Airbnb and the $300 Billion Business Travel Industry
The world’s second most valuable startup wants to change the way you travel for work.
In less than a decade, Airbnb has gone from having a single listing, for an air mattress in founder Brian Chesky’s living room, to having nearly twice as much room capacity as the largest hotel chain.
The home rental network has 60 million users and a $24 billion valuation, making it the second most valuable startup in the world behind Uber. Airbnb has so far managed to brush off potential impediments such as regulatory challenges and the occasional PR mess, but in order to maintain its status as a Silicon Valley darling, the company will have to hit aggressive growth targets.
By some estimates Airbnb currently accounts for 1 percent of the global lodging market, and would need to increase that share to as much as 10 percent by 2020 in order to meet its revenue projections. Having already established itself as a popular choice for vacationers and “lifestyle travelers,” Airbnb is now placing business travelers at the center of its growth strategy.
The market for business travel is worth $300 billion in the U.S. alone, and a sizable percent of that goes toward hotels: A survey of corporate travel expenses from J.P. Morgan found that approximately one-fifth of the money businesses spend on employee travel is for lodging.
The corporate travel market is enormous and largely untapped. At last November’s Airbnb Open Conference, a company spokesman noted that only 10 percent of Airbnb guests are traveling for business–compared to over 30 percent of hotel guests–and estimated that business travel represented a $120 billion opportunity for Airbnb.
Will Airbnb be able to seize that opportunity? Certainly there are hurdles to clear if it is to become a major player in business travel. Some surveys indicate that a sizable percentage of business travelers are either unaware of sharing economy services or reluctant to use them because of concerns about safety, comfort, and whether such services are permitted in their company travel policies.
However, there’s also evidence that a vanguard of business travelers has already started using Airbnb: Data from the expense software company Certify showed 261 percent growth in use of Airbnb last year.
Eye-catching year-over-year growth can be explained in part by the relatively small number of business travelers who were using Airbnb at the start of 2015. But statistical quirks aside, the sharing economy actually is having a transformative effect on business travel.
One of the primary reasons is cost. Airbnb can be significantly less expensive than traditional corporate hotel accommodations. Rocketrip, my company’s tech platform, which incentivizes business travelers to save on their trips, found that booking an Airbnb instead of a hotel saved $116 a night on average. If a company spends millions of dollars each year on travel, the potential cost savings from Airbnb could be too great to ignore.
Demographic trends will also work in Airbnb’s favor. Millennials have demonstrated a greater willingness than other travelers to use home sharing, and by 2020 this youngest generation will account for a majority of business travel spending.
Airbnb is investing heavily to make its offering more appealing to the corporate market.
To promote home sharing as a hotel alternative especially suited for long-term trips, Airbnb’s recent advertising campaigns have emphasized the theme “feel at home when you’re on the road.”
More significantly, Airbnb has started to certify units as “Business Travel Ready” if they meet certain standards for user reviews and host responsiveness. To receive this designation, the listing must be for an entire home (no bunk beds for business travelers) with essential amenities including Wi-Fi, 24 hour check-in, toiletries, as well as smoke and carbon monoxide detectors.
Already there are signs of traction. One month after introducing a new Airbnb for Business program, Airbnb announced that over 1,000 companies had signed up, and cited Google, Salesforce.com, and Vox Media as inaugural clients.
With so much being spent on business travel each year, there’s plenty of room for home sharing to exist alongside traditional hotels. Hilton, Marriott, and other chains aren’t going anywhere.
But in just a few years, the idea that a business traveler would willingly trade his or her familiar brand for a stranger’s home has gone from unimaginable to undeniably common.