Good project managers needed 📅
Now that a few clients were on boarded for the consulting side of the company I’ve noticed that most of them are stuck because of the same thing and that is that they do not manage, track and measure projects well. I’m a bit intrigued that this is the case, but, not at all surprised I used to be terrible managing projects and worse of all managing my time. I suffered from the very same thing I’m looking at right now which are these two everything feels important and demands my attention. Now that I have more experience in general operations and project management it seems baffling that people would think like that, but, it’s worth mentioning that I was the same way.
I don’t want to come across as the all knowing one because I most certainly am not and have a lot more to learn and build on. But, maybe detailing common mistakes could be beneficial for someone.
As far as I can tell the problem ultimately stems from the talent in the upper level management realm. Meaning the Executives and upper managers (The people who take on the most difficult and sensitive projects). It’s relevant to state that I’m speaking within the realm of start ups not long established companies, they have their own monsters to deal with.
Executive’s problem
What I’ve seen and analyzed is that a lot of executives tend to overestimate the abilities of their managers just because they know they (themselves) could do it (or maybe they think they can). This creates a really big expectation bar for the managers to hit and if they don’t then it’s all their fault. I’m a huge proponent of accountability and putting people through the fire and hope they come out unscathed (I’ve gone through the fire), but, most people if they don’t know something they often don’t have the cognitive tools to figure it out.
This leaves the executives to question why their managers are so inefficient and it’s not as much a matter of inefficiency as it is a matter of ignorance. There are people willing to step up, but, you have to be a good teacher to help them or hire someone like me to do so.
In summary: The executive’s problem is measuring their managers by the standards that they measure themselves
Upper manager’s problem
It’s very funny that in a way the manager’s problems are rooted in overestimation as well. We’ve already talked about ignorance, the expectation that they could do more, etc. We all love the story of a good underdog, odds stacked against you and you still pull through… I’m afraid that odds almost always are right, you shouldn’t operate under the presumption that everything will go right and as planned. Let me use this to detail the other problem, the lack of preparing for when things go wrong. WE ALL WANT TO WIN! But, a lot of us won’t so establishing contingency plans, buffer time and having very present that something WILL go wrong is imperative. If nothing goes wrong? Great, relish and celebrate in your next to god level victory, but, understand that just because everything you planned and executed went amazingly well don’t pretend that it will always be the case.
In summary: Manager’s overestimate their abilities in pursuit of ambitions and their ignorance blinds them to the actual risk of the project
Let’s finish this
Even though most of this post is more about the negatives, don’t let that cloud your views and ambitions. Go for the big fish, try to conquer the world, do everything you can to achieve success. But, be aware of what could go wrong, and with that knowledge, minimize your chances of failure by preparing for the what-ifs.
Stay strong entrepreneurs!
-Gian from Hostpitality
I started consulting again 🏨
It’s been sometime since the last post, I’ve been a bit busy and a bit out of it cause you that little sickness going around. I was a bit reluctant to go back to consult for what now seems to be not important reasons. Now that I have taken on clients again I think about it like; Why wouldn’t you want to go back to consult? I thought that consulting was a transition phase to the next step and this is not the case at all. I now see that it can be much more than that.
At the moment, I’m focusing on STR operations and scaling. No surprise there, right? This company, my experience and this blog is about that. I wanted to write something down about this as a reminder of the things done and not avoid new challenges given that this blog is filled with things that were at one time challenges and now they are accomplished projects, activities and new found knowledge.
As you I’ve been in the STR industry now for about 4.5 years and in that time I traveled to multiple countries, helped scale fast growing companies, managed and operated over 200 unit rentals across multiple country borders and started investing in Real Estate. So now thinking about it, why not help other scaling brands? I’m super up for it!
I don’t think this post deserves much more writing on it, but, just as a nice product placement if anyone reading this is in need of any type of operational consulting within STRs and/or hospitality in general fill out the contact form on the consulting tab or just click here: https://bit.ly/3knq9qJ and let’s get the conversation going.
