Airbnb: Stop Locking Guests Out!
How can Airbnb innovate to sustain growth, attract more customers, increase customer loyalty, and create more value?
Airbnb has been growing tremendously over the past few years, with room availability reaching 1 million rooms in December 2014, exceeding rooms of the largest hotel chain by room number. The success of the company has been supported by its unique business model that minimizes its costs while positioning itself as the link between hosts and guests, and collecting fees from both sides. The business model is supplemented by the company’s culture that allows employees to continuously develop and test ideas to yield better results.
Is the current level of innovation sufficient to enable Airbnb to sustain its growth? Probably not – a lot more needs to be done.
During one of my first Airbnb experiences in the Dominican Republic, my friends and I booked a villa after contacting the host and inquiring about it, and headed on a 6-hour drive before receiving a confirmation from the host or agreeing on key pickup. The host was on a different time zone (6 hours ahead) and was already asleep. We luckily had a phone that could make international calls and managed to call him as we arrived to the neighborhood. We were even luckier that he is an early bird that wakes up at 5 A.M. and got access to the house.
I am positive that many guests had similar experiences, and in order for Airbnb to maintain a pool of loyal hosts and guests, these incidents should be minimized. Airbnb can further disrupt the industry by moving to the next stage of innovation:
- Keyless Access: in order to remove the hassle of hosts meeting up with guests to hand keys to them upon arrival, Airbnb should request hosts to invest in changing their doorknob to one that requires no key. The doorknob could either have a code that can be shared with guests upon confirmation, or could enable scanning a code using the app that gives access to guests.
- Business Traveler Acquisition: in addition to keyless access, Airbnb could create a point of contact in each community to enable companies to book multiple rooms within vicinity for business travelers. This could enable the company to increase its market share of business travelers.
- Consistent Offering: Airbnb hosts have different amenities provided by hosts across listings, which detoriarates the service when guests book a room without paying sufficient details to included amenities. This could reduce customers’ level of satisfaction. To improve this, the company should request all hosts to have a standard set of amenities that cannot be overlooked (towels, bed sheets, wifi access, etc).
- Customer Stickiness: in order for the company to enhance its customer loyalty and become the first company of choice for travelers, it should start a customer loyalty program that rewards its customers for their loyalty. To ensure that the reward system is fair, the number of points rewarded should be a function of the number of rooms per unit or dollars spent.
- Adjusting for Long Term Planners: Airbnb potentially loses customers that plan over the long term when the host of their selected room cannot decide on the availability of the room ahead of time. If a customer faces this problem multiple times, the company might lose him/ her. To avoid this, Airbnb should keep track of such incidents and force hosts to show a night as available only when they are sure that they can offer it to guests.
Airbnb has many advantages over hotels for customers, but it is expected that hotel chains will fight back legally and operationally to protect their industry and revenues. The company has been a digital winner thus far, but the future of its sustainable growth and expansion, and its winning strategy, will depend on its second level of innovation. To ensure its continued success, Airbnb should innovate to achieve further growth, create more value for itself as well as for hosts and guests, capture more of the created value, and increase customer loyalty. Despite its success so far, Airbnb needs to accelerate the introduction of these improvements, which will lead to increased revenues.
I love the suggestion about keyless entry, but I think the only way that AirBNB would be able to do that well would be to provide the new locks to the homes, which would be a pretty large expense for them.
I’m not sure whether your thoughts are that AirBnB is a winner or a loser, but from the laundry list of improvement ideas that seem beneficial but unlikely, I see how it could be slipping into loser territory. That’s a really interesting view, since most of the press I’ve seen about it has been positive- a few years from now, I guess we’ll see which way it goes! I think you make a lot of valid points, and they should pay attention… or pay the price.
I agree that it would be a huge cost and hassle for Airbnb to install the locks, but I was actually suggesting that they request hosts to invest in the locks. These locks have a price point of below $80 (some are even at $30), so it would not be a significant cost for the host.
I was suggesting that they have been a winner so far, but since they can never know what happens in terms of regulations, they should innovate further to capture more value, especially in terms of business travelers, and keyless access is essential to this segment since business travelers could arrive at times when hosts are sleeping, so giving them the ability to check-in conveniently at any time of the day would make them more attracted to use the service.
Thanks for the feedback!
