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Boutique hotels see Airbnb as potential distribution channel
Airbnb’s founder Brian Chesky recently said on Twitter that 15,000 boutique hotels have a listing on the platform since being allowed to join last November.
At first glance, hotels advertising on Airbnb might seem an unlikely relationship. After all, the company is frequently claimed to represent a growing threat to the hotel industry, winning the loyalty of travelers and stealing market share. But a strong contingent of hotels see the partnership as a potentially fruitful one.
There are still stringent rules about the kind of properties allowed to appear on Airbnb. For instance, a hotel has to have 25 or fewer rooms. Style guidelines also state a preference for a number of boxes to be ticked—hotels with “unique design characteristics” and “local influences” are actively sought and welcomed.
Yet despite certain firm requirements, it’s clear that plenty of boutique hotels are making their way onto the platform. In fact, Airbnb now has dedicated pages that only feature hotel listings—a signal of its growing ambitions in this new booking space.
The question is, will these first wave of hotels find success? It’s too early to say. But in the following post, we’ll dive into some of the pros and cons to bear in mind when considering Airbnb as a new distribution channel.
The pros of listing with Airbnb
Compared with the stringency of OTAs, a listing on Airbnb generally comes with greater freedom and the potential to increase booking revenue. Here are four major advantages as we see them.
Direct communication with guests
Following a confirmed booking, Airbnb hosts can communicate directly with guests via the main Airbnb platform and app (in fact, the company requires all communication to remain on their platform to be protected by their insurance policy). This is in stark contrast to the way OTAs commonly restrict hotels from communicating and marketing to guests after an initial booking.
Airbnb sees this interaction as an integral part of their welcoming, host-led service. For hotels, it’s an approach that can prove highly advantageous.
With instant interaction, a hotel can inquire about a guest’s personal preferences and needs prior to arrival, helping to enhance their overall experience. In turn, this can help build rapport and strengthen relationships that lead to future bookings.
Having direct one-to-one communication also creates invaluable upsell opportunities. Room upgrades, personalized tours, and additional services can all be recommended to a guest based on any specific pre-stay data a hotel collects.
Lower commission costs
Airbnb also has lower commission costs than OTAs. Hosts are charged a service fee for each confirmed booking, which is usually 3% (although this can range between 3-5% based on the cancellation policy that the host selects). But even at 5%, this fee is significantly smaller than average OTA commission rates, which generally range from 15-30%.
Hosts can also implement a separate cleaning charge from their daily rate, helping to keep the published daily rate attractive and competitive during search.
When pricing an Airbnb hotel listing, however, hotels should keep in mind that Airbnb also charges a guest service fee ranging from 5-15% depending on the reservation subtotal, length of reservation, and characteristics of the listing. Airbnb is also required to collect VAT in certain areas, which may also bring the guest service fee to more than 15% of the subtotal. These fees are not published until the guest makes a reservation, then it is included in the total price charged.
Reach new audiences
Promoting hotel rooms on Airbnb is a great way to reach a new demographic that might not consider booking a hotel. A survey by Goldman Sachs found that most people who use Airbnb don’t go back to hotels. With that in mind, being present on the platform may be enough to tempt those who prefer peer-to-peer accommodation to reconsider their stance.
Tougher cancellation policies
Airbnb has created flexible, moderate, and strict levels of cancellation policies that hosts can select when creating their listing. In all cases, the Airbnb service fee is non-refundable, which helps to limit the practice of travelers booking multiple rooms and then canceling on all but one in the last minute. This practice has been made worse by some OTAs, which encourage this behavior by advertising “FREE Cancellation” on their listings.
The cons of listing with Airbnb
While ideally tailored to homeowners and alternative accommodation providers, Airbnb’s interface isn’t really refined for the more complex needs of a hotelier. Overall, a lot of the main drawbacks involve a lack of flexibility and a bigger time commitment in managing the listings.
Restrictions on room listings
Due to the limitations of the Airbnb platform, hotels will need to create separate listings for each individual room, instead of managing one listing for a specific room type. The primary reason for this is the availability calendar. It is tied to the room itself, so if a guest books specific dates, Airbnb will block out the calendar for those dates and the room will not be available to be sold, even if you have several other rooms like it that are available.
In addition, multiple rate plans can’t be sold for the same room. This lack of flexibility prevents hotels from easily implementing special offers or rates for booking (e.g. discount for booking far in advance, package for breakfast or spa, etc.). Airbnb does however allow hosts to create “Special Offers,” which essentially is a custom price.
No integration to hotel PMS or CRS
Airbnb hotel listings would have to be managed separately from other channels, as Airbnb has few integrations between standard PMS or CRS platforms. This means that if a room is booked via Airbnb, the reservation would have to be manually entered into the hotel’s PMS or CRS. While smaller properties may not find this process overly time-consuming, having to replicate work for each booking is clearly less than ideal.
It’s worth noting that Airbnb’s system isn’t set up for complicated tax structures such as occupancy tax and tourism tax. This means you may need to collect tax separately at the hotel, or make sure to delineate what VAT or taxes are included in the published rate. In both cases, guests need to be clearly informed about the exact tax they must pay before booking and during check in.
How Airbnb can adapt to the needs of hoteliers
Combined, the current downsides of managing a listing with Airbnb may prove too restrictive for some. But If Airbnb welcomes more hotels onto the platform, we may see specific changes that make life far easier for hoteliers.
The integration of more PMS and channel managers within the platform would be especially helpful. We may also see Airbnb start to build out more hotel-friendly management features such as the ability to sell multiple rooms through the same listing.
One thing’s for sure, Airbnb won’t be missing an opportunity here. The company’s track record of ambition and innovation indicates that it will almost certainly adapt its platform to the needs of hoteliers if this latest venture proves profitable.
A platform with promise?
Overall, Airbnb has a lot of potential as a low-cost distribution channel. The ability for direct guest communication, lower commission costs, and the chance to reach Airbnb’s loyal audience are all major perks worth consideration.
Of course, certain cons must also be weighed up. Hotels will need to factor in some of the platform’s inflexibilities, and the added operational costs involved such as the time spent managing the channel directly.
But with 15,000 listings since last November, boutique hotel owners clearly have an appetite for testing Airbnb as a new marketing and distribution channel. It’ll be fascinating to see how many hotels share this optimism and test out the potential for themselves.
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4 thoughts on “Boutique hotels see Airbnb as potential distribution channel”
This was a very interesting read – I have actually come across quite a few small independent hotels who are now using Airbnb as their primary online booking channel. The far reduced commission structure is clearly the motivation for these smaller properties.
I agree. I think we will definitely see smaller hotels get more and more creative with their distribution channels in the future. And who knows what Airbnb might do to court these properties?
Very interesting article to read about distribution channel of AirBnb.