Best of Frenemies No. 2 To Airbnb or not to Airbnb?

By Simon Tolson on 29th Oct 2019
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Owners » Owners Blog » Best of Frenemies No. 2 To Airbnb or not to Airbnb?

‘To Airbnb or not to Airbnb that is the question?!’

Running a small business in the hospitality sector nowadays is a balancing act in judging whether to be involved with tech giants building huge platforms acting as both gateway and barrier to your customers.  As Jeff Bezos of Amazon neatly put it ‘Your margin is my opportunity’ Last month I wrote about Google which is an essential tool of pretty much all businesses, this month it’s the more nuanced subject of Airbnb for those of us providing accommodation.

We’re best of frenemies with Airbnb- there’s no doubt they bring us extra bookings but in the end they are also trying to take over the industry and kill us!  Whilst there has been lurid publicity about guests behaving badly and we’ve had a couple of incidents over the years I don’t think it’s any more on average than our normal customer base- we seem to attract the same demographic who are often using the platform for the first time at the behest of their children. In the end a 50 year old couple will end up choosing the same sort of property they always book, not sleeping in someone’s spare room or on a couch.

Nearly 90% of our bookings by value are still direct but Airbnb accounts for most of the rest managing in just a few years to eclipse all the other third party platforms in our market.  Average booking value is about half due to the number of weekends and late deals but we have taken bookings worth up to £6,000 a week on the platform so it’s not just cheap weekenders.

I’ve done some testing and I reckon that about half of their bookings come from people going to Airbnb first and half from them buying all the top search advertising spots.  If we pay more for the top spot they will often up their bid in due course as they are venture funded and focused on growth rather than making money.

One of the great marketing lessons we have been taught by Airbnb is presentation of price.  The model is to charge owners 3% and guests 10-12%. In my simple brain if a guest pays £1,000 and you receive £850 then the cost of using the platform is 15% but I’ve had the conversation many times with Airbnb hosts saying they are only charged 3% as the guest pays the rest.  Perhaps we should be free and add on a 20% service fee!

There’s a huge variation between properties in terms of working with Airbnb- some get no bookings and for others it can be more than 50% of their bookings.  It seems that there’s lots of competition for small apartments, including the alternative of a room in someone’s house for a couple but if you want a dog friendly house with a garden then there’s a very good chance you’ll end up with an agency like us.

In the end like many things in life there’s a glass half full or glass half empty vibe here.  You can take a negative view and see it as a big venture funded organisation stealing our margin however I prefer to think about it as an introduction fee- if we give the guest a good experience there’s every chance they will book direct next time and refer friends and colleagues to us.  We also can’t measure the number of guests who may find a property on Airbnb then search for it and book direct.

‘Et tu Airbnb?’ it’s good business to take advantage but never forget that all our margin is at stake.