Sell Disneyland tickets or retain its curated Experiences offerings? Things are already beginning to change, but that's a dilemma for Airbnb as it tries to build a profitable tours and activities business in a rough-and-tumble and highly competitive market.
Nearly five years after launching Airbnb Experiences, which the company bills as “Activities Designed by Locals,” the business is beset with challenges with no obvious or publicly articulated path forward.
Part of the issue was the pandemic, which decimated tours and activities’ providers around the world. CEO Brian Chesky has stated publicly that prior to the Covid-19 outbreak, he envisioned that 2020 was going to be a breakout year for Airbnb Experiences. That didn’t happen, of course, for obvious reasons.
It’s unclear how much attention Airbnb’s Experiences’ staff is giving to offline tours at the moment. Airbnb’s focus in the tours and activities arena during the Covid crisis has mostly been on online or virtual experiences, ranging from a sign language-inspired workshop to streaming the best of Paris with a Parisian, and the secrets of interior design.
Attention-grabbing promotional events, such as several K-Pop experiences, running this week. have been part of the mix, too.
But Airbnb Experiences has nonetheless been undergoing some important, if still burgeoning, changes.
No tickets to must-see attractions
The company has stuck with its refusal to offer tickets to popular attractions in favor of curated experiences offered by hosts, and increasingly by professional tour companies. So if you are looking for theme park tickets in Orlando, Florida, or admission tickets for the Eiffel Tower in Paris, you won’t find them on Airbnb.
“They just do not have a lot of product that people want,” said Douglas Quinby co-founder and CEO of Arival, which recently released a research report, based on pre-Covid data, about Airbnb Experiences.
Airbnb, though, has bowed to the popularity of big-name attractions after a fashion, and has started to offer walking tours of 30 top sites in Paris, London and New York City, as well as helicopter tours of a city’s landmarks.
So if you can’t buy a ticket to get inside the Louvre or the Statue of Liberty on Airbnb, then at least you can book various tours on Airbnb to take photos of them.
It’s important to point out that these top-site tours can have unique attributes. For example, the host and co-hosts of the See Top 30+ Paris Sites tour are performers who play a selection of the myriad characters who helped mold the city’s history.
Airbnb hasn’t broken out its Experiences business separately in financial statements but lumped it together with apartment and vacation rental stays. But Morningstar analyst Dan Wasiolek estimated that Airbnb likely did $250 million in Experiences’ bookings in 2019, undoubtably at a loss.
He expects Airbnb to invest in Experiences over the next few years, and that profitability could eventually be on par with its accommodations business.
But the tours and activities business is a tough one, and there is plenty of competition with ample resources.
Tour Operators, Not Locals, With Rising Influence
As with its accommodations’ business and the pressure to expand deeper into hotels as a growth opportunity, Airbnb faces the quandary of trying to build an Experiences business that’s in keeping with its people-to-people cultural tale versus the need to go more mainstream.
“The relatively low number of Experiences that include traditionally high-volume products such as theme parks and other attractions will need to significantly grow for this business unit’ financials to materially improve,” the pre-Airbnb IPO Arival report stated. “While it is certainly possible that Airbnb can grow Experiences by remaining focused on smaller tour products, the company will face much bigger time pressure to get the product right as a public company.”
As the Airbnb Experiences business matures, it is starting to add more professional tour operators to run the tours, and that’s a development that runs counter to its mantra of offering activities carried out by hosts and other locals.
Tour operators are seemingly out-performing experiences run by individuals on Airbnb. “Tour and activity operators are seeking to take advantage of the platform and are already outperforming individual hosts, on average,” according to Arival. “Those 10 percent of hosts with three or more listings already account for 28 percent of all listings and 30 percent of all reviews. Just 2 percent of hosts (fewer than 700) have five or more listings, and those hosts account for 12 percent of all listings and 10 percent of all reviews.”
An Airbnb spokesperson stated: “Airbnb Experiences have always been designed to help people connect more meaningfully with people and communities and the vast majority of our Experiences hosts have only one or two listings. In some cases, there are hosts who have successfully grown their businesses on our platform from a single Experience to a portfolio of more than 10 and they have succeeded because they offer the kind of hosted travel and unique experiences that people are looking for.
“We will continue finding ways to support our hosts and create opportunities for connection. Online Experiences and in-person Experiences will remain a key part of our work.”
Quinby said he thinks Airbnb Experiences will have parallels to the trajectory of Airbnb accommodations, which saw the increased influence of property managers and real estate interests in recent years. Some tour operators have come to view Airbnb as an important source of demand, he said.
Software as a Burden
One key issue for professional tour operators listing on Airbnb — or those considering it — is that Airbnb Experiences doesn’t connect with most other third-party software, according to Erik Hormann, co-founder of Paso Robles Tour Co., which conducts wine tours and rents electric bikes along California’s central coast.
Tour operators who might run their operation using software from Peek, where Hormann previously worked, or FareHarbor, would have to consider the inefficiencies of having to add an Airbnb’s Experiences interface to the mix, he said.
For some harried operators, who might be driving a tour bus and conducting tours in addition to running the back end of their businesses, adding an extra software system just isn’t worth it, Hormann said.
Hormann has participated in Airbnb Experiences off and on since its earliest days five years ago. He said it didn’t pay off for his company in cities such as San Francisco, where there is a crowded field of Experiences.
But Hormann said in places such as Paso Robles, where there are ample numbers of Airbnb accommodations but few Experiences, it can be “pure gold, better than Tripadvisor.”
And Airbnb’s commissions, around 20 percent, are often lower than those of rivals, which can be an advantage.
Airbnb has a key marketing advantage over some operators: A few hours after guests book a stay on Airbnb, they receive an email from Airbnb that might say, “Make the most of every moment you’re in town. Check out these unique Airbnb Experiences hosted by expert locals — all happening during your stay.”
Those expert locals often offer compelling tours on Airbnb, although Airbnb’s tour products frequently are not unique to Airbnb, and the influence of local guides on Airbnb is waning.
Disneyland or differentiation? That’s Airbnb’s Experiences dilemma.
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Photo credit: An Airbnb art experience in Johannesburg, South Africa. Airbnb