How Airbnb’s Redesign Will Grow Revenue for STVR Owners

June 22, 2022 by  Chris Erwin

Airbnb has a massive app redesign is launching this summer, as described in The Verge article here. It’s most significant product overhaul in a decade will include three main components:

  • Categories – a new way to discover places through the lens of experience elements, like camping, surfing, amazing views, bed and breakfasts, countryside, and more. Of note, its Design category will feature over 20,000 unique homes, including those by architects like Frank Lloyd Wright and Le Corbusier.
  • Split Stays – will let users split their time between multiple stays in the same area, in case one stay isn’t available for the entire time of their trip. Will allow discoverability of 40% more listings.
  • aircover – Comprehensive travel and scam protection including booking protection for host cancellations, check-in guarantee, quality assurance, and a 24 hour safety line.

I’m very, very excited for this update.

First, because I’m planning a summer road trip through the southeast US, and will definitely trial these new features.

Two, and more personally important, I recently decided my next rental real estate investment will have a STVR strategy (short term vacation rental). And one of the key ways to win in STVRs is in optimizing discoverability to drive higher occupancy rates, which translates to higher revenue and margin. To that end, I believe Airbnb’s update will help materially grow the overall STVR market by

  1. Increasing owner revenue, which can be reinvested in improving the customer experience and also enable small and medium-sized STVR owners to invest in more properties, which will in turn…
  2. Attract more capital for innovation in STVR development and customer servicing…creating more delight for more end consumers…which then drives higher revenues, and the cycle repeats!

Some quick analysis and takeaways:

Looking at airDNA data, STVR monthly revenue across many US markets is growing quickly. In my focus market of Savannah, between the 2 year period of May 2020 to May 2022:

  • Average Daily Rate grew from $207 to $270, a 30% increase
  • Booked properties grew from 1,520 to 2,192, a 44% increase
  • The “50th percentile occupancy rate” (which benchmarks your rate VS rest of market), grew from 39% to 71%, an 82% increase
  • Put all that together, and (1) average monthly rental revenue grew $2,054 to $5,081, a 147% increase, and (2) total market revenue grew from $4.9 million to 15.4 million, a whopping 214% increase
  • This is remarkable, and why my rental strategy has changed!

This is just data for one market in the US, and accounts for the period before Airbnb’s full new product roll-out (launched mid May in just the US). Keep in mind that Airbnb serves tens of thousands of markets in the US, as well as internationally. And with Airbnb having the largest penetration of STVR listings, this update could drive a massive uptick in driving higher occupancy, and in turn STVR market revenues. And no, I don’t think post COVID we’ll see growth materially slow. There may be some impact to account for, and I’ll be tracking.

This move has broader implications for the convergence of media / tech / commerce, and is a key reason why I’m covering it here. Discoverability is an increasing challenge for all things content and commerce. Which impacts platform and partner unit economics, from driving higher LTV, AOV, utilization, time on site, to reducing CAC and churn. Relevant for OTT streamers, social incumbents, social and live commerce, publishers, creators, and much more.

To the above point, smart content marketing on STVR platforms is a must. That includes photos that showcase an “Instagrammable look”, great subject headers, copy writing, and good reviews. And all this is about to get even more important to stand out and maximize a listing’s potential on airbnb! Personally, this is where I get super excited → content / digital marketing savvy + passion for passive real estate income + financial prudence (got to keep those turnover costs low) + smart dealmaking to acquire more inventory. Yup, this feels increasingly like my future…

I really dig aircover. I’ve had nightmare scenarios like same-day cancellations while I’m on a plane to Europe for a 3 week holiday, and had to re-book while in an Uber from the airport. This experience caused me to start using hotels for when I need reliable stays, like business travel, and I know this issue has caused airbnb churn amongst my peer group. So this is a great way to improve user retention, rebuild trust and acquire churned users, and drive higher ADR.

Fun market cap benchmarking…will this put Airbnb on the path to be the largest online travel aggregator? Let us know your thoughts…

  • Booking: $78 billion
  • Airbnb: $65 billion
  • Expedia: $16 billion

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