Airbnb Experiences – a threat to franchised suppliers, not retailers

March 5th, 2018

by Alex Bainbridge

Innovation when an industry is watching your every move is hard, especially so when you have to bring hundreds of partners with you so have to disclose what you are doing outside of your own business.

You can either innovate in the open and hope to out execute and out market copycats – or you can show your interest in a sector, acquire the relationships you need for your larger plan (e.g. suppliers or distributors), but not show your ultimate intentions upfront.

Airbnb is in this position with Airbnb Experiences. They effectively “won” alternative accommodation building their now strong position while the hotel industry was not watching (or at least not reacting). But now when it comes to launching Airbnb Experiences, everyone is paying attention, they don’t have the luxury of 1-3 years of quiet innovation until they are discovered like most startups do.

As a result I believe they have chosen to mask their end-point objective for their Experiences product, creating some time for them to build up scale while competitors don’t appreciate quite what the big plan is. This blog post muses on that hypothesis (and this is just a hypothesis).


On the surface they appear like they are following a regular retail marketplace strategy similar to other online travel agents such as Expedia, TripAdvisor/Viator, GetYourGuide, Klook etc.

However I suggest Airbnb Experiences has a different strategy. It appears much more like a franchised supply side operation similar to how the leading global sightseeing operators trade, with each destination host supplying experiences using the global brand name.

As such, they compete long term with companies that probably don’t currently see Airbnb as a threat, while some companies who have upto this point been worried by Airbnb may end up best of friends and natural partners over the longer term.

Supply side differentiation

There are three distinguishing factors on the supply side that make the Airbnb Experiences service stand out. In particular exclusive supply is the key differentiator that hints at their long term supply side ambitions.

  1.  Exclusive supply
    An Airbnb customer may only be on a multi-customer operated experience with other Airbnb customers, not shared with customers booked directly or via other retailers. i.e. you can’t have the same tour guide / date / time combination sold on Airbnb as well as another online travel agent (or you can, but as soon as you have an Airbnb customer, you must go off sale on other channels, or as soon as you have a non-Airbnb customer booked, you must go off sale on Airbnb).
  2. Hosts vs guides
    Perhaps a more subtle differentiation but hosts tell the story of the present, tour guides tell the story of the past. Airbnb focusses on hosts while other retailers tend to focus on tour guide style tours as that is what is available from existing tour suppliers
  3. Guaranteed operation – “commitment to reservations”
    Airbnb is focussed on small booking sizes. Once a customer has booked, the host must operate (even if running at a loss). Painful for the host especially due to the exclusive supply requirement which makes it impossible to fill gaps via other means

The exclusive supply requirement gives Airbnb a great baseline for on-trip innovation as they can make the delivery of the experience unique to Airbnb in such a way that it becomes overwhelmingly attractive vs alternatives. e.g. opportunities like how Ctrip is approaching on-trip personalisation.

Read the Airbnb quality standards for more insight on what they want from their suppliers

Three P2P (person to person) models

There are three person to person (P2P) models that we have seen:

  1. Individuals can list experiences ad-hoc – the most common P2P model and the one that most P2P marketplaces have adopted. Works at low volume, fails at scale as at scale you end up with 30 tours exactly the same for popular ideas, which you need to maintain a high capacity. Customers can’t differentiate why one guide vs another
  2. Marketplace creates tours – tour guides sign up to say they can deliver that specific tour itinerary – works at low and high volume because in a city you can have hundreds of tour guides / hosts but only list fifty experiences. Creates operational resiliency as a single experience can be offered by multiple guides / hosts. Model adopted by Withlocals
  3. Airbnb model – like model 1 but with guaranteed operation and exclusive supply. This causes problems pre-scale as experiences have to run at a loss when not enough people are booking.

Host feedback on the Airbnb model showing issues when pre-scale – Wall Street Journal – February 2018

Airbnb guaranteed some hosts the equivalent of a full slate of bookings in the first few months after Experiences was launched, amounting to $2,500 a month for Anthony Laurencio and Cuci Amador in Miami, who offer a music-recording experience in a sound studio. The pair, bandmates who also were featured by Airbnb during the Experiences launch, say they get one or two customers a month now and struggle to make it profitable, since hosts are expected to carry through even if underbooked

Interesting that Airbnb chose a model that only works at scale (from a supply side perspective) when they could have gone the itinerary model that works pre-scale and at higher volumes. They must have a reason.

What next?

The industry expectation is that Airbnb will drop their exclusive supply model and begin to work with existing mainstream tour suppliers, just like they are beginning to work with mainstream hotel providers. This would make them like every other online travel agent retailer.

However I expect Airbnb are more astute than to launch something they know doesn’t work pre-scale unless it is a fundamental part of their future plans. They also believe in differentiation so becoming just like any other online travel agent retailer seems an unlikely objective.

Instead I expect them to double down on this exclusive supply requirement and push that model to its limit, ultimately becoming much more like a global supplier franchise model:

  • Uniform – hosts to wear Airbnb uniform when delivering an Airbnb experience. As only Airbnb customers on an experience, this will reinforce the brand
  • On trip upgrades – as all the customers on a particular experience operated by a host are all Airbnb, use this to make the experience totally memorable (and memorable that it is Airbnb)
  • Redistribution – Airbnb experiences to appear on online travel agent systems. By definition if these experiences are exclusive to Airbnb (either at itinerary or date/timeslot level), they could be distributed to retailers such as Expedia, TripAdvisor/Viator etc with no overlap with existing experiences the retailers are listing
  • Airbnb featuring existing tours – a large proportion of existing industry tours (currently unlisted on Airbnb) are vehicle based (including transport to an attraction, city tours, etc) which are hard to offer with the exclusive supply model. Airbnb doesn’t need to feature these right now and can wait a few years for autonomous vehicle sightseeing using the Airbnb brand

Or I have got this all back to front, and they ultimately drop the exclusive supply model, go fully mainstream like existing online travel agent retailers and become an undifferentiated retailer…….. what do you think?

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2 responses to “Airbnb Experiences – a threat to franchised suppliers, not retailers”

  1. Alex Bainbridge says:

    One comment I received not in public is that one difference is with franchised local suppliers (vs Airbnb going that direction) is that franchised local suppliers have exitable assets when they want to stop running their local operation. Be interesting to think how that concept could be incorporated into the hypothetical Airbnb model, or whether that is really important or not

  2. Thanks a lot for the post. Really Great.