How Airbnb is empowering
Boutique Hotels and B&Bs to build their business
Traditional hotel chains and large resorts have
long dominated the accommodation industry because of their
strong brand marketing and distribution channels.
But as with so many other industries, the internet is
disrupting the traveller accommodation industry. With
internet booking platform operators such as Airbnb, Stayz,
eDreams and Bookings.com, the internet is providing small
accommodation providers with easy access to a global market
for travellers, whether it is for business or pleasure. The
accommodation sharing economy is here! In this article we look at how internet booking platform
operators are providing services to small accommodation
providers to help build their business, and the legal
compliances applicable in Australia. We draw upon
information found on Airbnb websites.
How does Airbnb create a marketing position for small
accommodation providers? Airbnb has created a clear marketing position for its hosts. Airbnb describes itself in this way: Airbnb connects people to unique travel experiences in more
than 34,000 cities and 191 countries. The focus is on local travel experiences, encouraging guests
to live like a local. This clearly differentiates Airbnb
listings from large hotels and resorts which market their
rooms and in-house dining, gym and business facilities as an
‘all-inclusive’ experience.
Airbnb encourages its hosts to engage with the local
community by providing:
- Locally relevant or unique amenities, such as local food
or beverage;
- Local maps with personalized recommendations;
- Local tours such as neighbourhood walking tours; and
Airbnb specifically lists these types of accommodation as
suitable for Airbnb listings: Bed & Breakfast; Boutique
Hotel; Nature/Eco lodge; Timeshare; Serviced Apartment;
Hostel. What four services does Airbnb provide to small
accommodation providers? Airbnb provides these services to small accommodation
providers: (1) Marketing
Until recently, it was hard and expensive for small
accommodation providers to market their property for
short-term stays. So the traditional hotel chains, with
their superior marketing resources, dominated the market.
The small accommodation providers - boutique hotels,
resorts, bed and breakfast establishments and serviced /
holiday apartment owners engaged specialist booking agents
to market their property, and paid a commission often in the
range of 15% to 20%. They advertised in accommodation
directories, in the print media and in brochures.
Airbnb gives small accommodation providers access to a
global marketing platform. Airbnb has over 2 million
listings, including 70,000 in Australia. These listings
generate over 60 million guest bookings per year. Hosts can
list on Airbnb free of charge.
In terms of legal compliance, both the host and the platform
must comply with the Australian Consumer Law by not falsely
advertising or misrepresenting the property or the price.
Airbnb calls it having an accurate profile and listing.
The profile is the host’s profile, where a photo, a
description and a ‘fun fact’ are encouraged. The listing is for the property, where photos, descriptions
of the room and accommodation type, and the amenities within
the property are required. These photos and descriptions,
and local information such as proximity to transport and to
restaurants, must be accurate.
Airbnb will sanction hosts who do not comply by removing
their listings.
(2) Bookings Management
Airbnb provides a booking platform. As part of its booking
management, it screens both hosts and guests. It carries out rudimentary background checks on hosts using
available public records to check for criminal records, sex
offender registrations and membership of a terrorist
organisation. These checks are limited and do not guarantee
safety. It obtains information from guests, such as passport
details, before they are allowed to book.
Hosts have considerable control. Hosts set availability and
house rules. Hosts set the rent for the accommodation (the
‘price’) which can be adjusted as desired. Hosts can refuse
a booking application, after viewing the guest’s profile,
without giving a reason. Airbnb encourages both hosts and guests to get to know each
other when confirming the booking, using the website
platform. Various tools are provided, including reviews from
other members, verified ID or other identity process on
arrival, on-platform member messaging to message the host or
guest (with the real email address anonymized) and
reservation requirements that hosts can set for their
guests. After the stay, hosts and guests are encouraged to
review each other – the reviews must be genuine, accurate
and not misleading to comply with the Australian Consumer
Law.
