AIRBNB VS BOOKING: WHO WILL WIN THE ONLINE ACCOMMODATION BATTLE? Comments Off on AIRBNB VS BOOKING: WHO WILL WIN THE ONLINE ACCOMMODATION BATTLE? 1690

The next years promise to offer a fascinating duel between two very different type of internet giants in a quest to own the $555-billion global accommodation market. Challenger Airbnb, posterchild of the Sharing Economy, is striking hard and fast to become the new King, but current leader Booking.com seems well suited to extend its phenomenal growth track for another decade. Who has the better cards to win the game?

The lines between private and hotel accomodation are blurring. Phocuswright most recent study among Airbnb bookers showed that the key drivers for booking a privat accommodation were the same than for hotel bookers: price and location (meet local people and experience local culture ranked 3rd and 4th respectively).

Airbnb seems to have acknowledged this fact and is pushing forward major transformational changes that were announced with great fanfare these last weeks:

“Our competition is two companies –  Expedia and  Booking.com – and I’m extremely excited about what the next ten years have in store.”

To date, Airbnb already offers more than 24,000 boutique hotel listings on the platform. This might only represent around 5 percent of their 4.5 million listings, but they are 100% instantly bookable. 1.9 million properties were available for instantly booking out a total 4 million listings in August 2017, and the company claimed that 70% of all new listings were using this facility (most likely spurred by the fact that share of hotels and Bed-and-Breakfast newcomers is higher than individual properties). We can deduct that the total number of instantly bookable properties on Airbnb today is likely to be north of 2.2 millions, hotel inventory representing aprox 10% of the total.

Despite boutique hotels being typically smaller than traditional hotels, the room capacity of these type of lodgings will still in average more than double the number of rooms offered by private accommodations. Therefore it seems reasonable to assume that the weight of hotels exceeds 20% of the total Airbnb instantly bookable room inventory.

Booking.com leading the pack

Meet Booking.com, current worldwide leader in the online accommodation sector with over 1 million room nights booked per day. They consistently outperformed the entire industry during the last decade thanks to the flawless execution of a simple but super-efficient formula:

  • Maximizing the onboarding process for all type of lodging properties to offer the largest choice of accomodations
  • AB test to death the booking funnel to maximize conversion
  • Laser focused optimization in Search Marketing allowing them to efficiently outbid the rest of competitors

Each of these success factors re-enforced the other ones, creating the most powerful booking platform of the industry.

The clash of titans

The same way that Airbnb is making a foray into the hotel sector, Booking.com has gradually expanded its footprint into the vacation rental sector during these last years.

In the prepared notes of Bookings Holding Q3 earning call, CEO Glenn Fogel stated:

aggressively expanding our vacation rental business is a key part of our growth strategy. As consumers increasingly desire to explore more unique places to stay, including homes and apartments, we want Booking.com to remain to be the leading platform to search and book all types of accommodations

In the latest Q4 earning call they announced that by the end of 2017 Booking.com listed over 1,200,000 vacation rental properties, which represented a 53% year-over-year growth

Compared to Airbnb 1,980,000 instantly bookable properties (assuming the rest are hotels), Booking.com has an aprox. 700,000 property gap to cover if they want to compete head to head against Airbnb in the inventory game.

This seems to be a key strategic goal for the company, as they highlighted in Q3 earnings call:

“We’re also making significant investments on the IT side. So we’re adding teams of people under our booking home umbrella, and they’re focused on improving the experience with property owners, including individual property owners that are putting their apartment or home up for rent, to make it a more intuitive experience, easier for them to self-signup and improve efficiency that way.”

Assuming they can keep up a 50% YoY listing growth in private accommodations, it would take them little more than a year to catch up with Airbnb current offer.

The winning cards of each contender

Airbnb´s CEO argues that his company has the upper hand in this race thanks to their unique home sharing content, a passionate travel community and a one stop shop travel app offering homes, experiences and restaurants. On the supplier side, Airbnb´s lower commission structure of 3% to 5% should make them an attractive distribution channel for homeowner and hotels in comparison to the likes of Bookings.com who charge in average between 15% to 20%.

All of them seem valid points, but let’s dig a little bit deeper if these assets are sustainable in the long run.

The inventory game:

With 4.5 million properties, Airbnb beats all its competitors in number of listings. But Booking.com, with teams in 198 offices around the world focused on contracting and their well-oiled onboarding process, will likely close the gap on the most valuable part of the inventory, which are instantly bookable properties.

