Competing with Booking and Expedia
Former Country Manager at Airbnb and Director at eBay, APAC
inpractise.com/articles/airbnb-challenging-booking.com-expedia
Why is this interview interesting?
- How Airbnb can differentiate itself from larger OTA’s and offer something different to traditional hotels
Sam McDonagh
Former Country Manager at Airbnb and Director at eBay, APAC
Interview Transcript
Clearly, we’ve seen Airbnb onboard more traditional properties, to the marketplace which has somewhat shifted the pricing structure from strictly a guest paying a service fee, to also the host paying either a fixed fee or a host and guest fee. What is your view on how Airbnb can really compete with traditional OTAs, in that traditional property game?
Where it remains authentic to Airbnb’s mission, of a world where people can belong anywhere, that could mean they belong in a hotel, it could mean a serviced apartment and it could mean all of these things. Predominantly, it means staying in someone else’s home. I think where Airbnb will compete against the traditional OTAs is, Airbnb is more than just transaction based. I recall conversations I’ve had with GMs of five-star hotels that maybe have listed on the Airbnb platform. You talked to them about what’s different and they say that Airbnb helps them remember what hospitality is actually all about. It means that they come out from behind the desk, they potentially greet the guest, in a way that’s different from coming up and checking in, in the traditional way, or sitting down at a desk, in some of the more upmarket resorts. Maybe they actually show them to the room, because it may have been outside their traditional booking system. They show them the room, they show them the minibar and, when they check out, they return the room key or the room card in a different way from, maybe, that business of traditional hospitality has evolved into.
I think that that’s a way that Airbnb would continue to be able to differentiate itself from those traditional OTAs, in as much as, it’s not just a transaction that has taken place. There’s something more to it. There’s the human element, even though that human element can be virtual.
Do you think, in the long run, whether that’s five, seven, 10 years’ time, the supply side is, effectively, completely commoditized across all of the OTAs, including Airbnb? You’d see that, arguably, Airbnb would have probably more individual homes, versus the Bookings or the Expedias, but also Airbnb could onboard the independent hotels and the hotels that are on the OTAs and Expedia? Do you see that the supply side is going to be completely commoditized, in the long run? If so, what do you see the effects of that being?
One of the things that guests are coming to Airbnb for is the genuine, authentic travel experience, when they go to a place. I’m not sure I can imagine a time where everything is as commoditized. One of the risks that the OTAs have that Airbnb has, and one of the things that I hear from hoteliers, is they don’t like the OTAs. They feel as if they are competing with them, for their own inventory. You see hotels and hotel chains and groups offering benefits if you book direct, specifically with the hotel, as opposed to going through a third-party OTA. They don’t want to be beholden to a third-party OTA, to compete with their own inventory. As information on the internet becomes, again, more freely available and transparent, how people find places to stay could be different.
In the future, we’ll see far more of people going directly to properties, as opposed to through a third-party OTA. How that might represent a risk to Airbnb is, I think, is along the lines of individual hosts may have their own website. They might be a home or an apartment that’s booked out 90% of the time. Many of those people might want to come back again and again and again. Those hosts have the opportunity to market directly to their guests, again and again. I don’t believe that’s an issue, so far, for Airbnb, because they do more than enough to get guests to come back to the Airbnb platform. It’s so simple, they value the reviews and their standing on Airbnb. There is the right kind of insurance that’s built in, on Airbnb. They can trust where they’re staying. There’s a lot of reasons why people will continue to come back to Airbnb in the numbers, if not more so, than they have so far.
Do you think Airbnb entering the traditional hotel space, versus OTAs, will drive the take rate down lower than the 14% it roughly is?
Whether it drives it down or whether it goes up, I think could be quite different. For the property owners on the traditional hospitality side, are they driven by price or occupancy? What are they willing to give up? The thing that Airbnb brings is so much organic traffic, of people coming to Airbnb that that could, effectively, be a far more cost-effective driver of demand than paying an OTA a significant take rate than what they are currently doing. I think that there will be a balance, as well. I don’t think it’s a matter of picking winners or losers, at this stage. There is a lot of runway in this space but, at the same time, things can be turned on their head, pretty quickly.
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