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A follow-up to last year’s annual AlphaWise survey of 4,000 consumers in the U.S., UK, France, and Germany, the report found a continuation of slower growth for the homesharing giant in those markets, as well as increasing competition from online travel agencies Booking and Expedia.
For this year’s survey, the percentage of travelers who used Airbnb during the 12 months leading up to October 2018 increased to 27 percent, or about 2 percentage points. In 2017, the percentage of travelers who used Airbnb during the same period increased to 25 percent, up 3 percentage points. By contrast, in 2016, that increase was up 8 percentage points.
Not only that, but user frequency has started to fall by 10 percent, or three times per year, after being flat for the past three years.
Morgan Stanley researchers attributed the slowdown in Airbnb’s growth to three primary reasons. For one, awareness of Airbnb has reached a peak of approximately 86 percent across the regions surveyed.
Secondly, issues surrounding privacy, legality, and safety are still barriers to adoption for some travelers. More than 50 percent of survey respondents who do not use Airbnb listed safety, privacy, or legality as reasons.
Another reason for the slowdown: competition from the online travel agencies is giving Airbnb a run for its money. Morgan Stanley Research expects online travel agencies’ U.S. and European hotel businesses to grow at approximately 7 percent versus 6 percent for Airbnb. They also anticipate the online travel agencies’ global alternative accommodations businesses will grow 1.3 times faster than Airbnb’s over the next two years. Online travel agencies also remain the most commonly used booking channel; 59 percent of respondents use them to book travel.
An Airbnb spokesperson told Skift, “Airbnb has listings in 191 countries and more than 81,000 cities. Our goal is to have a billion people a year annually on the platform by 2028. By treating our hosts and guests like members of a community and not commodities we continue to benefit from robust growth across the board. This survey wrongly assumes a significant decrease in growth in recent years in the United States and Europe. In fact, this survey is so off that it offers projections for the growth of Airbnb in the United States and Europe by 2020 that are not only inaccurate but are numbers which Airbnb has already surpassed.”
Looking ahead to 2019, Morgan Stanley researchers anticipate that Airbnb will generate a total of 150 million room nights in 2019 in the U.S., UK, France, and Germany, representing an increase of approximately 6 percent year-over-year. In last year’s report, researchers expected Airbnb to generate approximately 155 million room nights in 2018 in the U.S. and Europe, an increase of 14 percent over 2017. They have since lowered that estimate to approximately 140 million room nights in 2018.
Globally, researchers anticipate that markets outside the U.S. and Europe will make up nearly half of all of Airbnb’s global room nights by 2020, and that Airbnb’s total room nights will grow by 20 percent from 2017 to 2020.
Airbnb Is Less of a Threat to Hotels
Morgan Stanley’s research seems to suggest that Airbnb is becoming less of a threat to hotels, or at least to the revenue per available room (RevPAR) that hotels in the U.S., UK, France, and Germany can generate. Overall, researchers estimated that Airbnb will have a 20-basis-point drag on U.S. RevPAR growth from 2018 to 2020.
The report’s authors still maintain that Airbnb is a “headwind for the broader U.S./EU lodging industry,” however, and that Airbnb is still having an impact on hotel occupancy, with 47 percent of respondents having replaced a hotel stay with an Airbnb in 2018. Likewise, researchers anticipate that Airbnb will be roughly a 10-basis-point drag on annual occupancy for hotels from 2018 to 2020.
This year’s survey also found that Airbnb users are lengthening their stays, staying an average of 4.5 nights per stay. Last year, they averaged 4.3 nights.
When it comes to compression or high-demand peak nights where occupancy in a market is at 95 percent or higher, it also appears that Airbnb is having less of an impact on hotels’ ability to achieve compression nights — and the high rates that come with them. While the number of compression nights in the top 25 U.S. markets was down in 2016 and 2017, that number is actually up 7 percent year over year in 2018.
Are the OTAs Winning?
While the report’s authors are “unclear” as to whether Airbnb is an increasingly bigger threat to the major online travel agencies, they did note the resiliency of those channels and the fact that they are increasingly branching out more into Airbnb’s core business: alternative accommodations.
They also said that while consumers are generally using OTAs to book hotels and Airbnb to book private accommodations, “we expect the lines to blur over the long term, as consumers are likely to favor the websites that offer the most inventory and selection across hotels and alternative accommodations.”
In other words, if Airbnb wants to compete head-on with the likes of Expedia and Booking, it needs to bulk up its hotel inventory and offer more than just places to stay and activities like it does at the moment. Earlier this year, Airbnb formally began courting hotels to list their properties on its platform, but the number of hotel listings on the site is still lower than the number of hotel listings to be found on Booking and Expedia. The last known number of hotel listings available on Airbnb was 24,000 as of February.
Because both Booking and Expedia are displaying alternative accommodations alongside traditional hotels on their respective sites, they’re giving consumers added convenience.
Likewise, the number of private accommodations on Booking.com now represents approximately 80 percent of its inventory, and is growing 50 percent year over year versus the low to mid-teens for hotels, motels, and resorts, according to the report. In Booking Holdings’ most recent filing with the U.S. Securities and Exchange Commission, it said, “Booking.com included approximately 2,065,000 properties on its website at September 30, 2018, consisting of approximately 430,000 hotels, motels and resorts and approximately 1,635,000 homes, apartments and other unique places to stay.”
Relatedly, Booking and Expedia also spend two times as much on marketing as the top five largest hotel chains combined, and if Airbnb wants to compete, it too likely needs to increase its marketing and advertising budget.
Researchers also noted that outside of the U.S., Booking.com has a higher traffic lead over Airbnb, with 130 million app downloads over Airbnb’s 82 million. In the U.S. however, Airbnb leads with 27 million app downloads, trailed by Expedia with 21 million and TripAdvisor and Booking each with 17 million.
A Few Bright Spots for Airbnb
Forty-six percent of all U.S. and European Airbnb users surveyed in the report had booked an Airbnb Experiences activity in the past 12 months, while 67 percent of U.S. users had booked one in the last year.
Airbnb Plus, the company’s newest product featuring verified homes, has 55 percent awareness among American Airbnb users and 40 percent awareness among all Airbnb users surveyed. Nearly eight out of 10 U.S. respondents indicated that they would book an Airbnb Plus home over the next year, as well. European Airbnb users, not surprisingly, had a lower intent to book Airbnb Plus homes (69 percent for UK, 70 percent for France, and 58 percent for Germany).
When Airbnb debuted Airbnb Plus in February, the company said it hopes to have a total of 75,000 Airbnb Plus listings in 50 destinations worldwide by year’s end. It’s not clear if the company is close to meeting this goal.