Many homeowners will diversify the risk by listing their properties among the 2 to 3 sites that guarantees them enough leads to maximize occupation. As long as Booking.com is part of this shortlist, the private accomodation content of both players will increasingly overlap.

Airbnb latest moves will strongly increase their inventory in the near future but the largest part will be Bed-and-Breakfasts and Boutique Hotels that in many cases are already present in Booking.com.

The increasingly strict city regulations for short rentals across the world poses a serious risk in the inventory game too. According to the Financial Times in the UK only it represented a loss of $100 million last year and this recent article showcases the example of San Francisco where Airbnb lost over 50% of its listings between Aug17 and beginning of 2018. This trend will impact Airbnb to a higher degree than Booking.com, who has been cautious in playing by the local rules in this area.

Brand strategy: rational vs emotional

Airbnb has managed to build the first truly lifestyle brand in the online travel industry thanks to their unique content and their design driven focus through the entire customer journey. This strategy has paid off with a loyal community that connects with Airbnb values at an emotional level.

Will the brand premium they currently command against other industry players such as Booking.com be sustainable over the next decade? Certain facts seem to play against them:

  • their key strength, the uniqueness of their lodging content, is gradually getting diluted
  • new products additions that are more commoditized like restaurants, powered by 3d party technology provider Resy, or new property types like Airbnb Plus, with more standardized hospitality-like features, don’t always match with their core values
  • the company moving from a niche startup player to a mainstream corporation-type actor might potentially alienate part of the core Airbnb base.

Booking.com comes from the exact opposite branding spectrum with a marketing strategy focused on profitable traffic acquisition via performance driven online channels and a rational value proposition based on choice and price.

However, things don´t stand still in the internet giant neither and channeling more advertisement dollars to branded channels like TV have become a strategic priority (likely also driven by the fact that Google CpC´s inflation have made them hit a ceiling in how much value they can extract in this channel). In Q3 earning call Fogel confirmed their goal to advertise Booking.com on TV in 30 countries by end of 2017 vs 12 countries the year before. In the 2017 annual report their branding investment grew by nearly a third year on year to $392 million.

The new tagline “Hotels, homes and everything in between” for US TV creatives highlights the fact that they offer more than hotels, and some of the ads specifically target the vacation rental audience:

Footage shot by Booking.com employees showcases the many destinations where the travel site offers accommodations. From hotels to igloos, with over 1 million places to stay, Booking.com encourages travelers to book theirs.

CFO Daniel J. Finnegan confirmed this strategy in their last earning calls

“I think where we have an opportunity in the future is with our brand advertising to get the message across to people that, you know what, if you love Airbnb and that type of property, well, take a look at Booking.com, too, because we’ve got a massive amount of those properties as well as the more traditional properties, as Glenn said, available to you in one search.”

One stop shop travel app?

Airbnb recently shared their lofty ambition to become the proverbial “one stop shop travel app”. Offering Homes, in-destination activities labelled Experiences and restaurants is a good start, but key travel components like flights and car rentals are still missing.

While Booking.com has been busy expanding services to cover all traveler needs (flights, train, car rental etc.) for desktop users, their mobile app is so far limited to accommodation only. Two possible reasons might explain this:

1.  Hotel conversion has taken a hit in their tests on mobile adding new products due to the limited screen space

2.  The non-hotel services are integrated via white label solutions that work fine in a desktop environment, but pose a serious technical challenge for a seamless integration in an in-app environment.

Airbnb´s vertically integrated full-stack platform has an edge in this respect, but its current limited offering outside accommodation can so far not fulfill the promise of a one stop shop. Other players like Tripadvisor or Expedia are better positioned to truly offer a multiservice app covering all travel needs.

Commissions and fees – which is the right formula?

To have the full picture of distribution costs, final prices and operating margins, commissions and customer fees have to be added together. The website for Homeowners Gonitely provides a good overview in this article on the current landscape of commissions and fees:

Airbnb can lure hotels and hosts with 3% to 5% commission levels thanks to their customer fees ranging between 5% to 15%. Adding it up, their overall revenue margin are probably not far from Booking.com, who applies a 15% to 18% commission and a no fee policy across all properties.

From a consumer perspective, in a rate parity scenario between both players, Booking.com would be consistently cheaper in final price thanks to this policy.

This might have been less of an issue for Airbnb in the past thanks to their unique inventory, but with the increasing overlap of their content, it can pose a serious competitive threat – except if properties provide Booking.com more expensive rates to offset the higher commission.

