This document discusses Airbnb and its impact on the hotel industry. It begins by defining the sharing economy and how Airbnb fits within that trend. It then summarizes Airbnb's business model, rapid growth, and key reasons for its success, which include meeting consumer needs for value, personalization, and empowerment. The document also outlines some of the challenges Airbnb faces, such as regulation and competition from sites focused on luxury rentals, family travel, or hotel services. In conclusion, while Airbnb is disruptive to the hotel industry, hotels are working to address consumer trends and fight back with enhanced loyalty programs and personalized offers.

1. Airbnb and the Hotel Industry
Hamutal Schieber | December 2015

2. The world’s largest provider of
rentals, doesn’t own a single room.

3. Introduction
• The following presentation aims to explore a disruptive trend for the
hotel industry: the Sharing Economy.
• This trend affects the entire hotel ecosystem, including Online Travel
Agencies (“OTAs”), boutique hotels and hotel chains.
• Another disruptive force in the industry is the penetration of “new
era” competitors such as Google, Amazon.com, Facebook and
Apple to the travel & accommodation industry. This trend is not
covered by this presentation.

4. Competitors - Definitions
Type of Competitor Examples
OTA (online travel agencies), Meta-Search -
leverage their search technology to aggregate
travel search results for the consumer's specific
itinerary across travel service provider (e.g.,
accommodations, rental car companies or airlines)
Expedia (inc. Hotels.com, Hotwire, Travelocity,
Venere, and others), Orbitz.com (which has
agreed to be acquired by Expedia), laterooms and
asiarooms, which are owned by Tui Travel,
Priceline etc.
TripAdvisor, Trivago (Expedia)
Direct Booking: travel service providers such as
accommodation providers, rental car companies
and airlines, many of which have their own
branded websites to which they drive business
Travel companies, inc. Hotels / Hotel Chains,
Airline companies such as - Carlson, Best
Western, Starwood, Accor etc. including joint
efforts by travel service providers such as Room
Key, an online hotel reservation service owned by
several major hotel companies
Vacation Rentals - focuses on vacation rental
properties, including individually owned properties
Airbnb, HomeAway
Online / e-commerce Google, Apple, Facebook, Alibaba, Amazon and
Groupon

5. Intro: Hotel Industry Consumer Trends
• As described in detail on our latest Hotel Digital Marketing Trends, in
order to offer value to consumers, travel industry competitors must
understand what is driving consumers:
Personal Social
Value For
Money
Convenient
The travel consumers
are increasingly
searching for a
tailored, personal
experience
they rely on their
social network and
friends – as a result,
we are witnessing a
booming “sharing
economy”
they are looking for
the most convenient,
instant experience,
straight from their
mobile, seamlessly
moving between
channels
they are looking
for the best offer
that would
maximize the value
they are getting for
their money.

6. The Sharing Economy and Airbnb

7. What is “The Sharing Economy”?
• “The Sharing Economy”: a trend that stems from the consumers
desire to access and manage assets without the interference of
corporations on the one hand, and from enabling technology and the
emergence of social media on the other hand.
• It mainly refers to digital peer to peer platforms, which allow people
to share goods and services, acting as virtual matchmakers and
lowering transaction costs. Examples include: Uber, Lyft, Lending
Club and Airbnb.
• Per Goldman Sachs, Millennials are especially interested in access
to products without the burdens of ownership.
• According to PhoCusWright’s Share This! Private Accommodation &
the Rise of the New Gen Renter, 22 million adults stayed in private
accommodation when traveling for leisure over the past year.
• This accounts for 17% of all US travelers.

8. What is “The Sharing Economy”?
• Top funded start-ups in the “Collaboration / Sharing Economy”
landscape; Source: Jeremiah Owyang, Crowd Companies

9. What is “The Sharing Economy”?
• Some of the
competitors
operating in
the sharing
economy
landscape,
by Jeremiah
Owyang,
Crowd
Companies.
• full picture:
https://www.
flickr.com/ph
otos/jeremia
h_owyang/1
5780762319
/in/photostre
am/

10. Airbnb: Sharing Economy’s “Poster Child”
• Founded in 2008, Airbnb connects "hosts" with guests
through an online platform – Airbnb.com.
• Though about two thirds of the listings are for an entire
home, guests have multiple options, ranging from living
room couches to shared and private rooms to even
castles, tree houses, and igloos (source: nasdaq.com)