-Gian from Hostpitality
New local tourism 🏖️ regulations 🥴
They have arrived! What has arrived you ask? RULES! Rules have arrived… In all seriousness very strict cleanliness and disinfection parameters are needed to be able to effectively provide safe and sanitized spaces to our very eager to travel guests. But, yeah! Would rules from governing bodies who have not been able to handle three major emergencies in a span of three years be effective or rather outside of the business teams common sense? I think not.
The STR community here in Puerto Rico sat through an almost two hour long webinar to wait for it… “Discuss the new parameters on how to handle this pandemic scenario and what will be expected from an STR by the governing body”. There’s a pretty clear underlying situation in regards to this that screams out say it SAY IT to me and that is oversight. Puerto Rico’s government has a notorious reputation of not running effective oversight on programs and regulations they stipulate and this coupled with the amount of active STRs in Puerto Rico seems like another moment when they will fail at this once more.
Now I’m not saying that some of the regulations aren’t sound and make sense. Heck! They came out of the CDC’s own disinfection protocol and some out of Airbnb’s recommended protocols, maybe it’s better to say they copy and pasted. There’s nothing wrong with copy and pasting. Why reinvent the wheel? Of course they make sense, they were made for the specific purpose of combating this disease. My actual problem with the webinar was that the part of actually discussing disinfection protocols was kept to a minimum and the webinar was hijacked by the office that oversees STR registry and taxes. We spent more than 50% of the webinar listening to the person heading the office that STRs needed to be registered and have to report on occupancy taxes which I completely agree, but, don’t use a webinar that is supposed to discuss a sensitive and very important topic to talk taxes. This could have been a whole other webinar and you would have had so many questions all over the place making you lose track of the webinar progression.
There are some things that enter into the realm of wait what how? For example:
A guest is required by the tourism company to fill out a declaration of contact and travel upon checking in to a unit. I can’t begin to say why this is a close to impossible feat for hosts particularly to accomplish.
First off the guest must be willing to comply, which may come as a surprise to our tourism company a lot of guests do not follow house rules let alone will they file a government mandated form (I could be underestimating our guests but, we’ll see). The tourism company also expected to add a time limit of two hours after check in to have the form completed, yeah great move.
Second, actually having them complete the form and receive poses a logistical problem.
On one side you can collect it at the end of the reservation (But, that will likely mean it will never get filled out)
Or you can personally provide it and collect it at the time it’s filled. This means person to person interaction and an unnecessary risk and privacy invasion on your guest. Additionally that they are advocating for self check ins to be the norm which leaves us with the first scenario.
How would’ve I done it? Well using the same online platform that the tourism company has for collecting taxes and issuing hospitality registrations they could have created an in app link that would provide the form electronically to the pass it on to the guest. No interaction, no paper, no exchange, better process tracking and better storage for future reference.
24 hours between check out and new check ins
This is somewhat difficult especially for people using advanced PMSs that prioritize maximizing the number of bookings and takes away the ability to establish preparation time (a period between a check out and a check in)
Also, it severely affects the NOI of the listings even when we do know methods of containment and highly effective disinfection.
Guests need to have a written guide of the safety and disinfection protocols
Additional to the inefficiencies of paper, its raises costs, it needs to be physically distributed and does not provide an intuitive way to portray the info.
I would just have required a digital guidebook that people can access anytime anywhere without having to rely on paper. A permanent sign or a video can complement this solution.
Auto certification
Operators need to auto certify themselves to ensure that they understand and are following the procedures. This is a very good measure and the fact that the operators get a badge signifying that they are complying provides a sense of important comfort to the guest that is very much needed.
A stand up letter signaling who was the last to enter and inspect the unit
It’s a whatever measure, operators should have the option to opt out of this since it’s really not up to the governing body to decide how they process their guest’s experience.
This should be a suggestion (a suggestion we would have taken since it’s a good idea).
We’ll see how this goes and keep you updated.
-Gian from Hostpitality
Starting to receive guests 🛬 in pandemic times 👑🦠
Guests have begome to comeback to Puerto Rico for semi-leisure travel. I say semi-leisure because currently theirs a pretty irrational curfew law still in effect and other bogus restrictions that we won’t get into in this post because we would not be able to make this a quick read. We’ll be discussing our procedures and how guests are going about the whole situation.