Fogel wasn´t shy in highlighting this situation in the last earning call:

“We do not charge the travelers fees. I mean that’s also an annoying thing for a customer, you go through. You think the price is one thing. Then all of a sudden you see there’s this big service fee. That, also, to me is not the proper way to go. So I believe we have a superior offering.”

And the winner is…

According to a report on alternative/private accommodations released by Susquehanna International Group in 2017 the 2018 global accommodations market could be as big as $555-billion, private accommodation with $106 billion representing 19% of its total. Who will grab the biggest slice of this market in the coming years?

To pick a winner let´s look to the end consumer. As mentioned at the beginning, Phocuswright report (US consumers only) concluded that Airbnb customers are increasingly driven by the same factors than hotel bookers: price and location.

Booking.com with its simple value proposition around price and choice seems to be better-positioned to beat Airbnb in their home turf than the other way round.

The current leader in hotel bookings can rely on a 6 times higher global traffic volume than Airbnb according to Similarweb. They seem better prepared for a mobile first future with a significant higher mobile share of mobile (although this doesn’t factor in App traffic):

Booking.com is still below Airbnb in their home market US, but clearly beats them in the rest of the world (ranked by largest markets for Airbnb):

In terms of direct traffic, Airbnb has a higher share than Booking.com but in absoluteterms Booking.com would beat its competitor hands down:

Google worldwide branded queries also give Booking.com a leading position, although the long-term trend shows Airbnb closing the gap:

Booking.com has another winning card in the sleeve: their 2017 advertisement Budget of $4.1 billion allowed them to outspend all competitors, while keeping industry record Ebitda margins thanks to their advertising efficiency. This spending is likely to keep growing in coming years, based on the historical trend.

Despite Airbnb´s deep pockets and the fact that they recently reached operational profitability, it is difficult to see how they will be able to get anywhere close to these spending levels in near/mid term future with an IPO standing at the door.

In Airbnb´s 10 years’ history, the company has proven to be a phenomenal competitor that has profoundly disrupted the global accommodation market. Their ambition to keep reshaping the travel industry in the coming years seems to be limitless.

Nevertheless, in a private accomodation space increasingly commoditized, Airbnb competitive advantages will dilute over time and will face stronger competition. Make no mistake, Airbnb is here to stay and their competitive nature will no doubt allow them to adapt and keep thriving in the coming years, but expecting a change of Kings in the online accommodation space seems an unrealistic scenario.

Booking.com will dominate this industry for many years to come.

Mario Gavira

Mario Gavira

Managing Director at liligo.com

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MICHELIN STAR – CHEF FRANCO BOWANEE 0 651

CLAIM TO FAME   

Executive Chef, Franco Bowanee strikes gold : Honoured with his first Michelin star on 21st January 2019 in Paris the chef, still revelling in his thumbing victory, shared his success story with us : “   To reach such an epitome of excellence his mantra has throughout his journey been an inspiration, dedication, discipline and creativity. Winning the Michelin star was a very moving and proud moment: A lifetime of devotion to his art being given such an unparalleled recognition”.  

Heading the team at Chateau Vault-de-Lugny as Executive Chef for the past 12 years has been an insightful experience to elevate his culinary finesse’’  

Welcome to  Chef Franco Bowanee’s world of perfection  

THE ROAD TO MICHELIN 

After the completion of his diploma at the Ecole Hoteliere’ of Mauritius, he entered the realms of the culinary world at Le Labourdonnais Hotel. Six years later he undertook a  two– year diploma course at the Ashworth University USA to broaden his knowledge. Further to which he worked for a short lapse of time alongside Chef Nizam Peeroo. Ready to meet new challenges, he embraced a career in France where he encountered and collaborated with Chef Gérard Besson and Christophe Muller, Executive Chef at Paul Bocuse restaurant in Collonges. His culinary creations and his ability to visualize unique combinations of flavours, herbs and spices fascinated Chef Muller and won him a  sponsorship for the France Culinary College from which he qualified with distinction. 

The true spirit of a chef is his ability to share his knowledge and creativity open heartedly. 

Each element of a meal tells a story that triggers inspiration, tunes our intelligence, and seizes the imagination. Through TV shows hosted locally and internationally, Executive Chef Bowanee initiated his audience to the wonders of his art.Dans la peau d’un Chef “ ( broadcasted on France 2 ) along Michelin star pastry Chef Christophe Michalak was an enriching platform to showcase his talent. Featuring inJ’ai faim et Saveurs culturelles , a local TV show allowed him to acquaint the Mauritian palate to the burst of flavours inherent to his dishes. He participated in ‘The Wine Burgundy’ tour in Taipei & Hong Kong as part of his quest for lifelong learning.   