11. Airbnb: Success by the Numbers
• Airbnb recently secured $
1.5 billion in VC financing,
according to a valuation
of over $ 20 billion.
• Since Airbnb's creation in
2008, it has hosted over
40 million guests across
34,000+ cities spanning
over 190 countries.
Currently, there are
almost 2 million listings
worldwide (75% increase
2014 – 2015) with about
25% of them in the U.S.
250
450
900
2013 2014 2015
Airbnb Revenue in $ M

12. Airbnb: Success by the Numbers
Source: Skift 2015 (based on company filings for all except Airbnb which is
self-reported)
1,200,000
1,100,000
722,575 715,000715,000
600,000
500,000 480,000
348,117
156,875
Rooms/ Listings in 2015

13. Airbnb: Success by the Numbers
Source: Skift 2015 (based on company filings for all except Airbnb which is
self-reported)
27.68
24
21.1
14.05
12.6
10.09 9.87
8.14
3.24 2.95
Market Cap / Valuation 2015 USD Billion

14. Airbnb: Success by the Numbers
A new report by Airbnb
shows that, the summer of
2010, about 47,000 people
stayed with an Airbnb host,
compared to almost 17
million people stay at an
Airbnb: X353 growth.

15. Airbnb’s Business Model
• The primary source of Airbnb’s revenue comes from service fees
from bookings. Depending on the size of the reservation, guests are
required to pay a 6% to 12% non-refundable fee. A more expensive
reservation will result in lower service fees for guests.
• With every completed booking, hosts are also charged a 3% fee to
cover processing of guests payments. When a reservation is
booked, guests pay the service fee unless the host cancels or
retracts the listing. If the reservation is altered, Airbnb adjusts
service fees to accommodate users. Source: Investopedia, 2014

16. Airbnb’s Business Model
• While the company mostly targets younger individuals, it
recognized growth in the business travel segment and begun
focusing on business travelers as well. The new business
product will include central billing and a dashboard for travel
managers to track employee itineraries and spending.
• Hosts can now get a “Business Travel Ready” badge for their listings
to make it easier for business customers which means that they
have Wi-Fi, a designated workspace, an iron and hair dryer and a
strict policy when it comes to cancellations - hosts can’t cancel less
than seven days before the planned stay

17. Airbnb’s Business Model
http://www.wired.com/2015/07/people-business-like-
airbnbs-better-hotels/

18. Airbnb’s Business Model

19. Is Airbnb Disruptive?
• Airbnb accounted for 2.9 million, or 7.8%, of overnight stays in
New York (one of its key markets) in the latest fiscal year,
compared with 33.9 million, 92%, of nightly rentals among
hotels, according to the Hotel Association of New York City.
Yet hotels brought in a larger portion of sales — 95 percent of
gross revenue, or $9.4 billion, thanks to a higher average cost
per room.
• In addition, Airbnb’s growth does not necessarily come at the
expense of the hotel industry, as some of its visitors would not
have considered to travel without the Airbnb option.
• However, the rentals market is most definitely disruptive:
first, it creates a large number of new options for travelers,
competing with hotels; second, competitors in the industry are
courting luxurious segments such as business travelers and
premium travelers.

20. Is Airbnb Disruptive?
• An Airbnb infographic claims that many of the Airbnb travelers would
not have traveled otherwise, indicating that the company increases
the pie – rather than taking a share of it:

21. How is Airbnb Disruptive?
• The vacation rental platforms are also disruptive to OTAs, as
hotels may choose to use the Airbnb platform instead of OTAs
to list their rooms. While typically charge hotels a 10% to 25%
fee per reservation, Airbnb, by contrast, charges hosts a 3%
fee.
• At the recent Revenue Strategy Summit, Mark Carrier,
president of B.F. Saul Company Hospitality
Group, described Airbnb as "a structural threat to our
industry," citing its ability to undercut hotels on price during
critical peak seasons.
• At the same event, McKinsey & Company analyst Ethan
Hawkes predicted the company could rise from 1% to 9% of
the $1 trillion global hospitality bookings market by 2020.
(source: CNN, 2015)

22. Airbnb’s Reasons for Success

23. Airbnb: Key Success Factors
• Airbnb’s success stems from the fact that it meets the
needs of the consumers, in particular the millennial
consumer (born between 1980 and 2000):
1. Democratization (part of the VFM trend)
2. Loyalty and Community (part of the VFM trend)
3. Sense of Belonging (part of the Personalization
trend)
4. Customer Empowerment – the micro entrepreneur
5. Brand Building through content and engagement

24. Airbnb: Key Success Factors
Democratization (part of the VFM trend)
• The company says it wishes to “democratize” services by
bringing them to the hands of the people.
• The company claims that 81%of hosts share the home in
which they live, and that the travelers assist local economy.
Therefore, staying with Airbnb is positioned as “a community
which benefits local economies across the world by
supporting residents and local businesses, and
encouraging cultural exchange.”
• OTAs and hotels cope with this strategy by offering tie-ins with
local services (such as: local gym access for a lower fee), and
new pricing methods such as bids, last minute offers and
reverse bids.

