Will Airbnb Revolutionize Business Travel?
Airbnb, Inc., the online marketplace that connects travelers with rooms, has changed the face of leisure travel and now it’s starting to make its mark on the business class. In July of 2014, Airbnb announced Business Travel on Airbnb, a service that helps business travelers’ search and book accommodations. The program signed up 500 companies in its first 24 hours, and a year later, it counts more than 1,000 companies in 35 countries as customers.
Airbnb is part of the sharing economy, largely a byproduct of the Great Recession. The idea behind the sharing economy is the trading of human and physical resources, whether it’s a room in someone’s house, or a car that sits idle during working hours. The sharing economy comes in many forms with one of the earliest technology-driven examples being peer-to-peer music services.
The popularity of sharing economy services is being driven by millennials who are much more comfortable with technology and have a desire to save money. Many of the services, whether it’s accessing a car when you need it instead of owning one, or staying at someone’s home instead of a hotel, can cost a lot less than the traditional counterparts. Not to mention it gives people options in terms of space, type of dwelling and location. According to Pricenomics, the San Francisco data company, Airbnb users save around 21% when renting out an entire apartment and 49.5% when it comes to a private room versus a hotel.
Airbnb burst on the scene in 2008 amid an economic downturn that rivaled past recessions and has been helping people find places to stay ever since. Today it boasts more than 40 million guests and more than 1.5 million listings. It is currently in 34,000 cities and 190 countries.
Airbnb Cost Savings Appeals
Using Airbnb for business travel isn’t as simple as going to the website, perusing the listings and placing an order. To book a room through its business service, your company has to be enrolled. Only then can you look through the database of more than 500,000 business accommodations.
Airbnb’s meteoric growth in the business market is understandable given the number of benefits companies see by letting employees travel this way. Not only does it cost less in most instances, but business travelers also don’t have to worry about finding a room if everything else is booked. Not to mention you get more amenities from staying in a home rather than a hotel room. A lot of the accommodations provide full kitchens and washers and dryers, things guests might not find in a hotel.
It’s also appealing for companies who are looking to host corporate retreats or meetings where they want all of their employees under one roof. Google Inc. (GOOG), Facebook Inc. (FB) and Salesforce.com Inc. (CRM) are a small sampling of companies using Airbnb for corporate travel. It doesn’t hurt that Airbnb makes it easier for companies and employees to manage their expenses thanks to a partnership with Concur, the provider of expense management systems owned by Germany-based SAP SE (SAP). Business travelers who use Concur’s TripLink service are able to book Airbnb stays directly and have their expenses automatically populated into Concur.
Risks Vs. Savings
While Airbnb is luring a lot of companies to its service, there are some concerns that could dampen its growth or at least give some corporations pause. While the sharing economy is saving people tons of money, it isn’t without horror stories as well. Because there is a lot of trust built into these services there is also a lot of risks. Although it’s typically the property owner who gets hurt in these kinds of arrangements there’s also a chance travelers can get ripped off. Because you are relying on pictures, reviews and correspondence with the host, the property may not match the description. What’s more you may be on your own if there is a problem with the property or if you can’t access Internet.
Spotty Internet in and on itself is going to be a big problem for business travelers. After all, there isn’t going to be a business center in the lobby and you may not have a responsive host that gets it back up and running. Airbnb does offer some safeguards to ensure both parties are protected in the transaction. Some of that includes a verified ID system that helps you confirm who you are dealing with, profiles that display all the reviews for both parties, and an internal messenger service. Airbnb also urges travelers to purchase their own travel insurance to protect themselves in the event of an emergency, which may cause some corporate concerns.
Redefining Hotel Industry
Although Airbnb has only been around for a few years now, it is redefining the hotel industry and putting the old stalwarts on watch. Take Paris as one example. Airbnb has a lot of listings in the City of Light, so much so that Paris hotel operators are starting to complain about losing business to this start-up. Hotels around the world are bemoaning the service, contending it is stealing their customers and that the Airbnb operators don’t have to pay taxes.
Airbnb is focusing on the extended stay and off-site meeting market with its business travelers’ service, and there is already proof that its ideas are working. According to Airbnb the average business traveler stayed 6.8 days in an Airbnb property.
The Bottom Line
Although Airbnb is still in its infancy, its business is expected to continue see growth. In fact, the travel company is reportedly in talks to raise private equity capital that can give it a value of around $10 billion, surpassing the valuations of established hotel companies Hyatt Hotels Corp. (H) and Wyndham Worldwide Corp. (WYN).