to which renters consider and stay in hotels, whether non-renters consider private accommodation, and the potential impact of rentals on the traditional hotel market.
NB3: Hotel icons image via Shutterstock.