25. Airbnb: Key Success Factors
Loyalty and community
• Airbnb’s referral program has changed
over the years as a result of a “trial and
error” strategy.
• In 2014, Airbnb’s new referrals program
has resulted in hundreds of thousands of
nights booked by referred users in 2014,
and referrals increased booking as much
as 25% in some markets.
• Loyalty has been one of the focus areas
for hotels in the past year, with mobile-
based customized plans helping to attract
customers.

26. Airbnb: Key Success Factors
Sense of Belonging (part of the Personalization trend)

27. Airbnb: Key Success Factors
Sense of Belonging
• Part of Airbnb’s DNA is the idea that we are all citizens of
the world, and that every “home” is “our” home.
• Hotels might suffer from a more distant image in
comparison.
• However, through personalized offers, or tie-ins with
“sharing economy” initiatives such as social meetings
and dinners, hotels can overcome this barrier. It also
might serve the hotel’s differentiation, to position the
hotel as an ex-territory, not necessarily connected locally.

28. Airbnb: Key Success Factors
Customer Empowerment – the micro entrepreneur
• According to the Airbnb, a host’s average annual income per
listing is $ 7,770.
• The company, and other apartment rentals companies, have
recognized that the secret to success lies in their ability to
draw the best properties, in the best locations.
• The fight over great properties manifests not only in pricing
changes, but also in the tools that companies have been
offering hosts, to better market and manage their apartments.
• Hotels cannot, apparently, help people make money.
However, OTAs may adopt the same tools as a solution
offered to hotels and other service providers.

29. Airbnb: Key Success Factors
• At its Airbnb Open conference, Nov. 2015, Airbnb announced a few
new tools to help hosts from pricing to making sure guests have
everything they need.
• A Host Assist feature for easy key management – smart locks to
send virtual keys, and lockboxes to hide physical keys (currently in
Paris).
• It is important to mention that the company is adding smart pricing in
order help set a price for the listing, according to demand.
• According to Tech Crunch, Smart Pricing is going to be a
progressive rollout.
Customer Empowerment – the micro entrepreneur

30. Airbnb: Key Success Factors
Customer Empowerment – the micro entrepreneur

31. Airbnb: Key Success Factors
Host’s tools include an Apple Watch up, to manage the
process

32. Airbnb: Key Success Factors
Brand Building through content
• The company’s content strategy is a best-in-class story.
• Airbnb uses photos, videos, print magazines and social media, to
spread inspiration regarding locations and hosting / travelling
experiences.
• The company uses content to connect its community, but also to
build trust and to inspire more people to travel, even if they did not
plan to or if they are on a budget.

33. Challenges & Competition

34. Airbnb: Challenges
• Airbnb’s growth is not a smooth sail: the company has
encountered many problems along the way, and still has
to overcome challenges, including:
1. New, niche-oriented competitors are beating the
company at its own game
2. Lack of trust among consumers and hosts
3. New business models emerge
4. Becoming Customer-oriented: empowering the
owner, not the consumer
5. Regulation
6. Consumer backlash due to apartment price hikes

35. Competition | Family Focus - HomeAway
• The most prominent competitor for Airbnb is also the oldest
competitor – Homeaway, with its family of companies including
VRBO, VacationRentals.com, Homelidays, Ownersdirect, Abritel,
Travelmob and others.
• Only entire homes qualify to be listed on HomeAway, as the
company believes in offering “The whole house. The whole
family. A whole vacation.”
• HomeAway used to charge homeowners an annual fee of between
US$349 and US$999, but did not receive any further income per
booking. It has switched to an Airbnb-like pay-per-booking (PPB)
model early 2014, taking 10-20% per booking from hosts. It has
further announced that it will start charging guests an average of 6%
per booking, although specific details are not yet known.
• The company was recently acquired by Expedia, in the latter’s
attempt to enter the rentals market.