Our governing bodies making sense of their decisions
Reasons for traveling
We’ve had a pretty common trend coming up in our guest messages. It has always been present to some degree in our portfolio and market but, it seems to be more prevalent or at least within the reservations we’re receiving, it seems that more people are coming to visit family particularly elderly members. That’s the reason for the semi-leisure travel there’s a specific reason to make the journey and to also have some fun.
The first couple of guests
Oddly enough the guests that we’ve had the pleasure of receiving have been very…… um…… different in a very good way. They have been unusually responsive, going the extra mile to try to help our cleanliness efforts and actually following our relatively lax house rules. I mean different since the last few years (before hostpitality) we’ve just been Airbnb hosts and we experienced first hand the progression of guests from people that were very conscious of following house rules to people that were expecting hotel style accommodation in our units or they knew about Airbnb’s guest first mentality and proceeded to take advantage of it.
But, now it’s been different we’ve encountered the guests that we had used to encounter three or four years ago. It seems surreal, but, it could just be a function of the current situation. People are just starting to head out again and maybe their extra careful meaning that they are abiding by the dictates of wherever they are.
Maybe it’s that the guests that still hold that initial value are the ones traveling…
Our process
I wanted to offer guests peace of mind when choosing a place to stay this is the reason I went back to the drawing board and re imagined our cleaning process. This is when the decision was made to scrap it and start over, not the wisest thing but, I wanted to build out a factory meaning a process that could be scaled up and not have the priors hindrances (I didn’t really scrape all of it, there was still valuable info there).
I started by trying to put myself in the shoes of my cleaning staff and the guests. The cleaning staff wants to be as isolated as possible from any risky situation and the guest wants a clean place with as low human interaction as possible. So naturally I got that cleaning staff needs preventative and disinfecting equipment and the guests would retain our regular self check in and would now have disinfecting stations, supplies and the state mandatory prevention equipment in the units. These factors were my guiding principles for our new protocol, one which our staff is being trained for and our guests will notice our care.
Going forward
It’s probably going to be an interesting rest of the year to say the least and we’ll more than likely be put to the test numerous times. I can only say for you guys to stay strong and keep a problem solving mindset, I hope I see you on the other side.
-GIan from Hostpitality
Getting featured in CNBC 💻
Sooooo, we go featured along with some other awesome hosts online. It was a pretty weird experience to be able to share my thoughts with Sal at CNBC and later see the reach of the article with everyone who took notice at the company and reached out to us after.
But, in all seriousness I was really thinking about it and maybe it’s because of the concept of any idea is better than no idea. I presented that a bookable website was a valid option to expand our business offerings and attempt to gain more presence and further Hostpitality’s identity. Taking something from our last post I believe that differentiation will be key and if you can differentiate in any way that can take most of the risk out of traveling the you will have the edge.
For example, we are developing higher cleaning standards (beyond what Airbnb has said would be their standards) that will hopefully lower the guests perceived risk to stay with us because we take the measures necessary to ensure a clean and fully disinfected place. This along with an educational campaign will be our differentiating factor in the short term.
Now the article talks about how other hosts feel and what their doing in the face of this tourism cataclysm and it’s pretty interesting to hear their views. Check out this quote from one of the hosts:
“I do think Airbnb has a place in my business to bring me clients, and I’m happy to pay them a percentage,” Greenawalt said. “But if people find me organically, I can make a little bit more money on my direct booking.”
Other hosts focus on creating alternative booking channels like letsconvention.com or Zeevou.direct. Which it’s not my cup of tea but, it shows that they are going with an idea that surged from being tied to other booking channels. Some might interpret that as being a bit contradictory, but, if it works and their values are sound I say go for it.
But, in any way that you want to go about it trying out new things is a great way to get back into the flow and have that muse feed your creativity again. Check out the article here: https://www.cnbc.com/2020/05/06/airbnb-hosts-are-building-their-own-direct-booking-websites-in-revolt.html
-Gian from Hostpitality
It's time to get versed 🤓 in sharing your rentals on social media 📱 (FREE PDF Annotated by me!)