I definitely see where you’re coming from, but regarding your point about “consistent offerings”: I wonder if this would perhaps detract from the variety that AirBnb offers. I can understand wanting to set a standard for a certain level of quality, but I do think one of the things that appeals to folks about the company/organization is that you can book a place dependent on your specific needs or budget. So while one person may want a small, no-frills hut on the beach, another may want a 5BR villa with all of the perks.
I’m not convinced AirBnb is a loser here…I think they’re winning in many ways, though agree that there’s always room for improvement.
CSS thank you for the comment.
I think that there are specific amenities that travelers expect and would appreciate, like bed sheets, towels, and toiletries. I agree that wifi might be a premium offering in some places, but travelers appreciate light traveling, and for that reason, I expect the majority to expect these basic amenities to exist across rooms regardless of whether its a cheap or luxurious place.
They are certainly not a loser. They have been a winner, but I am doubting their ability to continue to be a winner if they do not pay attention to minor details. Also, if they want to sustain growth and increase penetration of business travelers (I think that currently stands at 10% of their customers), they need to introduce more products and services.
Thanks for this article, really interesting to think about tweaks Air BnB can make to offer and capture more value. I agree with #1 National Cranberry Fan says that replacing hosts’ locks would be a huge expense that would sort of go against the companies scrappy business model (…couldn’t they easily solve this situation by using good old fashion lock boxes).
Based on what I’ve been hearing about Air BnB lately, there are two bigger picture threats that concern me more in the long-term. First, large hotel chains are currently doing incredibly well in terms of Revenue per available Room Night and are starting to say that they don’t see Air BnB as a true threat since they are not really worried about the latter taking market share of the business traveler segment. I like your suggestion on this point but I think like Air BnB would have to start a new brand or new business model all together to really compete with Starwood, Hilton etc. Second, real estate firms are buying up and renting out properties on Air BnB which, if I understand the value proposition correctly, goes largely against the unique and local experience it promises leisure travelers. What is Air BnB doing to protect its operating model from these property sharks :-)?
Carine, thanks for the comment.
As mentioned in my response to #1 National Cranberry Fan, I was suggesting that hosts invest in the locks, not Airbnb – it is not very clear in my post.
As for the competition with hotel brands, they are currently competing directly with them in the tourist segment, but less so in the business segment, which generates a large portion of their revenues. 10% of Airbnb’s guests are business travelers, and I think that it should improve its offering to cater for more of these travelers on the longer term as it reaches a point were growth in other segments is limited. Moreover, hosts might already be users of Airbnb and it would be easier to start offering them a service to use during the business trips that is as convenient as hotels in terms of access and services. It is a far-fetched goal, but if achieved in at least some markets, the hotel industry will be further disrupted, and hotel chains will admit that they are being impacted.
As for the property sharks, Airbnb can monitor the identity of hosts, and should ensure that hosts are actually personal owners and not real estate firms. To be able to create communities of hosts for business travelers, it should include a feature that allows users to look for multiple rooms within a close proximity and then allow the user to book them at once in the same booking, with various check-in and check-out times, or allow users to search for units near a unit rented by another Airbnb users (their friends) to make sure that they can all be in the same area even if they do not book all at the same time.
Great article, Sara! Thanks for sharing these insights. Out of the various interesting value creation ideas that you share, I really like the “target the business traveler” one. I think Airbnb can enable businesses to save a ton of money by partnering with the large corporate travel agencies and integrating with the self-service travel booking portals that are frequently used in the workplace.
I’d be cognizant of ideas such as “keyless entry” which have a huge logistical component attached to their execution and don’t align well with AirBnB’s core capabilities which are in software. To evaluate such ideas, one needs to be able to understand how much time / effort / money would implementation involve vs. how much does the idea move the needle in terms of better customer experience, average booking size, and retention.
Thank you Shashank for the comment.
I agree that without disrupting the business traveler segment, growth will be limited over the long term. They should test multiple options and potentially vary their approach for different markets.
As for keyless entry, I was suggesting that they should request hosts to install keys and pay for the costs, which would remove the hassle from Airbnb and move it to them, aligning with the general business model.
Great thought behind this article. However, I believe it’s still too early for Airbnb to focus on the incremental improvements to customer experience you suggest. Airbnb is still disrupting the hotel and travel industries and most customers are satisfied with “good enough.” Instead, Airbnb should (and is) focusing on growth through new markets such as China, rather than experiential improvements for existing customers. Growth will also depend largely on host acquisition. Just as Uber and Lyft are extremely focused on acquiring and delighting drivers, so too Airbnb needs to focus on acquiring and delighting hosts (rather than forcing them to offer standard amenities or guarantee long-term bookings). But, perhaps I’m biased as I am a new host myself!
hbs2016, thanks for the comment.
