NB: This is a guest article by Drew Meyers of OhHeyWorld.
Airbnb is the darling poster child of the entire startup world right now. The company raised $200 million in its latest round, at a valuation of $2.5 billion.
Over the course of the last few months in San Francisco, Seattle, Boston, New York, and Washington DC, I’d venture a guess that Airbnb was mentioned in 95% of conversations I had related to tech startups.
In San Francisco, TaskRabbit is a close second — coming up in roughly 65% of conversations related to startups in the Bay Area (though I rarely heard their name on the East Coast).
Having booked with Airbnb while I was in Barcelona this summer, and for a New York stay a few weeks ago, I absolutely love the service, and don’t plan on going back to hotel life any time soon.
For me, what I’m purchasing is not so much the room as it is the local experience and local expertise. Particularly when I’m abroad, I don’t want to even spend five minutes on the internet trying to find the nearest grocery market.
I’d rather get the answer from someone that lives there, in 20 seconds.
Of course, there are many threats to the business – such as city ordinances in many places or expanding too quickly (see Groupon disaster) — but the real long term threat is a competitor.
As with any successful web startup, there is a huge list of competitors that seems to grow by the month, all across the globe. Sites such as Wimdu, Roomorama, 9Flats, and Tripping. Plus the dozens of smaller regional players. (Quora thread about competitors here).
Airbnb is, by all accounts, killing it — booking roughly 200,000 rooms per month. That said, like any company, they do have weaknesses competitors can exploit.
Here is the strategic approach I’d take if I was one of their competitors and really wanted to take on Airbnb (I am not and I do not):
- Focus on one specific country.
- Research the legalities of that country. There are a few cities where it’s illegal to rent your apartment short term (like NYC and San Francisco). If it’s illegal in your proposed country or city, pick a new one and try again.
- Build a great product, suitable to that specific country (and language). Make sure there are some real values behind your company — it has to be more than “a copycat of Airbnb for country X”.
- Make sure the human component is highlighted prominently. Remember, the actual host is a huge part of the value for many people (at least those that book shared rooms).
- Book a 2-night stay with every single host on Airbnb (in your country) — and tell them about how your service is better (hint: there better be a differentiator). Ask what you can do to make their experience better.
- Focus hard on driving awareness among travelers going to that region. Find them on Twitter, Facebook, Google or wherever else they may be lurking online.
- Do whatever it takes to ensure that inventory stays at least 20% than demand in your country of choice. If needed, pay a small bonus to get properties listed. You absolutely do not want to ever run into a scenario where someone searches on your site and can’t find any properties to rent.
- Do whatever it takes to get 100% of inventory (or as close as possible) in your country.
- Repeat steps 1-8 for between three and five additional countries.
- Build software tools for your hosts (and particularly the ones managing multiple units) to manage their entire business — accounting, inventory management, email marketing to touch past guests regularly, revenue reporting and predictions, and online presence (some super hosts have websites).
- Inventory management software needs to work with all booking sites, not just your own. Individuals are placing their rooms on multiple sites in an effort to remain fully booked — but they of course don’t want to update availability in multiple systems every time someone books.
Though I do not think Airbnb has public API’s to hook to, I’m sure building the software from standard Airbnb system emails wouldn’t be too hard for someone good at parsing emails.
A fair amount of work, yes, but not crazy complicated
Or, indeed, an independent software company should build a tool that manages inventory across all booking sites. Perhaps that company already exists and I just don’t know about it?
If so, I’m willing to bet a lot of money that Airbnb, or one of their competitors is going to come calling soon.
NB: This is a guest article by Drew Meyers of OhHeyWorld.
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Nice post Drew.
Just FYI, there are already services to manage availabilities across booking sites, like e.g. http://www.bedandbreakfastcalendar.eu/features
Hey Robert-
Good find, wasn’t aware of them. It looks like they only work with AirBnB and Wimdu? They need to cover a few others to gain real penetration with hosts.
I’m willing to bet they’ll be bought out in the next 18 months if they are really working hard on product and gaining users. But if they don’t have power hosts using their system, then someone else will just build the product and market it more effectively.
Lots of companies doing this (Kigo is quite good) and expanding their channels offered.
good article, method could be used to copy many online travel sites
Wow-so insightful! Seriously, articles like this are a complete waste of time-I want my 5 minutes of my life back! None of the above is news,and there have been some serious, smart people involved in this industry from the beginning- 2008, 2009. See istopover, 9 flats bought them earlier this year.
If you have any real, concrete feedback or suggestions, I’m open to listening.