36. Competition | Family Focus - HomeAway

37. Competition | Family Focus - HomeAway

38. Competition | Family Focus - HomeAway

39. Competition | Family Focus – Kid&Co
• https://www.kidandcoe.com/

40. Competition | Premium - OneFineStay
• Launched in 2010, OneFineStay.com is a home rental agency for
luxury homes in London, Los Angeles, New York and Paris with an
average market price around $2 million.
• Recent industry news indicates Hyatt Hotels participated in
a $40 million investment in the business.

41. Competition | Premium - OneFineStay
• Onefinestay aims to offer the consumers that which Airbnb lacks:
personal service, and a quality signature.

42. Competition | Customer Focus - Flipkey
• Flipkey is owned by TripAdvisor.
• It should be noted that Flipkey specifically targets offers to those that
manage 5 or more rental properties. This website focuses on the
property owner with empowering tools, to help the host succeed:
business analysis tools for 5 or more rentals including ROI analysis,
automated listings, expert advice, unlimited photos, verified reviews,
global exposure, analytics and special offers.
The website also lists the
relationship with TripAdvisor
as a point of attraction to both
consumers and hosts.

43. Competition | Customer Focus - Flipkey

44. Competition | Hotel Services - BeMate
THE WELCOME YOU DESERVE
One of our City Mates will await your arrival to guarantee everything is at your complete
satisfaction and to assist you with every question or need.
Currently available in Madrid, Barcelona, Málaga, Florence and Amsterdam, coming
soon everywhere else.
https://www.bemate.com/

45. Competition | Vacation Rental Aggregator
• http://alltherooms.com/

46. Regulation
• Cities are beginning to pay more
attention to the sharing economy’s
poster child. In some cities, Airbnb is
already not allowed due to lease
restrictions against subleasing an
apartment, homeowners association
or co-op board rules, or lack of proper
zoning and permitting for what is
essentially an "illegal hotel" (a
residential property with three or more
units that are leased for a period less
than 30 days).
• Airbnb has tried to respond both via
marketing & PR, but consumers are
already starting to understand the
difference between a regulated hotel,
and a random apartment.

47. Trust | How Airbnb Builds Trust
Documentation
• Professional
photographs –
and later, videos
Social Networks
• Airbnb Social
Connections
(launched in
2011) leverages
users’ social
graphs via
Facebook
Connect
Communication
• Blog and social
media are used
to respond to
stories and
explain how the
company
handles the
situation
Reviews
• the website
features reviews
and ratings for
both hosts and
visitors
Infrastructure
• An open phone
line
• $1,000,000 Host
Guarantee

48. Industry Strategies & Focus Areas

49. Hotels Respond to the Airbnb Threat
• Hotel chains are beginning to recognize to the potential threat of the sharing
economy, and particularly Airbnb, especially ever since Airbnb had announced that
it will try to attract more business travelers – the bread and butter of many chains.
• Main strategies used by hotel chains:
Provide a Better
Experience
• Utilizing the same
competitive tactics
designed to
compete with OTAs
• For example,
focusing on the
entire experience;
incorporating loyal
programs; digital
check ins;
concierge services;
etc.
• Offer budget stays
– with hotel
amenities.
Leverage the
platform
• Apartment rental
platforms provide
another source to
drive visits to the
hotel’s website.
• Hotels may choose
to target specific
segments such as
families through
this platform.
Differentiation
• Hotels might
actually want to
leverage that
feeling of ex-
territory instead of
considering it as a
disadvantage.
• In addition, with
vacation rentals,
hotels should
emphasize the
amenities, trust and
security that they
offer the guests.
M&A
• Hotels and OTAs
have turned to
deals in order to
win a share of the
vacation rental
market – such as
Expedia’s
acquisition of
HomeAway or
Hyatt’s investment
in OneFine Stay.

50. Hotel Strategies: Marriott
• In addition to offering Netflix on its guest rooms, Marriott is trying to
approach millennial, social consumers with a new, more affordable
model, “Moxy”, currently tested in Milan and New-Orleans.
http://moxy-hotels.marriott.com/
• The concept, designed in collaboration with Ikea, aims to offer
young travelers the services (and bar) they expect from a hotel – for
a lower price.

51. Hotel Strategies: Marriott
• Taking a note from Airnbnb on approaching this
consumer segment, the Moxy concept uses content
marketing, with a web series with a “quirky” and
humoristic attitude. http://moxy-
hotels.marriott.com/whats-up/do-not-disturb-atthemoxy

52. Hotel Strategies: Marriott
• To emphasize its advantages over Airbnb, the concept communicates its
hotel services and the lucrative Marriott loyalty program.