Be a flavor bible; picking the right ingredients is what elevates a dish  

Creativity is certainly a gift but no one is born with any mastery of skills. Discipline is the thriving force which can groom abilities to excellence. The tricky part in conceptualizing dishes is to hit the right notes with the audience. Gourmet and fine cuisine are inherently dynamic and entail an interaction between the Chef and the diner. The degree of receptiveness from the audience defines the success of a dish. To ensure that the end customer is highly appreciative of his culinary art, Executive Chef Franco Bowanee undertook the set-up of an organic vegetable garden at the Château de Vault-de-Lugny to secure a permanent supply of fresh vegetables and herbs. His objective is to not only serve  artistically alluring dishes but to ensure they are exquisitely luscious and appetizing; packed with freshness, wellness and aroma. His genius lies in creating new dishes as well as bringing forth variations to classics to challenge and delight the diner.  

The Château de Vault-de-Lugny , his artistic gallery  

The Château de Vault-de-Lugny (5-star Hotel, 89200 Vault-de-Lugny), is the playground where he has put his mastery at work. The hotel boasts of a high-end foreign clientele in need of an optimal service. Dividing up and watering down the pool of talent is a demanding task when you are required to provide top-notch service round the clock. The ten people team led by the Chef caters for breakfast, lunch, afternoon teas, High teas, dinners and room service on a 24/7 basis. The cutthroat competition entails from his strong leadership skills:  

  • to foster discipline and maintain consistency in daily operations  
  • to pledge that each and every dish is properly cooked, seasoned and plated 
  • to  initiate the development of  younger chefs 
  • to nurture loyalty in the staff  
  • to maintain a positive attitude in the team 

The service industry being hard and taxing, there is no room for mistakes but rather an impetus for continuous improvement 

Creativity delights in dedication and refinement 

Passion without creativity tastes like food without salt. Fine cuisine is an art with no boundaries in that it is a constant learning process of new innovative techniques to revamp ideas and cement inspiration. To him, success is a catalyst propelling him to higher grounds to refine his art further. Staying focussed on both short term and long term objectives have a numbing effect :  

Glorifying achievements does not endorse growth ; seeking constant improvement breeds enhanced creativity ‘. 

Harnessed in such wisdom and armed with a vigorous thirst for refinement, Chef Franco Bowanee, sets out to conquer new horizons in culinary art and fine cuisine. 

BACCHANALE: A BENCHMARK FOR HIGH QUALITY 0 531

Wine is said to be ‘the most healthful and most hygienic of beverages.’ Bacchanale saw the light as a Wine Merchant in 1999 to endorse their commitment in the supply of high-quality wines to the industry. Specialist in the import of “Terroir Wines”, it offers more than 400 references across the most famous wines alongside a new generation of talented winemakers. To provide a unique and friendly experience the team of sommeliers advises customers on their selection and pairings. A range of wines carefully selected from various countries, with a focus from France, Italy, South Africa, is offered in house.

In addition, Bacchanale offers a range of artisanal spirits, ciders and beers. This line is an incentive to promote artisans and producers working essentially with organic products having no additives or conservatives.

Accessories 

‘Coravin’ : is a revolutionary tool giving you the opportunity to drink any wine, any time without pulling the cork and without having to finish the bottle the same day. You can enjoy a sip, a glass, or more from any bottle and save the rest for weeks, months, or even years!

 Riedel’ : ‘Designing and producing the highest quality glasses and decanters for the enjoyment of wine and spirits since 1756. As expert glassmakers, for several generations, the extensive range of glasses offered is tailor made to suit the selected wine or spirit so as to preserve floral aromas and maintain the right temperature of the beverage to delight your palate.

Avintage’ : Modern and elegantly designed with cutting edge technology, it is the ideal solution for wine cellars.  

A commitment to professional service 

At Bacchanale, providing a true wine experience is essential: 

  • Wines are conveyed and stored in cooled containers to maintain the quality of the wines. 
  • Deliveries are made across the island.
  • Customers are given assistance with their cellar designs.
  • Passionate sommeliers at your service for wine selections, wine pairing, theme wine tasting or events. 

This wine merchant being an ode to the best selection of wines is a must stop in your gourmet journey. 

Visit their new showroom at Beau Songes or at Ruisseau Creole T: 489 23 43 E: admin@bacchanale.mu