It’s been a pretty interesting spectacle to watch this unravel and with more and more countries saying they are wanting to re open (be it the right or the wrong decision) it’s time to trim our beards, wash our clothes, take a shower and prepare for the new environment ahead, if you haven’t already. Now, why are we advocating for you to take up some of the marketing efforts of your property? Well because the industry is fairly weakened and there will be an oversupply of goods for the projected demand and you my friend have got to get savvy in order to get your rentals booked by those few participants wanting to travel. So I’ll give you five reasons to do so and an annotated pdf created by Lodgify on how to advertise on social media or at least how to start (unpaid ad). Let’s do this!
Makes you a legitimate business (In the eyes of the market)
The reason is because you are now present outside your main medium. To give you an example, if your primary OTA is Airbnb as a host then being advertised there just makes you another listing inside of this GIANT marketplace. Having a social media page for your listings makes you consider multiple things that make your business tangible. You have to come up with a name, which photo do you present yourself with, what are you posting about, etc. All these things make you now a business in the eyes of your social network and people within that network will start seeing you as an authority figure in the topic.
You create a community
Like we said in the last point you are now open to the world in another front. It’s like having two locations where people can find you at, one that you sacrifice identity for exposure and the other where exposure is a bit harder to come by but, it’s all you in there. People who will come to see your page will be a very high value commodity, because they specifically came to see you. This gives you a very high advantage over others because half the job is already done and they have invested in you time and attention. So make it worth it and close!
Show your space’s true identity
Remember it’s all you you don’t have any guidelines, posting policies, ad blocking protocols, non of that. You’re free as a bird, of course within the parameters of the social media network you’re on. But, that is better than an OTA blocking brands that show on your pictures, censuring words with their algorithm and throwing you into the bottom of the pit because you didn’t play by their rules. So use all that freedom to your benefit and show your true colors on your page.
Create more demand with signature deals
Even though Airbnb at the moment is looking at expanding the deal offerings and privileges that hosts have at their disposal it’s still restricted to what Airbnb codes into the site and even alteration’s section is available for any change in pricing it’s still doesn’t award you with any extra social capital because you’re still just a listing inside the platform. With a deal promoted through your social media page you receive much more for example you’ll receive a like, a new community member, a positive review on your page, maybe even a positive review on Airbnb if you directed them to the platform and most importantly an invested guest that will very likely turn into a loyal customer.
To finish off I’m not saying to replace one for the other, what I am saying is to add it to your repertoire of tools for succeeding. You will need all the tools you can get, specially coming out of this situation and entering a new business environment. It will be common knowledge that you will now have to leverage multiple aspects of business in order to survive and even thrive.
*PDF below
- Gian from Hostpitality
Flexible Travel? What Airbnb 🏘️ thinks the aftermath will bring vs what it will probably bring...
I’ve been actively speaking to my account manager and the market team to get a sense at the direction to where Airbnb is heading towards in regards to comebacks and recuperation and it’s very troubling the current decision making to “handle the situation” and the planning on how recovery will look like. Granted nobody knows what the sure fire way for an effective comeback is, but, not having one is all the more worrying or maybe they do and don’t want to publicize it which is fair for Airbnb the private company, but, not that much for Airbnb the marketplace.
It’s a pretty interesting scenario the one that Airbnb is traversing particularly, and Expedia in some way with their VRBO section. On the one side Airbnb the private company must maintain profitability and keeping shareholders happy, on the other side they have to keep both sides of the marketplace somewhat happy and willing to continue to participate with hosts getting the short end of the stick them being replaceable and not having and easy out alternative.
