👑🦠 and Industry😟, Chaos in the Streets of Airbnb
The entire world has been in an involuntary economic halt. Our industry is not one that is exempt, it’s probably one of the most affected ones. We’ll face heavy casualties and no one will come out of this unscathed. Let’s take a dive at the current situation.
Both OTAs and hospitality operators are feeling the burn in this and it’s certainly showing in the numbers. I took a look at Transparent’s data set on the Corona Virus impact and was pretty bummed out with what I saw. Demand naturally has lowered steeply compared to last year to date while supply has maintained steady, but, I believe that this may not be the case for long. If the situation continues to progress in an unfavorable direction a lot of operators will be forced to close and/or consolidate mainly due to the lack of liquidity, cash reserves and loss of revenue. OTAs have also received a significant blow to the chest due to their valuations dropping drastically and even though we can’t see Airbnb’s current value in the data set they should have taken a significant blow as well and their market cap decrease should be in the vicinity of it’s peers.
Here are the current valuations
Source: https://seetransparent.com
You can see the overall travel sector suffering and headbutting the crisis, Nasdaq is down by around 21%. Tripadvisor down by more than 50%, Booking.com and Expedia Group with similar downturns. Global demand is definitely hit hard and probably global supply will drop, but, more interestingly supply distribution will probably shift pretty wildly.
With the turmoil Airbnb is facing it could mean the end of the platform as we know it. I’m not saying they will close up shop even though it’s a possibility, I’m saying that the way we’ve come to know it might change. Airbnb has been maintaining it’s demand side throughout this process making sure they are retaining them just so when everything is said and done people start travelling again they have retained a big enough user base to be able to start getting back to business as usual as fast as possible. But, that’s not the reason why it might change dramatically.
Airbnb’s Supply Side Will Change
While having several conversations with peers, friends and people at Airbnb it becomes very clear to me. Airbnb hosts (mainly the loyal single platform ones) are opening their eyes to new horizon which is that Airbnb opted to side with guests rather than them their core offering and market differentiator. The opted to save their guest base or not “save them” rather keep them happy, under the presumption that when this is all said and done travelers will still be inclined to use them as their accommodations option because they stood by them when a crisis presented itself.
How will it change?
It will very likely look like this; once loyal hosts that catered and created their spaces to fit the cool ecosystem of the Airbnb traveler will now opt to offer their amazing cool spaces in these other competing OTAs creating a market shift towards them because what they only used to see on Airbnb they now see them on Expedia, Booking.com, Homeaway/VRBO and a very small percentage will be directed to their own bookable website. The real kicker is that these other players have an average of 6 to 9 months advance booking average while Airbnb has a 14 to 30 day advance booking average. I bet you can guess what will happen, these properties will now be booked way before Airbnb users get the chance to book them. So Airbnb from 1st round pick went to 3rd or even 4th.
This is a very big hurdle that Airbnb will be facing in the coming months given that hosts are taking this time off to create their new listings on the other platforms. Some have even gotten to the point of permanently deactivating them from Airbnb. They’re under the impression that this will pass and their customer base will maintain itself fairly healthy to get back out and travel, but, they may be overestimating the amount of supply that is willing to stay just with them waiting it out.
On a positive note for those that choose to stay by Airbnb and can afford to wait it out competition could be at an all time low in your area and maybe you could capitalize on that by upping your prices if you’re all that’s left 😉.
See you in the next one
-Gian from Hostpitality