(3) Payments Platform
Airbnb provides a secure payments platform. The payment is
made in advance to Airbnb, which then pays the host. A
request by a host to pay outside of the Airbnb payments
platform is a violation of the terms of service and may
result in removal of their listings. Airbnb charges hosts a
host service fee of 3% of the price
for each completed booking. It charges guests a guest
service fee of 6% to 12% of the price for each confirmed
reservation, the percentage decreasing the higher the amount
of the price.
The price must be transparent: it must include all
compulsory fees and taxes, to comply with the Australian
Consumer Law. For instance, if a service charge such as a
cleaning fee is charged on all bookings, this should be
included in the price. Any Goods and Services Tax (GST)
(i.e. a VAT or bed tax) should also be included, if it is
payable by the host.
(4) Property Damage
Small accommodation providers will have business insurance.
But cover is often excluded for injuries sustained by guests
and property damage by guests, or is available at extra
charge.
Airbnb fills these gaps by providing “Host Protection
Insurance” to cover injuries and a "Host Guarantee" to cover
property damage by guests, at no extra charge, for bookings
made through Airbnb. This is how Airbnb describes it:
The Host Protection Insurance programme provides primary
liability coverage for up to AUD$1,000,000 per occurrence in
the event of a third-party claim of bodily injury or
property damage related to an Airbnb stay. It's available to
hosts regardless of their other insurance arrangements. The Airbnb Host Guarantee provides protection for up to
AUD$1,000,000 to a host for damages to covered property in
the rare event of guest damages above the security deposit
or if no security deposit is in place. The Host Guarantee
Programme doesn't cover cash and securities, collectibles,
rare artwork, jewellery, pets or personal liability. [It]
doesn't replace your homeowners or renters insurance.
What town planning compliances are there for small hotels
and bed and breakfasts? Airbnb states that the host is responsible for compliance
with local laws. In Australia, the zoning determines the use for a particular
property. Generally speaking, the zoning could be a Tourist
Zone, or it could be a Mixed Use Zone, to be a zone where a
visitor and tourist accommodation use is permissible.
If the zoning permits visitor and tourist accommodation,
then town planning consent is required for specific uses,
such as: bed and breakfast accommodation, hotel or motel
accommodation, backpackers’ accommodation, eco-tourism
facilities, farm stay accommodation and holiday lettings.
These are common conditions of consent:
- An On-Site Manager
- A Plan of Management, covering operating standards,
health, amenity and safety standards, staff, guests,
security, waste and water efficiency
- A Noise Management Plan
- Annual Certification, including for fire safety
- An Emergency Management and Evacuation Plan for fire
- Compliance with health standards
- Compliance with rooms, recreational facilities and
facilities requirements
Serviced Apartments, including Executive Apartments, are
different. The zoning is often a Residential Zoning because
they are in a building constructed for use as residential
apartments. Town planning consent is still required, but the
conditions are not onerous because the apartment is rented
as a whole (not per room).
If the Serviced Apartments are in block of Strata Title
apartments adjacent to owner-occupiers or long-term tenants,
this can lead to conflict. The conflict arises from
excessive noise at night, and extra wear and tear in the
foyers and the elevators by the travellers.
In a recent decision of the Supreme Court of Victoria, the
Strata Title management corporation failed in its attempt to
bar the use of 14 units in its high-rise building as
serviced apartments. The Court upheld the planning approval
obtained by the serviced apartment operator, and said that
this overrode the by-laws of the Strata Title Apartments
which barred short-term rentals.
Conclusions Airbnb is empowering short-term rental businesses such as
small hotels and bed and breakfasts to attract bookings from
global travellers.
Airbnb provides these services: marketing, bookings
management, payments platform and property damage cover.
These services are increasing lodging occupancy and pricing
power for small accommodation providers.
Traditional hotels and resorts will be affected by the
increasing popularity of internet booking platforms such as
Airbnb. They are likely to experience slower revenue growth
and weaker profitability.
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