In particular to denote Airbnb’s possible lack of vision or maybe even over confidence in the low current alternatives the supply side has it was made known that they are pushing for flexible reservations during this pandemic, which is probably a good idea to incentivize reservations and limit the risk that guest may perceive. But, I was told by the market team that they are advising that people retain the flexible policy even after the crisis is over. I was a bit perplexed because given Airbnb’s stance on host sided matters I don’t think that hosts would think that it would be a good idea. Let’s recap the major decisions that were taken during the pandemic that severely affected hosts
Extenuating circumstances - was implemented and it allowed all reservations starting after March 13th to be cancelled with a full refund regardless of the cancellation policy that the host and guest had agreed to upon reserving. This was also applied retroactively (since case managers were so backed up with requests they were very slow to respond to all the cancellations and refunds) meaning that reservation were already getting paid out to the host because the refund needed to be done by a case manager and the platform did not do it automatically. That meant hosts started receiving money to their bank accounts without knowing that Airbnb would comeback to take it because a reservation that was not considered to be eligible to extenuating circumstances was revised and re adjusted to now apply.
Offering hotel stays instead of homes - Yeah, you read right. Reality is that this feature is a way to further use their acquired hotel tonight platform and as a measure of their party prevention strategy. Apparently Airbnb offers users under 24 that are looking to book a last minute accommodation or a next day one to stay in a hotel room since these guests are higher risk and could be looking for a big house to throw a party. But, even though this is a totally separate feature and unrelated to the crisis it did not sit well with hosts that found that their bookings were down and Airbnb was offering a hotel instead of potentially their place.
25% Pity Payout - After hosts were vocal about the extenuating circumstances situation and said that they would go under and Airbnb was set to lose a lot of supply (listings) because of this they decided to “reimburse” hosts 25% of what they would have received under normal circumstances if the cancellation policy would have applied. That’s why I called it a pity payout, communications were promised to hosts early April and guess what they haven’t arrived. Not to mention that if you were paid out one of those reservations that was later revised and you now owe that paid out amount to Airbnb forget about the 25% because this pity payout will be used for that debt that you owe Airbnb.
Honestly hosts feel alone and are now feeling what business is actually like. Beforehand they felt safe and covered under Airbnb’s protective veil but, when things got tough Airbnb did what any other company would do which is attempt to ensure their survival, not yours. They don’t owe you your “business’s” safety or it’s survival they only work for theirs if you survive with them then it’s happy accident or by product.
Now given these three major changes the market team at Airbnb thinks that hosts will embrace flexible travel in the long run (flexible cancellation policies) and I believe that’s wishful thinking. Hosts will not go to offer a full refund up to 1 day prior to arrival on normal circumstances because if something like this were to happen again, the extenuating circumstances policy would decimate then again (regardless of policy), but, if Airbnb resorts to the pity payout technique again then guess how much money you would be entitled to. Yeap, you guessed it, you would get nothing. Because under normal cancellation circumstances you wouldn’t have gotten anything, but, at least your would have the opportunity to rebook those nights with some reasonable probability. In this case, or in our new hypothetical crisis you won’t be able to rebook them so easy or even at all.
This is a very good opportunity to revise your business and ponder if you could really survive with out Airbnb. If the answer is no then you’ll probably not get out of this one, but, if it’s yes then you have a very good chance to re organize and make a solid comeback.
- Gian from Hostpitality
An Golden 🌟 Opportunity for Transformation 💡
This period has been a very transformative one already. It’s forced a lot of business owners, travelers and even government to have to re think how they view their economics. It’s sort of impossible for me to not have my economics background show and with this situation I’ve found myself re visiting old lectures, notes and readings that I had throughout my student career as an economics major. But, instead of analyzing and scrutinizing our past actions let’s look toward the future and see what good can come out of this (Of course always having a good grasp of what has already past).
As every other crisis of situation opportunity rears it’s head to bless us with whatever it may bring, but, where’s the opportunity now? This situation has brought up corpses to the surface that we did not know where a problem or at least we thought that such a situation would not arise for it to be one. To give you an example, due to the lack of public education or the lack of initiative for the public to educate themselves on simple economic matters (that we use every day) like scarcity is why our toilet paper dilemma occurred.
It may seem silly and trivial but, the lack of understanding for scarcity is a very concerning thing since it triggers ancient survival mechanisms built in to us to overcome our situations. If a person feels that there is not enough of something they will stock up on the product as much as they can to ensure their supply for as long as they can leaving other people to acquire very little or maybe even no product ensuring their demise. On the other side over production is a problem of it’s own and not by a long shot a viable solution to scarcity for a multiplicity of reasons.
