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Thoughts on Airbnb, DMOs, taxes, millennials
April 21 2014

With a multibillion-dollar valuation, Airbnb is not going anywhere and is establishing itself as a competitor for hotel demand.

Highlights
  • Airbnb eventually will oblige and begin paying lodging taxes.
  • The booking site’s acceptance will grow as millennials work their way up the corporate ladder. 
  • A loyalty program represents an easy win for Airbnb. 
 
Jan Freitag
By Jan Freitag
Senior VP, Strategic Development, STR
jan@str.com

During the past six days I attended conferences in Vancouver; Breckenridge, Colorado; and Phoenix. Although Airbnb was not a stated topic of any specific presentation, this new hotel competitor permeated the lunch, dinner and breakout conversations. 
 
I talked to a few owners, operators and destination marketing organization executives, and here are some thoughts on the emergence of Airbnb, in no particular order:
 
  • Airbnb executives are smart to take the discussion about lodging taxes off the table. At the beginning of the conversation, hoteliers want an equal playing field and Airbnb eventually will oblige and pay. But this decision cuts both ways. Once Airbnb starts to pay lodging taxes, then occupancy-tax funded DMOs will have to promote it equally to all their other hotel members. DMOs are in the business of promoting the destination, but on their websites hotels and Airbnb inventory will have to be listed side by side.
  • Once millennials, who today use Airbnb for leisure travel, move up in their companies to positions that can dictate travel policy, Airbnb is on its way to being a legitimate accommodations choice for Fortune 1,000 corporations. It is not a stretch to imagine a newly minted director of procurement, acquainted with using Airbnb, forcing a decision that allows business travelers to stay in certified, “ready for business” homes and bedrooms. 
  • As large corporations look for ways to cut travel budgets (or at least not to increase them), they devise new schemes to incentivize staff. One large tech player basically lets a software program determine a budget per trip and then the staffer can decide how and where to book, stay and fly. Potential savings at the end of the year then revert back to the traveler. Obviously Airbnb is an easy choice for those travelers.
  • The premise for the rising acceptance of Airbnb as a legitimate choice for business travelers is obviously safety and security, and right now Airbnb is one lethal fire away from a public relations nightmare. But if it indeed, as is planned, hands out CO2 detectors to hosts and safety (and perception thereof) gets managed ever better, Airbnb will become a real choice for travel departments and the millennial business traveler.
  • Another easy win for Airbnb would be the start of a loyalty program that would allow business travelers to accumulate “Airpoints” (or AirBonBons?) to then take their family on vacations for free. Let’s face it: The blood, sweat and tears it takes to earn loyalty points on the road are only worthwhile if you can spend time in a high-end location to show off to your spouse and kids why it is worth for you to be away all those nights. Loyalty programs are not difficult to implement. Expedia did it, so did Stash Rewards for independent hotels. Yes, there are costs associated with them, but for a company that thinks about market share first and margins second, that trade-off is a no-brainer. 
  • Airbnb is the merchant on record for its transactions, which allows it to easily collect lodging taxes. Other companies that list rent by owner (RBO) inventory, such as HomeAway, are referral services. The owners receiving rent are supposed to pay lodging tax on that income. But not all owners do, depriving municipalities of their income. Tracking down owners who rent out their second home and are not paying their lodging taxes is a tedious, manual process. RBO websites refuse to tell destinations who rents what when citing privacy concerns, so quite a few mountain and beach municipalities are undertaking a manual “search and scrape” effort on third-party RBO websites, overlaying that list with tax rolls and owner names and then sending out tax bills. From a DMO perspective, Airbnb is actually the preferred vendor, because it can easily collect and remit taxes. Imagine that—DMOs steering their second home owners toward signing up for Airbnb to bolster their tax base. 
 
With a multibillion-dollar valuation, Airbnb is not going anywhere and is establishing itself as a competitor for hotel demand. It’s not for everyone; it’s not for every stay, but as an option it is what travelers want. We in the traditional hotel space better be prepared for a new influx of competing rooms vying for the traveler—millennial or otherwise.
 
The opinions expressed in this blog do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.
 
COMMENTS   Show All
Drew Dimond
4/22/2014 9:21:00 AM
The thought came to be that all of the game changers in our industry have come about by those who were in other businesses - i.e Jack DeBoer, Kemmons Wilson, Bob Wolley and now this appears to be up and running. Again, consumers are telling us what they want. It will have sustainability unless AB&B implodes itself. Timely and well written Jan.
Bob Rauch
4/21/2014 11:56:00 AM
I did not intentionally become anonymous on my demand/supply conundrum, just forgot to log in! Bob
Anonymous
4/21/2014 11:54:00 AM
Well said, Jan. Not a threat today, but wait until the next downturn when demand and supply are no longer in balance.
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