A company announcing a 22% drop in year over year revenue usually isn’t something to celebrate.
But at a time when the pandemic has devastated the travel industry, Airbnb’s first earnings results were very good news.
They’re also a sign of the resilience of the company that disrupted hospitality when it launched in 2008, and the growing appeal of alternative lodging for business and leisure travelers.
To be sure, Airbnb hasn’t skated through the pandemic. The lodging marketplace saw revenue plummet more than 70% last spring, and had to slash jobs, salaries and budgets.
But compared to traditional hotels, it has fared better during the past year and is rebounding more quickly.
After its IPO in late-2020, Airbnb’s market value of $120 billion makes the company more valuable than Marriott International, Hilton Hotels & Resorts, Hyatt Hotels and InterContinental Hotels Group combined.
As travelers begin planning trips again, it is a good time to look at the trends driving Airbnb’s popularity and what they mean for business and leisure travel in 2021 and the years to come.
A safer choice during the pandemic
The pandemic’s devastating impact on the travel industry might have been expected to hit Airbnb even harder than hotels, as crises tend to lure consumers back to well-known brands and reliable standards.
The opposite happened last year, with several factors coming together that led people to choose alternative options over hotels. Renting someone’s home or professionally managed apartment typically saves consumers’ money, which is even more appealing during times of economic uncertainty.
Amid fears about the safety of air travel and countries around the world banning travelers from other places, vacationers stayed closer to home.
Before the pandemic, domestic travel accounted for about 52% of Airbnb’s business. It now accounts for about 80%, making domestic trips a big driver of the company’s growth.
With people encouraged to practice social distancing, travelers preferred renting an apartment or house rather than share hallways, elevators or lobbies with other guests.
Not to mention, hotels have a higher number of personnel traveling between rooms, interacting with all guests, compared to a vacation rental which is almost entirely autonomous with less potential interactions. Hotels also lost some of their competitive edges when sought-after amenities such as restaurants and bars closed, and personal service became less desirable than contactless interactions.
For Airbnb travelers, delivery services like UberEats and Postmates made it easy to replace room service. The idea of being at home while on the road has always been Airbnb’s selling point and was particularly appealing during a pandemic.
Having a kitchen or kitchenette in a unit was even more valuable when restaurants are closed or at reduced capacity.
We’ve seen units with kitchens or kitchenettes rent at 40% higher rates. Finally, the rise in remote working gave people the flexibility to work from a rental on the beach as well as they could from their living rooms. That’s one reason bookings averaged six days, up from three, a trend that is likely to continue.
The 2021 rebound
Consumers are eager to travel again, but the majority remain concerned about their safety. Only about 34% of Americans said they felt comfortable staying in a hotel as of January, according to the American Hotel and Lodging Association’s 2021 State of the Industry report. At the same time, business travel is expected to rebound more slowly than leisure travel.
The cancellation of in-person events such as conferences and company-wide meetings through 2021 at least will continue to negatively impact hotels. In the U.S., hotel occupancy rates were a dismal 40% as of November 2020.
That grew to 48% by the week of Feb. 20, according to STR, a hotel data provider.
How quickly those numbers rise depends in large part on the speed of the vaccine rollout. About 20% of people responding to the AHLA survey said they won’t feel comfortable staying in a hotel until a majority of Americans have been vaccinated.
No one can say when that will happen, and that uncertainty may keep hotel occupancy rates from fully rebounding.
Return to pre-pandemic levels isn’t expected until 2024, according to the AHLA. Rather than continue to brace for more losses, this is an opportunity for the hotel industry to adapt to the modern traveler by embracing change so they won’t be left behind in the post-pandemic world.
The long-term shift to alternatives
Alternative lodging options such as Airbnb, VRBO and Jurny were increasingly popular before the pandemic. The past year has only accelerated the shift. Alternative rentals accounted for about 12% of the industry in 2019, and are expected to reach about 20%.
Consumer values and lifestyles are changing in ways that make alternative options more appealing for many travelers. People have become comfortable with the idea of renting accommodations through a marketplace, and with technology that enables them to do so conveniently and with minimal contact.
Many are looking for privacy and independence, and are less interested in service. Of course, the lower prices typically associated with alternative options will remain important.
Changes in how Americans work, with many forecasting that remote work and hybrid work arrangements will continue after the pandemic, are an opportunity for Airbnb to push further into the bleisure market, with business travelers adding vacation days to their trips or bringing their families along.
Key to the success of alternatives in the years to come will be continuing to offer those benefits while ensuring consumers that accommodations are safe and clean.
Hosts using contactless check-in and check-out and mobile technology to communicate with guests will have the advantage.
There will always be travelers who prefer booking traditional hotels for their vacations or business trips, but with its huge market share and cash to spend, expect Airbnb to lead the way to bring alternative options fully into the mainstream.