Airbnb would have to be at least in the top 5 of multinational businesses affected by the COVID-19 crisis. Despite raising US$1 billion in a new round of funding only a few days ago, COVID-19 has undoubtedly been devastating to Airbnb's economics, and a controversial handling of the situation will cause years of rebuilding as scorned hosts begin to leave the platform.
With international travel nearly non-existent during this pandemic, it is expected that Airbnb will lose about US$1 billion in the first half of this year, and their planned IPO will certainly not be happening. Still, even before the unfortunate events that threw the tourism and short-term rental industry into darkness, a major player had started making inroads into the industry, and you might know them as Google.
From around August 2018, being able to book a hotel started to become a lot easier on Google. A redesign of their website enabled those searching for hotels to not only come across photos and reviews, but also the ability to make a booking directly through Google - not via an OTA or sponsor.
You may have noticed that if you search for "hotels in Brisbane", for example, you'll be shown a unique section of hotel listings separate to the usual style of search results on the rest of the page, and well before OTA listing results.
Wind the clocks forward 6 months and Google has started to emulate this for short-term rentals, with enhanced listings that will include reviews, photos and more, and appearing before competitors on search results in the US.
However, it does look a little different for the majority of searches. If you search for "vacation rentals Brisbane" or any other city, the keywords will trigger 4 results from vendors including Expedia, TripAdvisor, and Rentals United. These OTAs have partnered with Google to be a part of this service, and it is believed they are paying a reasonable slice for it.
In November 2019, Airbnb trialled this with Google with listings in Europe, Asia, and the US. From my research, it seems like Airbnb Australia then joined in early March 2020 during the start of the COVID-19 pandemic in Australia.
One of Airbnb’s biggest drawcards for investors is their mammoth-sized brand awareness, which leads to efficient and economical marketing and sales. My research on Similarweb showed that Airbnb's direct traffic from mobile and web is consistently above 62% over the last 3 months. Compared to their direct competitors - booking.com (42%), TripAdvisor (16.8%), VRBO (44.16%), and HomeAway (49.66%) - this shows a significant saving for Airbnb by not having to rely on and pay for Google’s services.
The majority of us in this industry believe that Google will become Airbnb’s biggest competitor in the near future. Google will continue to gain market share while also charging the likes of Airbnb for their services.
Are the OTAs, including Airbnb, now more than ever going to be at the mercy of Google? If we look at Google’s unprecedented move into direct contact with hotels through pay-per-click commissions from preferred channel management suppliers, then you would assume the same for the short-term rental market.
As most OTAs in this current situation slash their marketing budgets and remove themselves from Google services, will Google use the opportunity to start ramping up acquisition at an even faster rate? The answer is: most likely, as many consider Google to be a ruthless competitor who has been known to flatten their competition before they even get a chance to begin.
Many hosts already have a fairly poor impression of most OTAs, what with high commissions and generally lacking customer service, and are seen as businesses that make a lot of money by ripping off hosts. This is a failed recipe for brand loyalty. If Google comes into the market with a reasonable entry price for hosts and shows results early, most people will jump on board fast and see them as the hero, and this is something we will see happen within the next 5 years.
But what about Airbnb, is it different? Yes. Unlike other OTAs, they took the controversial stance of refunding the guests in full during this crisis. Although they will lose hosts due to this and past indiscretions, I don’t believe it will be enough to see hosts and guests scrambling to look for other options. In a post-pandemic world, it's hard to know yet what people will be looking for in their accommodation needs. One thing you could bet on, is that Airbnb guests will stay loyal to Airbnb because they got treated with loyalty. This may be the last and most powerful line of defence against Google. As an Airbnb host, I was completely perplexed by the way hosts were treated during this time, and the after-measures were half arsed. But when looking at it from a perspective of a "Google vs. Airbnb" new world, it all makes sense now.