So your idea to beat a company is to do market research, come up with an unspecified differentiator, enter the market, and use marketing to court business on the basis of your differentiator/superior product? Not exactly earth-shattering thinking here.
Wow, tough crowd.
If you really want to get down to it…business is simple. Execution is everything. You can have the greatest strategy in the world, but most people fail because they don’t follow through.
As far as “unspecified differentiator”, I left it generic because it’s very dependent on the local market you’re in and what does/does not work there. A local with deep market knowledge would know way better than I would. One example could be a site covering Spain, catering toward French speakers.
Totally agree – it is pretty simple. I guess that was really my point. This isn’t really an article about how to beat AirBNB. It is an article about basic practices of starting a business…market research, differentiation, niche vs larger market decisions, start small, and focus your marketing. Good thoughts nevertheless, and it’s always a good idea to start with the basics when thinking through any new venture.
Or French speaking ski buffs in Switzerland. Or Spanish speaking visitors to Thailand. Or be the site that gives 5% of proceeds of all bookings back to the local community. There are dozens of angle to take. It’s just a matter of picking one.
You’re speaking about “ideal” building of “local competitor”. So is that all? Then there’s no way to beat AirBnb internationally and we’ll loose user every time he wants to book something in other country.
Would you use such a “local site” since you know what’s Airbnb?
You’ve got to start somewhere. Starting off trying to cover the whole world when AirBnB has a 4 year headstart is probably not a good strategy. Figure out a way to appeal to a very specific type of traveler first.
Would I use it? If I knew about it, and if there was a differentiator – maybe it was only entrepreneurs and there was events or something built into it? Agree, it’s not an easy proposition to beat AirBnB — but I think it can be done, at least in a few markets.
We have built a specific CMS for niche vacation rentals and it’s been used already by many local and niche sites
http://www.adormo.com/project/index.htm
so I agree in part with the article.
A strong differentiator we found to be working is the local Manager: when you book somewhere you may prefer to ask a local guy who knows all the apartments and the city, rather than browse through 100 listings.
Yes, totally think that’s an interesting proposition — if you can prove that person is knowledgeable. Has he/she actually stayed in/visited all the listings to know?
glad you like it!
Adormo is also a business incubator in the sense that the Manager pays to join the network and is given access to the CMS (so he can build a professional site very fast) and to the know-how (11 years in the business).
Each Manager has to go through a review process so you can be sure he’s a knowledgeable person.
Manager visit most of the apartments and sleep (test) in some of them.
This is the last one visited today in Tallinn
http://www.adormo.com/en/Accommodations/Estonia/Tallinn/3-bedrooms/Taime/5594
and this was tested last week in Riga
http://www.myrigaapartments.com/en/apartments/Latvia/Riga/2-bedrooms/Julia-Elegant-in-Lacplesa-street/5644
what do you think?
Hi Drew!
Very structured and nice article, thanks a lot! I think most of your tips can be used not only for accommodation industry but for any travel startup. Or not only travel.
And I agree with Psycho – it will work much better for create local competitor/local market leader, which can be also nice strategy for fast quit and sell company with good evaluation to AirBnB
Certainly selling to AirBnB is a potential exit. Personally, for me, building a company just to sell it quickly to the market leader is not interesting or motivating. But some people are more motivated by money than I am.
Does anyone have any thoughts about this service in Australia? Obviously it’s a breach of a lease contract to ‘sub-let’, but it seems people are getting away with it. What the landlord doesn’t know won’t hurt him right?
Sally, funny you should mention.
Wotif recently launched their holiday accommodation section attempting to break into this lucrative market, however I am not sure how successful it will be. Wotif have distanced themselves from the property owners by scrapping their existing payment model for this section of the site by only taking their commission rather than 100% of payment.
I think Drew’s article is very fitting and am really interested to see how Airbnb attempt to break into the aussie market considering how large a market share Stayz and Takeabreak (Fairfax owned) currently have.
Thanks for sharing your thoughts, Drew! Forget the haters. It’s just part of creating content online.
One thought I have, however. “Book a 2-night stay with every single host on Airbnb (in your country)” is an impossible task unless you pick a country like Rwanda or have raised a large amount of capital (which is unlikely considering the competition). Other than that, quality post
P.S. I’m excited to see what you have in store with OhHeyWorld.
I’ve been writing online for a long time (just in a different vertical). The haters don’t phase me…they’d rather put down others than do anything themselves
Booking a stay with everyone on the site is indeed do-able, it would just require multiple people to cover everyone or a long time..with enough time/money, anything is possible.
Nice article, but don’t many of these “killer” suggestions limit upside potential thereby rendering any new upstart at a disadvantage in the funding arena.?
