Airbnb wants to broaden its appeal by incorporating hotels. At a company event on Thursday (February 22), Brian Chesky, Airbnb’s co-founder and chief executive officer, outlined a roadmap designed to make his service more mainstream. The efforts include highlighting hotels on the website, a loyalty program, and the ability to match guests with accommodations that fit their budgets and tastes.
Chesky also showed off a new type of hotel-like accommodations called Airbnb Plus. The higher-end homes will be visited by an inspector, who will determine if the homes meet requirements ranging from fresh, matching towels and working appliances to a commitment to stock the home’s kitchen with a selection of teas and coffee, similar to hotel offerings. Chesky also teased a new luxury brand called Beyond by Airbnb. The tier of mega-homes, mansions and penthouses will be available to users in the spring.
Although Airbnb has let hotels and bed-and-breakfasts quietly list on its website for years, Chesky gave the clearest indication that hotels are an essential piece of his strategy to create a full-service travel company. The move is intended to attract business from online travel agencies Expedia Inc. and Booking Holdings Inc., formerly known as Priceline Group. Because Airbnb is charging much lower commission fees, it could be very effective. “At a high level this is a negative for Booking and Expedia,” said Kevin Kopelman, an analyst at Cowen & Co.
Since debuting in 2008, Airbnb has raised about $3.1 billion in funding, and recently it has been under some pressure to go public. Investors have valued the business at $31 billion, the second-biggest U.S. venture-backed technology startup without a stock listing. (Only Uber Technologies Inc. is more valuable.) But Airbnb is profitable before certain expenses, and Chesky is in no hurry to hold an initial public offering. Chesky has said there’s more he’d like to accomplish before then and that Airbnb would not go public this year. Bloomberg had previously reported on his plans to create a tiered listing system and offer more a hotel-like service through a program called Airbnb Select, as well as luxury accommodations through a brand then known internally as “Airbnb Lux.”
Airbnb has a long-combative relationship with what it describes as “the hotel cartel.” On the site, hotel inventory used to be indistinguishable from home-rental listings. Yet, hotel listings on the service have increased sixfold over the past year, according to the company. The service currently has 204,000 rooms from hotels and bed-and-breakfast places for rent.
The economics are especially attractive to hotels. While Airbnb charges as much as a 15% commission to guests, hotels and other hosts pay 3% to 5%for each booking. That’s considerably less than the average 17% fee Expedia and Booking take from hotels, according to Cowen, the research firm.
Soon, Airbnb will let people search for hotel listings in a new category called Boutique. Don’t expect to find a Motel 6 on there. A document Airbnb created for hotel owners reads, “Larger corporate hotel chains are not the right fit for Airbnb.” The company said it will vet listings and has partnered with SiteMinder, which provides booking software to about 28,000 hotel brands around the world. In marketing materials distributed in advance of Thursday’s event, the word “hotel” is never used.
A representative for the U.S. hotel industry wasn’t buying it. “Whether it’s called Plus or Boutique program, Airbnb’s latest scheme is just further proof the company is trying to play in the hoteling space while evading industry regulations,” Troy Flanagan, a vice president at the American Hotel and Lodging Association, an industry group whose membership includes Marriott International Inc., Hyatt Hotels Corp. and Hilton Worldwide Holdings Inc. The relationship clearly needs some time to mend.