By: Brad Greiner, CEO of Open Air Homes and OpenAiRE Brokerage
Are Ads Charged to Hosts the Next Step for Airbnb? Let’s Discuss
In the ever-changing world of short-term rentals (STRs), business models and revenue streams are perpetually in flux. Initially, platforms like VRBO had hosts pay for their placement, the more you paid, the higher you appeared in search results. However, as Airbnb rose in prominence, VRBO pivoted to a commission-based model akin to Airbnb’s, where both hosts and guests are charged fees, essentially generating revenue from both sides of the transaction.
Now, with Airbnb being a publicly traded company, it’s under constant pressure to increase growth and shareholder value. One of the intriguing avenues that’s being speculated is the adoption of an advertising model for hosts, reminiscent of how Google allows businesses to pay for top placements.
Historical Precedents: From VRBO to Airbnb
When VRBO first entered the market, it leveraged a pay-to-play model, where hosts’ placement was contingent on the amount they were willing to invest. However, as Airbnb, with its innovative commission model, began to dominate the market, VRBO had little choice but to adapt. Now, both these rental behemoths operate on a commission-based framework, essentially “double-dipping” from both hosts and guests.
Heaven or PS by Open Air Homes
The Pressure of Being Public
Airbnb’s status as a publicly traded company brings with it the enormous weight of investor expectations. The company’s primary mission? Continuous growth. Given this pressure, it wouldn’t be far-fetched to assume that Airbnb is contemplating integrating an advertisement model, akin to Google Ads. Such a model would allow hosts to pay for premier placements on search results.
However, this potential direction could conflict with Airbnb’s commitment to ensuring an optimal user experience for guests. It’s plausible that Airbnb’s current strategy revolves around refining their property recommendation algorithm. Once they achieve near-perfection with this system, they might then roll out paid ads, ensuring hosts can vie for top placement.
Laurel Canyon by Open Air Homes
The Open Air Homes Experience
From our vantage point at Open Air Homes, the ever-evolving algorithms can sometimes be perplexing and, at times, frustrating. A property that once garnered 1,000 views a month might suddenly drop to a mere 200, prompting us to scramble to identify and rectify the issue. Often, this means reducing prices to make the property more appealing to Airbnb’s algorithms.
Should Airbnb adopt an ad model, businesses like ours would inevitably view it as a necessary tax for staying competitive in the market. While we would participate, it’s crucial to note that we’ve been reducing our dependence on platforms like Airbnb and VRBO. Since 2019, our focus on direct bookings has intensified, with around 40% of our revenue now sourced directly, sidestepping platform fees entirely. The introduction of host ads might further push businesses to bolster direct booking initiatives.
A Glimpse from Financial Times
An article from Financial Times titled “New York officials take on San Francisco’s Airbnb” by Elaine Moore offers some telling insights. The piece highlights potential revenue-raising strategies for Airbnb, noting: “There is one potentially easy way to raise revenues and margins. Like Amazon, Uber and Netflix before it, Airbnb could add advertising. Charging hosts to promote listings would increase sales. If domestic growth does not pick up, expect ads to appear.”
Conclusion
The STR industry is in a state of constant evolution, and the next big shift could well be Airbnb introducing ads for hosts. While this would present another cost for hosts, it’s also a testament to the ever-changing landscape of digital business. For companies like Open Air Homes, adaptability remains key, as does the pursuit of more direct means of reaching potential guests. Only time will reveal Airbnb’s next move, but until then, hosts worldwide will watch with bated breath.