I agree that Airbnb is doing the right thing to enter new markets, but I am not sure doing that and these improvements are mutually exclusive. They can have local teams focusing on different initiatives as needs. For example, Uber’s offering varies depending on the market in terms of offering (Blackcar, UberX, UberPool, etc.). UberPool was initially introduced in San Francisco and has expanded after the initial testing phase. Moreover, they have a partnership with Starwood Preferred Guest to establish a loyalty program and allow users to user their points across the two platforms. I believe that Airbnb, which is as innovative in its model as Uber, should have signed a deal with Uber before SPG to further expand and use the brand name, but maybe that would not have been possible, as Uber might have used SPG for the branding. Therefore, I think that in some markets, Airbnb should already start implementing some of my suggestions to meet customer expectations and increase its market share of business travelers.
Very interesting perspective Sara! Spoken like a true business traveler 😉
I wonder, however, how much AirBnB is worried about competing with hotels and how your recommendations would align or not align with the AirBnB brand. One of the reasons I think AirBnB has been so successful is because they started by targeting a different type of consumer: someone who was looking for a unique, local experience as opposed to a standard hotel chain. If they adopted your recommendations, the rooms might as well be owned by a real estate property investment company and standardized appropriately, a business model that one of our classmates is trying to implement in Southern California. If AirBnB were to adopt some of your recommendations (and I believe regular hosts could adopt some of them to increase their ratings), I might suggest they open a different platform that caters to business travelers as opposed to vacation travelers as to not confuse the value proposition of the brand today. However, speaking of platforms – I would consider AirBnB a HUGE winner in this space because they have effectively acquired the hosts and travelers they need to make the business successful without facing much competition along the way.
Britt, thanks for the comment 🙂
I agree with you that they need to potentially split the offerings and create a slightly separate platform for business travelers. However, I believe that some rooms could be found across the two platforms if they meet both requirements.
Yes they are a winner, but I am worried about their future.
Very interesting post with very innovative propositions! I find them all valid in essence, but my only concern is that in many cities, Airbnb is starting to get competition from local/national/regional online rental platform, and I doubt they would put the same constraints on landlords as Airbnb if the latter was to implement your suggestions. What I mean is that Airbnb might lose its competitive edge and its interest for many apartment/house owners who want to occasionally rent their place (and not professionally do short-term renting). In cities like Paris or other European capitals, in which the majority of Airbnb business is done, the majority of “hosts” are casual owners who decide to rent their place when they go on holidays. As much as I love all your suggestions, I doubt Airbnb would decide to implement them, as it would take the risk of losing these “occasional” hosts.
europeanfederalist, thanks for the comment.
I believe that the offering of Airbnb is very diverse and does not have a consistent flavor across different rooms, which means that they could implement some of my suggestions like the Keyless Access for hosts that use their houses as vacation houses and rent them through Airbnb for the rest of the year. This segment generates a lot of revenues from Airbnb guests and should therefore allow its guests to have an experience that mimics hotels in terms of access so that they are not stranded outside the house in a country where they know no one, or potentially cannot speak its language.
On the contrary, I believe that Airbnb’s brand name and diverse customer base from all over the world would still be an attractive competitive advantage over local/regional/national rental platforms, so I think that they would continue to list their rooms on Airbnb along with using the rental platform to have access to a large pool of guests in case the rental platform does not have interested guests.
Another obstacle Airbnb has is making sure they are not left out while the host and the renters are finalizing terms over email (which the found a way to find out) and leaving the company with no revenues. In my personal experience the hosts are trying to use Airbnb to get leads but complain about the fees and try to find way to leave Airbnb outside of the picture when the deal is actually done and paid for.
More technological measures needed to prevent such transactions and eliminate the violating customers from the system.
Esty, thanks for the comment.
I agree that is one of many challenges Airbnb needs to think about. That is a threat to other similar businesses as well, but it is slightly easier for Airbnb to monitor this since they can oversee the interaction between host/ guest directly in the app. Also, some hosts only provide their phone numbers once the booking is confirmed, which could help Airbnb monitor cancellations that happen after payment is confirmed and try to analyze consistent trends from hosts or guests.