According to Airbnb’s website, more than 160 million people have booked a stay on the website. The great thing about Airbnb is that they create customer interest. The challenge for you, the host, is to compete for that interest and secure bookings. No matter where you are (with the possible exception of an igloo in the Arctic), you will face competition from other hosts.
Try a search on Airbnb for “Saint Helena, Saint Helena, Ascension and Tristan da Cunha”. This is the remote island in the South Atlantic where Napoleon was imprisoned after his capture by the British. Even in this remote spot, unheard of to most people, there are Airbnb listings!
If you’re living in a place with a lot of existing Airbnb listings, you might be thinking that there is just too much competition. But take a look at the numbers and you’ll see that Airbnb is just getting started. It’s going to get much bigger, and there will be a lot of business for those hosts who provide high-quality guest experiences.
Airbnb and Global Hospitality Statistics
- 80 million room nights were booked on Airbnb in 2016, up 100% from 2015.
- Cowan Group predicts that number could increase to 500 million by 2025
- Airbnb’s revenue was approximately $1.7 billion in 2016
- This represents 0.35% of the global hotel industry revenue, which is more than $500 billion
The global hospitality industry is massive and although Airbnb is getting a lot of attention from the media, it has just a tiny fraction of the overall industry market share. However, what is clear is that Airbnb has gone from $0 to $1.7 billion in annual revenue in less than 10 years. That is phenomenal growth and if it can continue growing at such a rate, it will create excellent opportunities for people like you.
Now is the time to take your share. Now is the time for you to develop a new source of income, one that can give you personal financial freedom.
Airbnb’s Hosts and Travelers
Airbnb’s customer segments can be split into two broad groups: 1) hosts, and 2) travelers. Airbnb is essentially a marketplace bringing these two customer segments together; one that desires a place to rent for a short-term period with another that has rooms available for rent.
When successful transactions occur (rooms are booked), hosts make money and Airbnb receives commissions. It’s a fairly simple concept!
Who hosts on Airbnb
There are many reasons why people rent out rooms, apartments, houses, treehouses (yes – treehouses!) on Airbnb. Here are a few. Maybe one of them fits your situation:
- You own a home or apartment and need to rent out a room or two to help cover the mortgage payments;
- You rent an apartment in an expensive city and need the extra income to cover the monthly rental payments;
- You have a larger home with more space than you need. Maybe your kids are older and have left home. You would like to make money in order in order to retire sooner or pay for nice holidays of your own;
- You own a second home which sits empty for large parts of the year or you pay a management company excessive amounts of money to rent it out on your behalf;
- You just love hosting and sharing your home and enjoy meeting interesting people from all over the world.
- You want to use Airbnb to subsidize holidays and weekends away. When you get a booking, you plan a trip.
There are plenty of reasons to host. It’s a great second income and can become a primary income. You can pay off your mortgage early and attain financial freedom allowing you to quit that overly stressful job. It can help you afford to live in places like New York City, San Francisco or Los Angeles without the need to work an additional job just to cover the rent.
Reasons why you might not want to host
Hosting is not easy. It can become a time-consuming way of earning money. You should be prepared for some hard work in setting up your home, maintaining it, dealing with guests, buying incredible amounts of toilet paper (I have no idea what some of my guests do with it), cleaning, and never-ending loads of laundry. A lot of the work can be outsourced but that costs money.
If you are very protective of your home, hosting might cause you some distress. Some guests are just hard to please and will find anything to critique. Others might scratch or break something. You need to be prepared for incidents and occasional criticism. You sometimes need a thick skin and patience. If you don’t possess these traits, hosting can be stressful.
There are hosts who enjoy hosting and those who don’t care too much for the people interaction part. Both are fine if you are renting an entire place. If you are renting a room in the house where you live, it probably doesn’t make sense for you to be a host if you don’t want to interact with your guests. Guests will likely find the experience uncomfortable.