I can’t speak for them, but my hunch is investors would way more likely fund an established business that has succeeded in one or two markets than someone with big ambitions, but no proven track record of success.
Hey Drew, we are offer remote access control to airbnb hosts by automating the meet & greet, via the SmarterKey mobile app which “opens the door”, so hosts can get on with their day to day life instead of hanging around waiting for guests to arrive, also the same app permits guests to get access to the hosts property so they too travel with peace of mind.
We do exactly as you say and book nights accommodation on the airbnb.com platform with profesisonal superhosts and pitch our product to them, in London it is starting to get traction and we are due to launch in January 2013. Any contacts/tips/advice would be really appreciated.
Dave-
Would love to chat, shoot me an email. drew at ohheyworld
Hey Drew, i think you didn’t give enough credit in your theory to wimdu. isn’t exactly what they did? 1) Starting country – Germany, 2) clone AirBnB, 3) nailed down hosts in a single geo location. The biggest diffirentiator from any other competitor was a $90 mln “seed” investment:). This is one big diffirentiator and the best one:)!
Yea, that’s certainly a good differentiator
I have to agree with the detractors, I don’t really get the point of this article. Frankly, Airbnb would probably love for some one to do what you suggest…let someone else do the hard work of developing a local market and then Airbnb can come in and buy them.
The fact that Airbnb would love competitors to do this shows its the right strategy in my mind. The point is to lay out the exact strategy to take — even if it sounds like total common sense to us, there are likely many people out there who are in one specific market interested in this space but lack the business background we have.
Hey Drew! Great article about opportunities in the market. Just a quick note – Tripping is a metasearch platform for home rentals so we’re not actually a direct competitor. We work with top suppliers (like HomeAway, Roomorama, Wimdu and others) and it’s fun to see all of them growing month over month. This market is still young and it’s going to be fun to watch all the innovation that comes out of it in the next few years for sure.
Thanks for clarifying that.
Interesting article but your suggestion for building a countrywide site could just as easily be taken down a notch to a regional site or even a city. I am not even a minnow in this business, more like a protozoan, but we get more bookings for our clients (home owners) than they get from the Goliath sites. The reason is because we are locals and we are on the phone to answer questions. None of the Goliath sites can do that. A potential customer can only contact the home or apartment owner and that may not be possible in the daytime if they are working. My second point would be that Google and the other search engines are drilling down to the local more and more because that is where the best information is. I find it kind of crazy that despite the communication capabilities created by search engines and the internet, we have (so far) allowed another set of media advertising gate-keepers to dominate as the newspapers,fv and radio once did. If you are planning to holiday in Cairns, Australia why would you go to an American or European based holiday home site when there are several smaller specialist Cairns based sites with better information. Why do you need AirBnB Neighbourhoods when we are the neighbourhood?
Nick,
I agree very strongly with your point of view.
The answer “If you are planning to holiday in Cairns, Australia why would you go to an American or European based holiday home site when there are several smaller specialist Cairns based sites with better information” is:
- branding: Airbnb is well know. People trust it. Even if they are charged a commission on top of the price. Even if the pay more.
- better websites: local websites tend to be a usability nightmare. The information might be there but it’s not well presented.
The solution would be professional looking local websites within a well known network.
With that you can enhance the local knowledge and win against the Goliath.
Luca – I agree with you that some local websites are not well presented. However, most will have a phone contact which often makes things easier. In our market there are at least four well presented websites (including our own) which offer 15-50 holiday homes. I don’t think I entirely agree with you that AirBnB has a sufficiently established brand that is trusted enough for consumers to pay more. It is just bigger and so has way more inbound links just like the other large listing sites. As a consequence it rates highly in the search engine results. In addition, large sites are a huge source of revenue for Google – they pay to maintain a position. Despite all the changes to Google’s algorithms, backlinks are still the key. No one has yet developed an algorithm that can really “read” and “comprehend” content in the same way that a human can. So the algorithms depend on keywords, their frequency, their placement and more than anything on the backlinks to judge the relevance of content. For anyone looking for a holiday home in Cairns, my site is more relevant than any of the large sites because 100% of my content is about my region but a large site covering a nation or the world would only be 10% relevant at best because most of the information on the site is about other places. Also many large sites, such as Stayz (a large Australian site owned by a major newspaper company) has holiday homes mixed in with, apartments, resorts, hotels and motels.
In time, I believe that Google will get better at what it does or find a way of monetising search that does not create such a large bias toward website size or authority. It does already seem to be doing this with its new found emphasis on the local. I am not complaining – business is business and the big guys pay more. I trust to the market – if Google’s SERPs depend too much on revenue rather than accuracy, then another search engine will most likely come along to specialise in travel and accommodation search. I do not think it is game over in the search space or any other area of internet commerce.