53. Hotel Strategies: Hilton
• Chris Nassetta, CEO of Hilton Worldwide, said in October 2015 that
the company is not worried by Airbnb, as this is an entirely different
segment in hospitality, that Hilton is not pursuing – i.e., budget
travelers. However, with Airbnb’s pursuit of the business traveler
segment, we expect to see Hilton communicating its ultra-
convenient offers to this segment, such as the Hilton HHonors app.
• Through the Hilton HHonors app,
guests can plan their trip, reserve
and choose their room, order in-
room items and check out.
• Digital Key enables frequent
guests the option to bypass the
hotel check-in counter and access
their rooms, as well as any other
area of the hotel that requires a
key, directly via the Hilton
HHonors app. Hilton Digital Key is
currently available at 17 property
hotels.

54. Hotel Strategies: IHG
• In order to compete, IHG
is sharpening its big data
utilization, to offer better
rewards to its loyal
customers. It is also
strengthening its digital
presence, and invests in
a mobile experience.
• For example, IHG has
recently launched a new
top-tier membership
category for its IHG
Rewards Club loyalty
program called “Spire
Elite.”
IHG Investor Presentation, 2015

55. Hotel Strategies: IHG
• In June 2015, IHG launched a series of mobile and in-hotel digital
technology pilots:
Mobile Check In and Check Out:
guests can manage their stay via their
mobile device, including confirmation of
arrival time and SMS notification of
when their room is ready.
Mobile Folio:
allows guests to view their hotel bill in
real time on their mobile device, before
receiving their final bill during Mobile
Check Out

56. Hotel Strategies: IHG
Mobile Room Key
Technology:
gives guests the
opportunity to
bypass the front
desk when
checking into their
room.
IHG Guest Request:
A service which allows guests to
make a request instantly through
the IHG® App.
iBeacon technology: Beacons placed in the lobbies and restaurants of
our hotels recognize IHG® Rewards Club members using
the IHG® App in close proximity. They then send information to the guest’s
smartphone, including personalized notifications and offers relevant to
their stay. The pilot is being implemented in a selection of hotels in China.

57. Hotel Strategies: Sheraton
• Sheraton announced a major change to the company’s hotels, with the
Sheraton 2020 plan designed to adapt the hotels to their local surrounding,
bringing in local designers, so you won’t walk into every Sheraton in the
U.S. or China and have the same look and feel.
• Food and beverage will be based on local ingredients as well, through a
new initiative called “Paired” that plays off the fresh market concept with
unique parings of local ingredients.

58. Hotel Strategies: Boutique Hotels
• Boutique hotels, marketing a unique experience, might be the
accommodation’s industry segment that is most at-risk.
• In order to turn a threat into an opportunity, Boutique hotels now
listing rooms on Airbnb to fill vacancies.

59. Everyone’s Goal: “Entire Trip”
• Hospitality companies are targeting the entire trip, aiming to accommodate
the various needs of the traveler. Through this, companies can offer a better
experience and more convenience, and they can also find new growth.
• One of the key technologies for companies in this regard is the smartphone:
Hilton, for example, considers the smartphone as the consumers’ “remote
control” for the entire travel experience.
• In this field, OTAs have taken the upper hand, since they have planned the
trip (rather than the accommodation alone) from the start. However, major
hotel chains have already stated that they are concentrating on the
traveler’s entire trip as well.
• Airbnb has said in an interview to Fast Company in 2014, "Our business
isn't the house - our business is the entire trip.” Indeed, the company is well
positioned to leverage its community to offer additional peer-to-peer
services.

60. Current Competitors’ Focus Areas
Business
Travelers
Families
Individuals
Airbnb
Home
Away
Hotel
Chains
Boutique
Hotels
Kid &
Co.
Millennials Older Travelers
Millennials Older Travelers
OneFine
Stay

61. Strategies by Focus Areas
Millennials Older Travelers
Business
Travelers
Families
Individuals
All-Mobile
Experience
Afforda-
bility
Social
experience
Loyalty
Concierge
apps /
Services
Personaliz-
ation
Millennials Older Travelers

62. Thank You!
The research was conducted by:
Hamutal Schieber
Schieber Research | Market Research & Competitive Intelligence
www.researchci.com | hamutal@researchci.com
Executive Summary. For the full research - please contact
Carmelon Digital Marketing
http://www.carmelon-digital.com