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How Airbnb’s latest announcements may transform the online booking space

Airbnb is on a blitz as of late, announcing major product changes, wooing hotels, and drawing the battle lines against the OTAs all within the span of a few months.

During a speech at this year’s ITB Berlin, Airbnb’s Co-Founder Nathan Blecharczyk announced new updates and initiatives both on the B2C and B2B front.

Rolling out throughout 2018, a raft of improvements are being made to achieve a lofty goal. In Blecharczyk’s words, the aim is to make “Airbnb for everyone.” Significantly, this includes a full-scale attempt to attract more hotels onto the platform.

Blecharczyk’s presentation then demonstrated exactly how the company intends to evolve, openly revealing its intent to compete directly with OTAs in the online booking space.

Updates include new ways of working with (and rewarding) partners, delivering extra perks to guests, and enhancing the Airbnb platform to deliver a superior user experience.

In the following post, we’ll dive into the details. As well as discussing some of the big changes Airbnb is making, we’ll look at the wider implications for travelers, OTAs and the hospitality industry at large.

More rewards for hosts

One of the major changes coming is an upgrade to Airbnb’s “Superhost” program, which recognizes outstanding hosts that tick certain boxes, including having a 4.8+ rating and 90% response rate.

Airbnb now wants to offer better rewards to its Superhosts, such as discounts on smart home products and increased visibility and exposure on the platform. These added perks are likely to incentivize more hosts to aim for this elevated status, helping to raise standards and so enhance the guest experience.

More rewards for guests

The company also wants to offer more rewards to guests. To that end, it’s launching “Superguest.” Coming this summer, this new rewards program will recognize the most valued customers with exclusive benefits, services and rewards.

By negotiating with its hosts, Airbnb will be able to provide an elite group of guests with perks like access to exclusive inventory, last-minute bookings, airport pick up, and flight upgrades.

Enhanced search tools

Airbnb’s sweeping changes also include some impressive upgrades to its user interface.  Blecharczyk touched upon the fact that while the platform has grown exponentially, its user experience hasn’t sufficiently evolved. But that’s about to change in a big way.

A flurry of changes will make it far easier for guests to find the accommodation they really want. This includes an expansion of property categories (currently limited to Shared Room, Private Room, and Entire Home), to include four new additions: Vacation Home, B&B, Boutique, and “Unique Home.”

The Unique Home category looks particularly exciting, with accommodations ranging from snow igloos in Finland to “bubble rooms” in the deserts of Jordan. You can check out some of the other quirky options available in a list that CNN pulled together.

Airbnb unique homes

To make it easier for guests to find their dream accommodation, Airbnb is also adding thousands of new sub-categories. For instance, an “Architectural Style” filter will let travelers search for specific stay features, from choosing a rustic home with a balcony or garden, to staying with a musician or beekeeper.

These UI improvements signify Airbnb’s intent to offer a platform that makes it easy to find and book accommodation across pretty much every property type imaginable.

The right home for the right trip

Yet another improve feature on its way is Airbnb Collections. This new tool will allow guests to search for the perfect place based on a specific kind of trip.

Two of the categories (“Family” and “Work”) are already live. In the Family collection, every property has earned a 5-star rating from families, and is available as an entire home complete with a full kitchen, Wi-Fi and TVs. Properties in the Work collection offer tailored perks such as flexible cancellation, self check-in, and a laptop-friendly workspace.

The additional categories to be launched this year include Dinner Party, Social Stay, Group Getaway, and One-of-a-Kind.

Raising the standard: Airbnb Plus

Going one step beyond Superhost accommodation, the new “Airbnb Plus” category will feature a collection of the most impressive homes. Specifically, they’ll showcase their homeowner’s personality, and incorporate thoughtful design elements.

Airbnb Plus Homes

Each home needs to pass a 100-point inspection, and hosts are required to have a 4.8+ star rating, 95% acceptance rating, and zero cancellations. Plans for this category are ambitious. Currently, Airbnb Plus has 2,000 homes in 13 cities. By the end of the year, Blecharczyk said he expects this to expand to 75,000 homes in 50 worldwide cities.

High-end hospitality is also coming to the platform. After acquiring home management company Luxury Retreats, Airbnb guests will be able to stay in some of the world’s most exclusive residences. The suitably swish range of accommodations include Villa Saraswati in Bali, and the 16th-century Villa San Luigi in Tuscany, which comes with its own olive grove and travertine infinity edge pool.

In terms of building a travel platform that genuinely appeals to everyone, these unique, one-of-a-kind properties seem to represent the final piece in the jigsaw.

Partnering with hotels

On the B2B front, Airbnb has been courting hotels to partner with them via an open letter published this March.