Types of Airbnb Listing
Most listings fall into one of four categories:
- An entire primary residence
- A room in a primary residence
- An entire second home
- A secondary dwelling unit (aka “a mother-in-law apartment”)
There are other types of listings on Airbnb such as commercial hostels, guest houses, and many quirky listings such as converted treehouses, camper vans, etc. But I will assume that if you are reading this, you fall into one of the main categories listed above.
We can identify two distinct customer segments based on their preference for either an entire home or a room within a home. Entire places are likely to be booked by couples, families, and groups for vacation and events. They are more likely to view Airbnb as a hotel alternative and are not expecting interaction with the hosts.
Private rooms in homes will be booked by younger couples, solo travelers and travelers who want the person-to-person interaction with their hosts – i.e. they want more than a room, they want the “local” experience.
Knowing Your AIRBNB Customers
You will likely get a mix of guests booking your place for many different reasons. One great feature of the Airbnb booking process is that it encourages guests to include a note of introduction to their prospective host. Most guests actually complete this section and tell you why they are visiting your area.
Keep track of these reasons and they’ll help you think of creative new ways to promote your place (via your Airbnb listing description) as well as amenities you can provide that appeal to certain guest segments.
Creating your competitive advantage
The purpose of this section is to get you to think about your customers and their needs. The more you know about your guests, the more you can appeal directly to them. This is marketing. While Airbnb has done a lot of the marketing for you in terms of bringing potential guests to its website, you still have to compete with all of the other hosts in your area for bookings.
Think about your place and who you want to attract. If you have a studio or one-bedroom apartment, you’re going to be targeting solo travelers and couples. The same holds true for a private room in a house. Set your place up to attract the segment of traveler most suited to your place. If you are renting an entire larger home, you’ll be targeting families and groups.
Make it obvious in your listing description why your place is the best fit for certain segments. You can even include wording in your listing title along the lines of “perfect for couples” or “ideal for groups”.
Why people prefer Airbnb to hotel rooms
To become a true Airbnb expert, you have to understand the motivations behind people’s preference for Airbnb over hotel stays. When you understand the reasons underpinning customer decision making, it becomes easier to appeal to them, which leads to more bookings and higher income.
The motivations for people using Airbnb over hotel sites such as Hotels.com and Booking.com can be broadly categorized into five groups:
This is the most obvious reason. In major metropolitan areas, even mid-tier hotel rooms can be extremely expensive. The average hotel room rate in Manhattan averages $400 per bed per night. These hotels cater mainly to business travelers whose employers are picking up the tab. But for a couple or family wanting to spend a weekend in New York, that’s a tough expense to justify unless it’s a special occasion. Airbnb makes it possible to do the things people would consider “special” more frequently. In Manhattan, you can find nice places to stay for under $150 per bed per night. If you rent out your own home on Airbnb for $150 per night, you’re now staying in New York for free! Unfortunately, you still need to splurge for the Broadway tickets.
Hotel rooms are functional. The typical hotel room is designed for sleeping and showering. Hotels don’t want you eating in your room. They want you to eat in their incredibly overpriced restaurant. Airbnb offers guests a more livable space with all the amenities of home including kitchen facilities should you prefer not to eat out all the time.
As mentioned in the history of Airbnb section, the original idea for the company came about because of a shortage of available hotel rooms during a conference. This still holds true today. In many cities, there are room shortages during major events. Hotels use a pricing method called “compression pricing” to increase prices as demand increases making them very expensive during popular events. Airbnb helps provide more accommodation options during times of peak demand and reduces the effect of hotel price gouging.
A lot of travelers just enjoy the “home away from home” feeling. They like the experience of staying in a quiet residential neighborhood as opposed to the sometimes soulless experience of staying in a hotel.
A sizable segment of Airbnb guests enjoys the sense of community. They enjoy meeting their hosts and getting tips on the best local places to visit.