Now that we have our concepts out of the way let’s bring the conversation towards hospitality and tourism. These corpses directly influence the traveler’s decision at the time of making a choice to travel or not, since one of these corpses was job security the traveler may be very weary in terms of decision making maybe prioritizing other goods and services before a flight and stay at a tropical destination.
Yeah, we can all agree that in the time of a cash shortage the vacation drops to the bottom of the pile. So what’s to become of leisure destinations which are the ones with more to lose. I read a very interesting skift article on tourism marketing and I’m very much on board with what a particular source said.
“In proving their value, DMOs must also move sharply away from the mindset that ever-increasing arrivals — and thus ever-increasing hotel taxes — is a valid raison d’etre. That unsustainable mindset, which led to overtourism in some places, has now also revealed itself to be extremely risky in the context of coronavirus.”
If you don’t know what a DMO is, it’s a destination marketing organizations are non-profits tasked with the marketing efforts of a travel destination. It has always been hard to justify the existence of these entities, probably because their efforts and results are more intangible than any other thing. The main measuring stick that these organizations use are arrival arrival numbers which let’s be honest are highly untelling of actual impact from the DMO’s efforts. It’s very probable that they will pivot aggressively just as the rest of the industry (Pivot into a slightly different way to do business more lean, agile and easier to manage). They are probably sweating heavy, thinking how will they now justify their existence. Even though the need for marketing efforts are needed the way to now go about it and the results will probably have to be measure ddifferently. Here’s the link to the full Skift article: https://bit.ly/2VmiM7g
- Gian from Hostpitality
What’s next? 🤔 Outside the regular programming
Certainly uncertainty has rooted within our minds and have begun to shine light upon fissures in our own companies, system and governments. Our lack of control over the situation are making travelers not plan any trips and us anxious if we will be able to continue given our own lack of preparation and reliance on purely reservation income. I’ve had a few conversations with other colleagues in the space, some are weathering the storm like us and others didn’t have as much luck as us, we’ve listened to big players also saying that they have had to close up shop. Now we can make whatever assumptions we want about the scenarios, players and outcomes, but, one thing is for sure nobody was ready for this. The ones who will survive this and be able to reap the opportunities of the new environment will be the ones that by chance could afford to weather the storm given their particular circumstances.
For example, Hostpitality will be one of those that will survive. Not because of the company being prepared, but, because of our current lean operations and low cost of operating. If we were to have acted upon our pipeline any sooner than expected (which we expected to on April) we would have probably been one of those that would have had to close and that is something worth thinking about. It’s worth the time for thought because if not for pure luck of waiting to execute we wouldn’t have been able to take the blow as well as we did. Particularly thinking within the context of what’s next, I’ve been deep in thought about what were the things that we could have really done to be prepared, and, quite frankly I still think my answers as far from adequate. Even though the strategies for mitigating losses in the short term would have worked, since other hosts are having relative success with them I still find that the answer for the long term escapes my grasp every time I think I’ve figured it out. It’s like a never ending chase!
So let me try to detail (at least as far as I can tell) what were the things we should have been prepared for:
Halt of your main source of travel traffic (No one visiting from there and you’re out)
Main income source decline (Not having any supplemental sources of income)
The inability to transit in your area (No work, no activities)
Bad debt collections (Being over leveraged)
High operating costs relative to the income (Willing to spend more because the going was good)
Since we haven’t reached the climax of the infection I would project that this will not be sustainable for most operators to continue and will have to close up shop probably defaulting on mortgages, rents, utilities and having to let go of a lot of their workforce if any (Vacasa and Sonder have already done so, Stay Alfred has not but, they aren’t working and without pay). Check out Transparent’s message on their impact to global supply page.
