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Airbnb doesn’t just want to find a place for travellers to sleep. It wants to be their go-to source for chef-cooked meals, spa treatments, hair appointments and personal training services too.
The company that took short-term rentals mainstream this week unveiled a major redesign that would make it easier for users to book services such as a massage in London, and experiences like wrestling with a luchador in Mexico City. In the same way that one can “Uber” a ride, the idea is that one will be able to “Airbnb” a photographer, or a make-up artist, both at home or on vacation.
The company thinks the new businesses could become billion-dollar revenue streams in three to five years. For comparison, last year it pulled in $11.1bn. Analysts at Bernstein think they could eventually add as much as 1.5 per cent to revenue growth.
But Airbnb’s new strategy is littered with pitfalls. To scale such services, it will need to find plenty of suppliers across the 10 categories that it is targeting. It will also need to spend on marketing and vetting. Stickiest of all, it will need to convince Airbnb hosts to agree to let third party service providers operate in their properties.
Airbnb has expanded into new verticals before. Just before the pandemic hit, it was building Experiences, the newly relaunched feature that would allow users to book activities such as guided tours or cooking classes. Covid forced the company to put those plans aside. To survive, it fired a quarter of its workforce, cut costs and turned its focus back on its core short-term rental business. This financial discipline helped Airbnb deliver its first ever annual profit in 2022.
So why rock the boat now? After riding the wave of post-pandemic revenge travel, Airbnb may be fretting about the potential slowdown in consumer spending. It has warned investors that growth in bookings could slow in the current quarter and that its average daily rate would be flat year on year. Regulatory pressures on short-term lets, in cities such as New York and Barcelona, may also have prompted it to seek alternative revenue streams.
Still, the new ventures warrant some scepticism. If someone wants a haircut, they can easily go to a local hairdresser rather than book someone on Airbnb at a price inflated by Airbnb’s commission. If Airbnb wants to attract hotel goers, the answer is not to try to replicate gyms and spas in a private property. It is to make sure that fees — pesky cleaning ones included — do not make it unaffordable for cash-strapped customers.
