Airbnb Expands Online Travel Business With New "Trips" Feature
Airbnb is evolving. The company's recent development of Trips, which includes things like personal experiences, shows how it might be disrupting not just the hotel industry but also the online travel agent business -- perhaps to the frustration of companies like Expedia (NASDAQ: EXPE) and TripAdvisor (NASDAQ: TRIP). Flights and other service bookings could be next.
A full transcript follows the video.
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This podcast was recorded on Jan. 25, 2017.
Vincent Shen: Airbnb started in 2008. They have millions and millions of guests across many, many, many listings. I think the theme that we're seeing that will take the focus today for the company is that for a long time now in the overall vacation travel booking industry, companies likePriceline,Expediahave seen the value in bundling essentially. By offering you or giving you the option to book through them, not only your airfare, but we where you're going to stay, maybe your car rental, by bundling that and giving you a discount, it's still more lucrative for the company. It seems like with some recent news in November and December that Airbnb is very much embracing this model with the launch of what they're callingTrips, right?
Seth McNew: Right. It's pretty amazing to remember that Airbnb is less than a decade old. It started in 2008 and here we saw it was disrupting the hotel industry and maybe now online travel agencies, maybe something else but the launch of Trips really shows how they're able to use their platform to really diversify.
Shen: In case you haven't seen the release for Trips, the way they describe it, kind of break it down into three components which is their Experiences, their Places, and their Homes. The Experiences aspect of it is very interesting. I believe they started testing for this as early as June of last year, but I think the more official release went out in November. As of early December, the most recent number I could find, Airbnb is offering 500 experiences available in about 12 cities around the world, and I am pretty sure that is expanding quickly to at least another 30 or 40 cities if it hasn't already. Just an example, and I think it's really interesting what these experiences might be, one example is you get to surf and explore the outdoors with a local in Los Angeles. The price is for three days of this immersed experience is $349 per person.
Another example, in Tokyo, where you just came from, you learn the art of the samurai. This is another that they kind of highlight on the Airbnb site. Two days for $437, and you can even book with hosts who have partnered with nonprofit organizations, and the company cites that 100% of the guest payment goes to the organization itself which I thought was interesting.
Reading through the frequently asked questions for people who would like to host an experience, they've obviously implemented some pretty strict standards making the experience unique, value-added, having that local touch and flavor that you might not be able to get as a tourist traveling there just for a week or two. These experiences can break down into two categories from what I find. Something that's just a couple hours and then something that's more of a multi-day immersion.
I was surprised they actually mentioned these numbers. The average price for bookings for the shorter experiences is just a $100, whereas the average for the multi-day immersions is about $270. The way the company makes money here is they collect a 20% booking service fee on the experiences from the hosts, not the guests, which is interesting because for their more traditional business model, they have that 3% listing fee I believe it is, and they charge usually 6% to 12% of the cost of the stay to the guests.
That's the Experiences part of it ...
McNew: This is just by chance, I did one of these in Tokyo. I did an experience so I took a ...
Shen: Oh, perfect! Here we go.
McNew: I took a bike ride around Tokyo. It happened to be an American who's been living in Tokyo. It was about three hours long. He took us on a bike all around these alleyways in Tokyo and we got to see the city. It was only about $22. It was great, we got to message with him on the app right before hand, all the payments were taken through Airbnb.
Shen: Did he just stay with you for like an afternoon about?
McNew: Yeah. I think it started in the mid-afternoon. We took a bike ride around sunset, and then we all had dinner together. It was definitely a full experience and well worth the $22 for sure.
Shen: Awesome! That sounds really cool. This, again, is part of Airbnb's efforts to start branching out beyond just the where you put your head each night, and to bring in not just the experiences like what you just described. The second part of this Trips platform which is what they describe as their Places. This has several options itself. The first one I could that find was with these guidebooks. I'm not sure if you saw any of these during your travels, but they call them Insider Guidebooks. Basically, the press release describes them as "hidden gems identified by cultural experts and neighborhood insiders." There's a hundred of these guidebooks available at launch in six cities. They're also pushing meetups, I think encouraging local businesses to organize meetups among locals and also travelers in the same city. They have these audio walks where they partner with Detour. At launch, it's only available in Los Angeles, but that's expected to expand to San Francisco, Paris, London, Tokyo, and Seoul this spring. It's basically supposed to be unique, very much value-added audio walks.
Those are the two components, and of course the third component of the trips is what they describe as Homes, which is their traditional business. I found the exact numbers here. They have three million homes now available in 50,000 cities spread across 191 countries. Quite the footprint.
Seth McNew has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Priceline Group and TripAdvisor. The Motley Fool has a disclosure policy.