Airbnb: More Than a Threat, It’s a Great Disruptor To The Hotel & Travel Sector

I recently read an article on Airbnb on Euromonitor that declared: “Airbnb.com Poses Only a Small Threat to Hotel Industry.”

The truth is, Airbnb is not only a threat, but is actually a great disruptor for the hotel and travel sector. The article I cited makes three critical errors in reaching its erroneous conclusion. Let’s break them down.

Mistake #1: Airbnb is a “vacation rental” business.

Characterizing Airbnb as a vacation rental market play is simply not right. The article uses Wyndham Worldwide as an example of a hotel group that  “owns one of the oldest vacation rental brands—the British Hoseasons est. 1940” (who knew!). Well, congratulations to Wyndham Worldwide for keeping this a secret from the online world for 70 years! Maybe it was classified as a secret project from the WWII era?

To put Airbnb’s reach in perspective, I polled 15 of my best-heeled traveler buddies. Many of them are currently working in the hotel industry. Everyone had used AirBnb or referred a family member to Airbnb at least once. (In case you were wondering, the number of them who contributed any revenue to “British Hoseasons” was ZERO.)

Folks, Airbnb goes way beyond vacay (I used vacay!) rental people. People book Airbnb for EVERYTHING – vacation, business, events, family get-togethers, elopements, comic conventions, etc.  What they are putting in the limelight is how quickly the online travel market is changing and growing.

Mistake #2: Its effects are limited to leisure travel.

Here is one of the headers from the article: “Hotels need to keep an eye on leisure travellers.” Well, hotels need to keep an eye on ALL travelers and the massive changes that are happening in the way people are booking travel. Hotels need to learn to provide better value. Airbnb is not just for a family on vacation that is looking for a kitchen to make breakfast in. Neither it is just hipsters looking for a hotel alternative because hotels are too mainstream. C’mon! It’s much broader. I used Airbnb three times in 2012 for some serious business travel. Meetings, conference speaking, etc. You know… the trips where you have to work a lot? Think a lot of business thoughts?

Even the geographical outreach of Airbnb is spectacular. I had rooms booked in San Francisco, Phoenix and Singapore. Every single experience was excellent. Pretty ironic when I was staying in a Phoenix penthouse that belonged to the General Manager of a local designer hotel! The town was pretty sold out for the days I was there. I made the choice not to pay $465 for an Embassy Suite, and so did many other business travelers that week.

Mistake #3: Counting on the government to shut it down.

Euromonitor article interestingly stated that “Local governments may be an ally.”  to the hotel industry in controlling  Airbnb. Wow. Counting on the government to shut down innovation and disruption-based business models is really sad. Hotels need to know that any government that is going to shut down innovators is going use the same logic to hurt you when you innovate. Unless you have sworn off innovation as a hotel brand, beware what you wish for. Anyway, let’s get real. Building code violations in NYC are not going to be stopping Airbnb. Wishing for that to happen is a fool’s dream.

In conclusion

Airbnb is way beyond a threat to hotels. It’s a new way of conducting the business of travel. It is adding new entrepreneurs to the hotel business, as anyone with an additional room to rent can now be a hotelier. Not only that, Airbnb is adding a supply of rentable rooms to cities across the globe. The words “the city is sold out tonight” have a brand new meaning thanks to Airbnb.

Hotel Online Marketing Budget Disconnect: A Perpetual Case of Bringing a Knife to a Gunfight.

“Nice try kid, but it looks like you brought a knife to a gunfight.” This line from Indiana Jones and the Kingdom of the Crystal Skull pretty much sums up the hotel industry’s current state of perpetual online defeat.

It’s 2013. Pretty much everyone — even folks living under rocks — have had some sort of exposure to online marketing. Enter hotels, still wildly under-spending on what is going to bring them the best outcome.

Here is a typical hotel marketing budget:

  • Branding: $5,000
  • Print: “Could we please spend a several thousand dollars on print…I know you saw the video on YouTube about paper. OMG, it was so awesome!”
  • Time wasted on branding “discussions”: $50,000
  • Website: $5,000
  • Time wasted on website “discussions”: $100,000
  • “Social Media”: $1,000
  • Online Marketing: $500/month

trexTo really put it into perspective for you, here is an amazing fact. In a recent conversation with a “Brand” looking to break into the European market, they assigned $800 (not a typo), yes 800 US Dollars as their online marketing budget! Which is like a 100 pounds! (Ok…I might be exaggerating just a bit about the exchange rate… but not the other part.)

Think about how short your arms are going to be when you have a pathetic monthly online marketing investment and then start competing for online market share in high-volume traffic cities like London and Paris, NYC and Miami, Hong Kong and Singapore, etc.

When you venture for market share online, you have to do more than buy your own brand name terms. You are also competing with these guys:

  1. OTA’s (AKA, we put our marketing dollars where revenue is.)
  2. Competitor hotels – Other hotels in your  location(s)
  3. Online Review Websites – Tripadvisor, etc., who are not diversifying their  advertising revenues and also actively selling rooms.

Every evil can be traced down to its root cause. In my industry experience, working for hotels and managing a marketing agency, I have located the hotel’s source of conflict, misery and defeat. It is the budget.

What’s the right budget then? It differs from city to city. Here is a top-level guideline.

Minimum Media Buy and Online Marketing Budgets

  1. Major Metropolitan Cities (NYC, London, Singapore): 18K/month
  2. Secondary Cities (Austin, Edinburg, Nice): 10K/month
  3. If your hotel is located in a smaller town. that brings the budget into the 1-5K range, because you are mostly focusing on brand name searches and low-volume, location-based keywords.

Hotels must reevaluate their budgeting philosophies. Bringing a low-budget knife to a high-tech online marketing gunfight is going to severely hurt your revenue.

Another Day (Not) Another Blog

This is not my first blog/dance/party/luau. It’s the fourth blog that I’ve launched since 2006. The other three blogs were focused on topics ranging from Online Marketing to Surfing Products and Big Wave Surfing. (What can I say…I have range.)

Why is this blog different from all other blogs? Simple. It bears my name. These are just my thoughts: no guest posts, no agency talk, nothing but me talking about what I know best.

I am Vikram Singh, and these are my words.

Interesting fact: The one thing all of my blogs have in common is that they were all launched in Oahu, Hawaii. The Island Kingdom simply inspires me.

Ok, now what is this blog going to be about? It’s about making a change. Stopping the business as usual that has the hospitality industry so trapped. I want to point out a better way of doing things: a better way to use analytics, a better way to use technology, a better way to use your staff… etc, etc.

After dedicating over 15 years to the hotel and online marketing industries, I am ready to share my stories, perspectives, thoughts and ideas.  

Don’t worry. This is not a “dear diary.” I don’t do diaries. You won’t have to read about what I had for breakfast. This is more like a serialized book on hotel industry best and worst practices, all based on real-life experiences with employers, vendors, clients and colleagues. Some chapters will sting while others will soothe. But I hope all of them will inspire you to think about what you’re doing and to aim higher.

Please bring an open mind and a saltshaker filled with grains of salt. I’ll try to keep it interesting.