Short term home sharing marketplace AirBnB has cemented itself as a leader in the space. With a reported valuation of 30 billion dollars and 100 Million users, it is clear that AirBnb has created value for both the home owners and renters.
However, Airbnb experiences serious multihoming on both sides of its platform. Other home sharing sites such as Homeaway and VRBO present the same value proposition as AirBnb. This leaves most of the competitive edge to marketing and pricing which is a constant race to the bottom.
Home owners can easily list the same property on multiple sites at the same time without any barrier. Similarly, renters can search all available sites looking at properties to rent. When you take into account the fact that many of the properties are available across platforms, you find that it even provides renters an incentive to multi home and price compare.
The home sharing space naturally has no direct network effects. It does not benefit a user to have a friend who is using Airbnb. The booking process is just as independent and transactional as booking a hotel. Because of this, Airbnb has tried to get creative with its value add. One example of this is through photography. Airbnb will send a homeowner a professional photographer to take pictures of their home. This theoretically should increase the value of listings on Airbnb’s site to the renter which in turn should increase the rate of bookings to the homeowner. However, in my opinion, this can further increase multihoming because there is no barrier to a homeowner using Airbnb pictures on a competing site.
Recently, Airbnb has taken its best steps yet towards the decrease of multi-homing and the strengthening of their platform. Airbnb’s introduction of Places and Experiences and their acquisition of Tilt are all brilliant steps in the right direction.
Places and Experiences by Airbnb are additional sides of the marketplace that allow locals to offer additional packages to Airbnb guests. Airbnb leverages the customer it already serves as a renter and now facilitates the service of their other needs. This obviously creates an additional revenue stream for Airbnb but it also provides a competitive advantage. Airbnb has recognized that there is more to planning a trip than the home stay and now they become a one stop shop. As a user, if you multi home with VRBO, you will now need to give up the ability to easily book the rest of your trip in one place.
Airbnb’s acquisition of Tilt is an even stronger move towards the reduction of multihoming. Tilt is a social payments system that allows user to contribute as a group to funding a particular cause. This is an obvious need for many Airbnb customers who rent out houses as a group and then need to split the costs. However, this goes beyond a nice to have feature. This actually represents Airbnb’s first instance of direct network effects. Tilt becomes more useful as more friends have it because it then becomes a useful way to pay for your Airbnb. In fact, you might encourage a friend to join tilt when booking an Airbnb to help pay for the stay. Eventually, you can envision a world where because so many of your friends are on tilt you only look to book and Airbnb because that is the only place you are able to pay through tilt.
I believe Airbnb will continue to add features and make acquisitions to service all parts of a person’s stay. This could create a winner takes most market where Airbnb will have extreme pricing power over the homeowners, increase margins significantly.