The standout pledge was to charge much lower commission fees than OTAs. While OTAs can charge between 15-30%, Airbnb will only charge between 3-5%. The company also announced that property owners will have complete control over when their inventory appears, and they won’t be locked into long-term contracts.

Property owners will also be able to list their accommodation in one of the four new categories (mentioned above), ensuring they’re easier to find by their target demographic. Airbnb has already rolled out filters that allow guests to filter by property type, including boutique hotels and hotels.

Airbnb filter by property type

In addition, the letter said that further updates are on the way, including a new guest loyalty program, a subject recently raised on Twitter by Airbnb CEO Brian Chesky.

Chesky welcomed suggestions to his tweet, a sign that shows the company understands the importance of expanding the platform while listening to its customers. One thing that we can be certain of: Airbnb is not interested in the typical points and free nights program—expect more of a focus on special perks, personalization, and elite benefits.

The impact on hotels

So what impact will these extensive changes have on hotels? Airbnb’s pressure on the OTAs could certainly prove very beneficial for certain types of independent properties, particularly those in the European markets where certain OTAs reign supreme.

Having an additional distribution channel will help relieve the pressure for hotels, and the lower commission fee model clearly has appeal. Many hoteliers remain dissatisfied with their OTA relationship, and new competing channel in the form of Airbnb may help to reinvigorate negotiations with existing OTA contracts.

As reported by Skift, an Airbnb survey of B&B and boutique hotel proprietors showed that most consider fees charged by major booking sites are too high, with 75% having this opinion of Booking.com, 68% of Hotels.com, and 65% of Expedia.com.

In addition, 59% of the surveyed hoteliers said they were “less likely to use third-party sites” when the survey researchers told them that small boutique hotels often pay higher commission fees compared to larger, brand properties.  A substantial 65% of respondents also said they were “more likely” to distribute through Airbnb after they learned about their 3-5% commission fees.

Offering more turnkey solutions will also be essential to ensure the company has the technological tools to assist hoteliers. We’ve discussed some of the pros and cons of listing your hotel rooms on Airbnb, one of the major hurdles being inventory management—larger hotels simply do not have the time or resources to list all their individual rooms on the platform.

Pricing & revenue strategy for Airbnb

Even with lower host/property fees, Airbnb will still earn a decent commission, but this cost will be passed onto travelers rather than property owners. Guests currently pay a variable 5-15% booking fee, dependent on the total cost of the booking—the higher the subtotal, the lower the fee.

With more hotels expected to come on the platform, one unknown remains: will hotels need to account for this variable guest fee when pricing their rooms? Will guest be willing to take on the commission costs, or will they price shop the property and end up booking with the OTA or hotel directly?

In the beginning, hotels on the Airbnb platform may find that the pricing model works in their favor. The typical Airbnb guest is generally less rate conscious than the typical OTA booker and willing to pay the fee knowing that the property is rare and “unique.”

Guests are also less likely to price shop hotel rooms on other booking sites, as Airbnb’s UI makes it rather difficult. Consider this set of boutique hotel rooms in Paris—while some properties reveal the hotel name in the listing, many don’t. The focus is on the property attributes (star rating, neighborhood, design, etc.) rather than the property name. This makes it much less easy for guests to simply search the property name on Google or a metasearch site to price compare.

Examples of Paris hotel listings on Airbnb
Examples of Paris hotel listings on Airbnb

Airbnb still has to play a careful balancing act, however—the more hotel properties they allow on their platform, especially if it’s chain or corporate-style properties, the more they may dilute the “uniqueness” of their inventory, currently one of the biggest customer draws. The company currently enjoys a clearly defined brand identity that engenders genuine customer loyalty. If they cross over too much into standard OTA territory, it may threaten their credibility with guests.

The impact on OTAs

Airbnb’s wealth of changes are very much intended to challenge OTAs for hotel and alternate accommodation bookings. But can it really topple the industry’s major players? It will be no small task.

A report by Skift argues that to really compete with the OTAs and become a Super Brand, Airbnb will need to attract chain hotels, but again, that comes at the expense of losing a key part of their brand identity.

Airbnb’s new granular search tools certainly look more impressive than the broad and basic OTA search filters. Arguably, this is where OTAs will really need to step up their game. But the vast spending power and industry experience of Expedia and Booking.com means they certainly have the resources to adapt at speed.

A fascinating year ahead

We previously discussed Airbnb’s growing ambitions in our trends for 2018 post. Based on these latest announcements, it seems its intention to dominate online travel has ramped up considerably.

As travelers increasingly seek unique properties that fit their personal tastes and lifestyle choices, Airbnb has positioned itself wisely, evolving its platform to offer more choice and the kind of personalization today’s traveler craves.

For hotels, the opportunities for increased distribution, lower commission fees and the ability to reach new audiences are significant. This is certainly an important channel to watch this year, particularly for smaller boutique hotels.

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