Airbnb wins customers and coffers towards profitability. Why aren’t hotel companies like Hilton affected?

The CEOs of the world’s largest hotel companies often like to sweep the idea of ​​the alternative lodging industry under the rug. After all, this industry – led by vacation rental platform Airbnb – is a threat to their business.

However, Airbnb’s latest financial reports should be a wake-up call for the hospitality industry. Traditional hospitality players cannot afford to sit idly by and watch this branch of the travel industry grow rapidly.

This week, Airbnb reported second-quarter earnings of $379 million, slightly higher than the Hilton posted a profit of $367 million for the same time. This is an impressive gain. Additionally, Airbnb executives indicated earlier this year that they expect the company to posts its first full-year profit since its creation in 2008.

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Airbnb Revenue and Trends

Like hotel executives who have already reported profits at the start of this cycle, Airbnb CEO Brian Chesky played down the idea that economic uncertainty would be a massive drag on the business that he founded.

“Our business model is adaptable. We have almost every type of space in almost every place, so no matter how travel changes, we can adapt,” he said on an investor call this week. “Regardless of the economic environment, our travelers come to Airbnb because they can find great value and our host can earn additional income.”

Airbnb reported that guests booked 103.7 million nights and experiences (the platform also offers experiential features like cooking classes) for the quarter, a 24% increase over the same period in 2019 .

This is the best performance of any quarter in the company’s history. Much of this came from demand outside the Asia-Pacific region (earlier this year Airbnb announced plans to pull out of China).

That’s not to say there aren’t signs of weakness at Airbnb. The strong quarter was driven by previous bookings, and Chesky noted growth rates weren’t as strong in May and June as they were earlier this year. However, there was a re-acceleration from June to July amid the busy summer travel season.

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The types of stays booked on the vacation rental platform are different today than they were before the pandemic. For starters, stays are much more expensive.

In April, May and June, the average daily rate for an Airbnb stay was $164, a 40% jump from the same period in 2019.

The time people spend in an Airbnb is also on the rise. Stays of 28 days or longer were the fastest growing travel duration category within the company.

These long stays accounted for 19% of gross nights booked in the second quarter, compared to 13% in the second quarter of 2019. In the second quarter of this year, 45% of gross nights booked were for stays of at least seven nights.

There has also been a significant growth in stays in the suburbs, highlighting the pandemic trend of travelers wanting more space outside the big cities. Still, there were signs of travelers returning to the cities, as gross room nights in those areas accounted for 47% of Airbnb’s bookings in the quarter, surpassing pre-pandemic performance.

alarm clock, hospitality

This could be a story about Airbnb’s second quarter financial results, but it’s hard not to mention Hilton CEO Christopher Nassetta because of some remarks he made about Airbnb on last month.

“What they do is they fill a certain customer need, and we fill another customer need,” Nassetta said on an investor call in July. “I’ve been saying this for a long time: there’s a lot of room for us to co-exist given that what we deliver is very different. It is usually for different kinds of stay occasions.

Nassetta, like many of his fellow CEOs of traditional hotel companies, publicly maintains the idea that his company serves one type of customer while Airbnb serves another. Although it has called Airbnb a strong company in the past, Nassetta also noted on a 2015 earnings call that it “strongly [does] not believe that they pose a major threat to the core value proposition we have. »

It’s hard not to roll your eyes just a little at this. After all, the lodging industry has fought tooth and nail against Airbnb and other short-term rental providers not to expand into major US cities for the past few years.

In the eyes of their leaders, hotel companies exist in a different way than vacation rental platforms.

Look at it this way, though: Airbnb now has 6 million listings. This is a hefty accommodation offering that hotel brands could have embraced if they used the strategies of a tech company and tried to appeal to younger travelers.

One company’s recession is another’s growth opportunity

Even amid fears of a recession, Airbnb’s management team has its sights set on growth. The economic uncertainty could even help the company attract more hosts and increase the number of registrations on its platform.

There are 4 million hosts on Airbnb, and Chesky noted that he thinks there could be “millions more.”

“Hosting is one of the easiest ways to make money off of an asset you already own,” he said. “There are a number of things we’re going to be doing this fall – this winter and beyond, but one of the most important things we want to do is continue to make hosting easier.”

Chesky didn’t provide many details on what might help with hosting. He noted that the company offers additional protections for hosts (recent crimes in Airbnb listings were almost certainly a catalyst for this) and other “opportunities to continue to reduce friction”.

“Airbnb was founded during a recession in 2008: the financial crisis. People were worried about being able to pay their bills, pay for their house and their income,” Chesky said. “So they turned to hosting, and we think a lot of people might turn to hosting again. This is a big opportunity for us.”

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