In simple terms this just means that hosts or operators are hanging on hoping they can catch some relief in high season, which will probably not happen. The two highlighted lines are key to really grasping the situation, 6 out of the 10 top short term rental countries in the world that constitutes 47% of the global supply and the next one there is likely to be significant impact at global level as we approach high season in many of them. Meaning as I’m interpreting it that close to 47% of the market are going to miss their high season or part of it also taking into account the ADRs that they will be having to rent at followed by uncertain reservations that could end up cancelling if something comes up or if it’s still not perceived as safe. Very troubling stuff…
In regards to what’s next? I don’t know what’s next, what to do or how will a bounce back strategy work just yet and we’ll all probably not know until the time comes and this is finally over. Be prepared to try new things, renegotiate your deals and internalize what we’ve learned from this to be able to survive another possible event in the future.
When I do figure something out and when I can give you a better sense of direction you will hear from me, in the meantime stay safe.
-Gian from Hostpitality
👑🦠 and Industry😟, Chaos in the Streets of Airbnb
The entire world has been in an involuntary economic halt. Our industry is not one that is exempt, it’s probably one of the most affected ones. We’ll face heavy casualties and no one will come out of this unscathed. Let’s take a dive at the current situation.
Both OTAs and hospitality operators are feeling the burn in this and it’s certainly showing in the numbers. I took a look at Transparent’s data set on the Corona Virus impact and was pretty bummed out with what I saw. Demand naturally has lowered steeply compared to last year to date while supply has maintained steady, but, I believe that this may not be the case for long. If the situation continues to progress in an unfavorable direction a lot of operators will be forced to close and/or consolidate mainly due to the lack of liquidity, cash reserves and loss of revenue. OTAs have also received a significant blow to the chest due to their valuations dropping drastically and even though we can’t see Airbnb’s current value in the data set they should have taken a significant blow as well and their market cap decrease should be in the vicinity of it’s peers.
Here are the current valuations
Source: https://seetransparent.com
You can see the overall travel sector suffering and headbutting the crisis, Nasdaq is down by around 21%. Tripadvisor down by more than 50%, Booking.com and Expedia Group with similar downturns. Global demand is definitely hit hard and probably global supply will drop, but, more interestingly supply distribution will probably shift pretty wildly.
With the turmoil Airbnb is facing it could mean the end of the platform as we know it. I’m not saying they will close up shop even though it’s a possibility, I’m saying that the way we’ve come to know it might change. Airbnb has been maintaining it’s demand side throughout this process making sure they are retaining them just so when everything is said and done people start travelling again they have retained a big enough user base to be able to start getting back to business as usual as fast as possible. But, that’s not the reason why it might change dramatically.
Airbnb’s Supply Side Will Change
While having several conversations with peers, friends and people at Airbnb it becomes very clear to me. Airbnb hosts (mainly the loyal single platform ones) are opening their eyes to new horizon which is that Airbnb opted to side with guests rather than them their core offering and market differentiator. The opted to save their guest base or not “save them” rather keep them happy, under the presumption that when this is all said and done travelers will still be inclined to use them as their accommodations option because they stood by them when a crisis presented itself.
How will it change?
It will very likely look like this; once loyal hosts that catered and created their spaces to fit the cool ecosystem of the Airbnb traveler will now opt to offer their amazing cool spaces in these other competing OTAs creating a market shift towards them because what they only used to see on Airbnb they now see them on Expedia, Booking.com, Homeaway/VRBO and a very small percentage will be directed to their own bookable website. The real kicker is that these other players have an average of 6 to 9 months advance booking average while Airbnb has a 14 to 30 day advance booking average. I bet you can guess what will happen, these properties will now be booked way before Airbnb users get the chance to book them. So Airbnb from 1st round pick went to 3rd or even 4th.
This is a very big hurdle that Airbnb will be facing in the coming months given that hosts are taking this time off to create their new listings on the other platforms. Some have even gotten to the point of permanently deactivating them from Airbnb. They’re under the impression that this will pass and their customer base will maintain itself fairly healthy to get back out and travel, but, they may be overestimating the amount of supply that is willing to stay just with them waiting it out.
On a positive note for those that choose to stay by Airbnb and can afford to wait it out competition could be at an all time low in your area and maybe you could capitalize on that by upping your prices if you’re all that’s left 😉.
See you in the next one
-Gian from Hostpitality