Well, according to the media, the verdict is in. Airbnb is going to reinvent travel, and everybody loves it:
- Airbnb's Ambitious Second Act Will Take It Way Beyond Couch-Surfing, Vanity Fair[i]
- Airbnb has taken on hotels, now it's gunning for the whole travel industry with Trips, Wired[ii]
- Airbnb's Next Act: Tours, Classes and Restaurant Reservations, Fast Company[iii]
Even Wall Street seems smitten. Deutsche Bank Equity Research issued a research note titled "Did Airbnb Just Reinvent Trip Planning?"
In November, the home-sharing site's cofounder and CEO Brian Chesky delivered an Apple-inspired product launch (replete with long queues for reporters, lots of applause, standing ovations and – of course – "one more thing") of the new Airbnb Trips platform. Trips features a revamped Netflix-like design that puts bookable "Experiences" at the center. Coming soon will be restaurant reservations, bookable activities and classes, and transportation options (with teases that Airbnb will move into cars and flights).
Experiences are led by local host experts, including astrophysicists, fashion gurus, and truffle hunters. The design entices with old-school movie posters and slick personalized trailers. It's all about going deep and local with what feel like hand-crafted opportunities to – you guessed it – "live like a local." Do people really want to spend their vacations making violins, crafting with recycled garbage, or learning to be an acrobat?
We're not so sure. The thing is, as Airbnb has grown to become the fourth largest online travel company, that Airbnb traveler is looking more and more like – well – the typical traveler. Yes, Airbnbers are more motivated to experience local culture and connect with locals, but not that much more. Price and location are far more important in the rental decision than living like a local.
parts of the world only motivates one fourth of Airbnb customers (mainly they just want to get away and spend time with friends and family), and the average traveler even less so.
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Will Experiences Move the Needle for Airbnb?
Accommodations are scalable. They are always there. Hosts can rent them out from anywhere. Experiences, not so much. The host has to be present and take the time to conduct each tour. Just how much could this new line of business generate for Airbnb? We did a little math.
Airbnb has launched with 500 experiences, and half are $200 or less. We ran some hypothetical scenarios with the following assumptions:
Airbnb plans to expand Trips to 50 cities in 2017. Let's assume the average group size is six passengers (PAX), tours run three times per week for 40 weeks a year, and the average price is $180. Airbnb's 20% cut would equate to $32.4 million in annual revenues, assuming all experiences ran fully booked.
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If Airbnb continues its
impressive growth and revenues for 2017 approach $3 billion, Experiences would be only 1.1% of their overall business (using our rosy assumptions). Even under far more aggressive scenarios, Experiences would still account for a relatively small, single-digit share of the company's business.
one third of Airbnb renters bought a tour or excursion on their last leisure trip, and Experiences would appeal to an even smaller subset. True, Airbnb Experiences aren't for the masses (Chesky
thinks mass tourism is one of travel's big problems), but Airbnb increasingly is. So perhaps scalability isn't their goal here. Perhaps the bigger picture behind Trips' unveiling is a branding exercise as Airbnb gears up for larger plans to come (air, services, car rentals, restaurant reservations).
Can the unveiling of 500 experiences, audio tours, geo-targeted tips from hosts and an impressive redesign really be considered the "
most significant development in Airbnb's eight-year history?" We're keeping our "game-changer" proclamations in our back pocket pending further revelations.
[i]Airbnb's Ambitious Second Act Will Take It Way Beyond Couch-Surfing
[ii]Airbnb has taken on hotels, now it's gunning for the whole travel industry with Trips
[iii]Airbnb's Next Act: Tours, Classes and Restaurant Reservations