Nick,
The fact that you get more bookings for your owner than the Goliath and the fact that you are well ranked (1st actually for “cairns holiday homes”) shows that there is space for local business.
I believe there should be even more but the two elements I wrote above: site quality and branding may be blocking it.
It may be easier for me to explain if we see it from the customer’s perspective:
I want a safe and easy to use website: I go to Booking.com / Airbnb and the other guys.
(note: I don’t mean they are ACTUALLY safer, this is all about perception)
I want local support / ask questions / good service and I am a bit more adventurous: I go to a local website.
The trouble is that the vast majority of users feel not safe online, those reserving with local websites are a niche. The others just stick with the well knows brands.
When a local website can offer also perceived safety in the form of branding and usability in the form of a good website, local wins hands down.
That’s all I am saying and I’m on your side here
> AirBnB has a sufficiently established brand that is trusted enough for consumers to pay more.
I don’t know in Australia but consider the trend. They are building it and it will increase. I am also pretty sure customers rarely realize they pay more when this happens.
I don’t know about Google. I have been in this business since 2001 and what I’ve seen recently is more and more paid ads in google’s home page. I have a few sites in 1st position on main keywords and what I can say is the 1st position today is like the 5th (more or less) a few years ago.
Just look at any search and see where the 1st organic results is. It used to be close to the address bar.
It makes sense and I don’t complain. But we need fresh ideas, fighting to be in the first of google may not be worth anymore for some markets.
This may be good: maybe local sites now can concentrate on improving what they do best, rather than reading SEO books and trying to get links.
I am actually reliefed. I always hated SEO, it was a nice trick in 2000-2005, a necessity in 2006-2010, a waste of time now (I am talking about my markets).
> then another search engine will most likely come along to specialise in travel and accommodation search.
I agree with that too.
To summarize. Let’s try to make local websites better and emphasize the incredible competitive advantage they have: being there.
Disclaimer: we run a CMS for local websites integrated in a network, so you may read this as a sales pitch. It’s not. I truly believe local players can do much better. I met hundreds of them, I just came back from a 2 months trip in Prague, Krakow, Vilnius, Riga and Tallinn. I know this market very very well and I just want to share my ideas with you.
Luca – you are quite right about perceptions. People tend to follow the herd. I don’t mean any criticism of AirBnB by this either. They have done a remarkable job and told a great story – you don’t raise $200 million without doing that. You are right too in your observation that the organic results are being pushed down the page. However, that may not be so bad as it once would have been because scrolling is back in again because of cellphones and touchscreens. It is so much easier to flick down (or even across) than to open a new page. Website design is already undergoing huge changes because of this. Smaller sites with less properties (say 50-100) are going to be much easier to navigate and access on a cellphone than a goliath site with thousands of listings. As you say, concentrate on making local websites better and making the best use of our advantages is the way to go. It is an exciting space to be in.
My suggestion to anyone setting up a site designed to compete with airbnb would be to listen to the needs of owners.
My biggest gripe with airbnb is when you get paid. Most self-catering businesses (in the UK at least) are accustomed to being paid in full for a stay before it commences. A non-refundable deposit of around 25% at the time of booking and the balance 2 months prior to a stay commencing is commonplace. It’s also offers a critical safety net to many such small businesses.
Yet airbnb hold the payment until approximately 24 hours AFTER your guest checks in before releasing the funds to you. (??????????!!!!!!!!)
Thank you but no thank you. Couple that with the many awful experiences you find online, and I’d sooner not take that risk.
I like your article Drew. It’s worthy to note that every company, regardless of size, has competitors. And there are ways to have a profitable business without being a Goliath like Airbnb. Airbnb will end up like Craigslist. That’s not a compliment btw. MOST of what is on Craiglist is scams in MOST categories. It’s a bloody mess @ this point. People continue to use it out of habit, not because it’s the best service out there.
As for your detractors, these are the same people who accomplish nothing in life because critics rarely take risks. They are on the sidelines in life doing nothing. Microsoft had the same mentality in the 90s and beyond. They are being marginalized by the day. Innovation really is the great equalizer.
Airbnb has many shortcomings. They don’t think they have any at this point. This hubris will end up biting them in the butt at some point. Men never learn I suppose! LOL!
Airbnb are thieves with no effective arbitration process for complaints. I am currently trying to get $1045 AUD refunded after they cancelled my account and all future bookings after a minor disagreement with a host. I am glad that NYC has banned them today.