Airbnb Guest Segments and Unique Needs
Guests can be divided into two broad groups: 1) vacation travelers, 2) business travelers. The majority of Airbnb guests are vacation travelers.
Vacation travelers can be broken down into four subgroups:
- Solo Travelers People traveling alone may be more inclined to book a private room in a house because they want some interaction with the host. But other than that, solo travelers are typically low maintenance and make great guests. They will generally require good internet service as they are more inclined to watch movies or work during their stay.
- CouplesCouples also make great guests as they are generally quiet and respectful of your property. Couples also tend to be low maintenance guests and their main needs are going to be a nice, cozy place to stay and a comfortable living area where they can relax and enjoy something on TV. If you have a one bedroom place to rent and want to attract couples, set it up with some romantic touches and you should do very well on Airbnb.
- FamiliesAs your number of guests increases, the demands of the guests can increase as well. You’re now catering to the needs of both parents and kids. Families are more inclined to want the typical amenities of home such as good cooking utensils and appliances. They will also likely want the popular children’s TV channels. Games are a good thing to include if you want to appeal to families. One other thing to add is a pack-n-play as this will make your listing stand out for families traveling with infants.
- Groups If you have a larger place, groups are going to be an important segment for your Airbnb business. Many people book larger houses on Airbnb for group events. These people are looking for places ideal for socializing, they want to hang out and catch up with family and friends. Groups are more likely to book places with big, open living rooms, outdoor decks, patios, and gardens with nice furniture, i.e. nice, inviting spaces suitable for entertaining. If you have a larger house, make sure you highlight the social aspects of your place.
Business Travelers on Airbnb
Business travelers are typically excellent guests. They spend minimal time in your place and almost always go out to eat. The clean up is easy and I’ve found my business renters to be very appreciative, leaving great reviews. Just make sure your internet is fast and reliable!
Business travelers have slightly different needs from vacation travelers. They typically need to be in a place that’s convenient to the office or place where they’ll be conducting their meetings. Homes available near convention centers or hotels hosting events make popular destinations for business travelers. For Airbnb hosts, this can be a goldmine as you can charge higher rates during popular conferences and business events.
Business travelers are looking for convenience, reliable internet, business news channels on TV, good coffee, a good iron and ironing board to remove those creases from their shirts/blouses, and basically all the other things that hotels offer. For additional convenience, you could include hotel-style toiletries, breakfast items, a desk with an ergonomic office chair and perhaps even daily delivery of the Wall Street Journal.
If you have a larger home in a popular business area, you can also set up your place so that business groups can host meetings. You might include a big screen TV that is HDMI compatible so business groups can use it for collaborative work. Whiteboards and marker pens, extra power strips, and a printer are other items you could include if you want to go the extra mile. These additional amenities will help your place stand out for business customers.
If you think business travelers are going to be your main source of bookings, then customize your entire listing to appeal to business travelers. Add “ideal for business travelers” in the title of your listing and highlight the reasons why in your listing description.
Make sure your photos feature your business-friendly amenities. Include recommendations for restaurants, printing/copy stores, and other places business people might need. You might know of a reliable Uber or taxi driver you can recommend. Anything you can do to make their visit more convenient will be greatly appreciated, and improve your chances of excellent reviews.
Airbnb also has a special Business Travel Ready designation. If you comply with Airbnb’s requirements for their Business Travel Ready designation, your listing with include a briefcase icon. They claim this will help you attract more business travelers, but I’m not sure that’s the case (pun intended!).
At the time of writing, “business travel ready” is not one of the options a user can select when searching for accommodation. Without this feature, the designation isn’t of much use. Why Airbnb promotes the designation but doesn’t try to match business travelers with business ready accommodation is confusing. It seems like a missed opportunity.
However, if business travelers are an important guest segment for you, then getting the briefcase designation is easy so you may as well do it. Airbnb may eventually add a filter option for Business Travel Ready. If they do, your listing will be top of the results.