Mohd lkhram Merican is a blogger, property enthusiast and author of “The Ultimate Guide to Buying Property”. In 2015, he entered the vacation rentals business and in less than 3 years, he was recognized by Asian Property Review as one of the most experienced and successful Airbnb hosts in Malaysia.
The future does not look too rosy for Airbnb in Malaysia, predicts Ikhram, one of the top Airbnb hosts in Malaysia.
We’re approaching the end of the year and that means it’s now the season of predictions for 2020. Writers, analysts, pundits, and the man on the street will be engaging in predictions of all kinds. It’s therefore only apt that I throw my weight in and make some predictions about AirBnB in 2020.
Airbnb is now a household name and the brand name is often loosely interchanged for homestays or short-term accommodation (STA). Its growth has been spectacular — from humble beginnings in a flat in San Francisco to a global household name worth nearly RM160 billion.
To put this in context, one of the largest hotel companies in the world, Mariott International, is worth RM180 billion after nearly a century of business. AirBnB is worth nearly as much as Mariott in 10 years.
Will Airbnb continue to be a disruptor and lead the way in the accommodation business in 2020? I’m going to attempt some predictions.
1. It will Jose its position as Top Dog
Airbnb is losing ground and fast. Booking.com has reportedly surpassed Airbnb in terms of total bookings recorded since 2007. Booking.com reported 748 million bookings for its homestays while Airbnb took 500 million bookings.
Bearing in mind that Airbnb did not exist until 2009, Booking.com’s total bookings is an indication that travellers are opting for alternatives to Airbnb.
Airbnb still has one of the best interfaces for browsing properties and communication between hosts and guests, but Booking.com allows guests to book first and pay later at the property. This appears to be an attractive option for budget travellers.
On top of this, in 2018, Booking.com spent over RM20 billion on marketing. It doesn’t appear to be slowing down. Coming close on AirBnB’s heels are Agoda and Expedia. The intense competition for market share is wearing down on Airbnb.
2. Airbnb’s experiences will grow
One of Airbnb’s growth areas in the future is going to be its “experiences.” This is something unique that none of the other OTAs are focused on. In fact, the other OTAs’ may need to make significant modifications to their platforms to provide this service.
The number of experiences offered on Airbnb Malaysia is relatively small but this is growing. There are adventures, sports and outdoors, classes and workshops, food and drink, history and local causes, and arts and entertainment categories to choose from.
I thought this was a stroke of genius from Airbnb in making their platform a purveyor of wholesome travel experiences that extend beyond accommodation, Experiences can be marketed to a larger customer base. Guests staying in hotels, or who have booked via other OTAs can still go to Airbnb for experiences.
More importantly, experiences has the potential to be more profitable for hosts than the accommodation segment.
3. Airbnb will lose its Best Hosts
The exodus of Airbnb’s best hosts in Malaysia started back in 2018. Why do I think this will continue to happen in 2020?
Most hosts are on Airbnb to make profit. This has been getting harder and harder to achieve. In 2016, hosts in Bukit Bintang, Kuala Lumpur, could expect to earn RM6,704 per month. In 2019, hosts can expect to earn RM3,468.
The earning potential has halved in 3 years and the downward spiral will continue. Airbnb has been rather indifferent about this situation and has not engaged in an active campaign to help hosts deal with price wars. In fact, it has encouraged lower prices in a bid to gain market share.
Hosts who are passionate about providing a good experience to their guests will find it harder to do so without subsiding the cost of good experience from their profits. Eventually, hosts or home owners will gravitate towards other ways to rent their properties. Subdividing properties into multiple rooms and renting them on a long-term basis is already catching on in popularity.
“Experiences has the potential to be more profitable for hosts than the accommodation segment.”
Conclusion
Airbnb’s growth prospects in 2020 is not going to be as great as previous years. It’s facing intense competition from other OTAs and the way it has been responding to gain market share has not helped hosts remain profitable.
However, Airbnb’s ace card will be its experiences segment. Experiences will appeal to all travellers. Not just budget travellers looking for cheap alternatives for accommodation but the whole gamut of travellers.
Visit Malaysia 2020 may help hosts improve their occupancy and provide some respite in terms of growth for Airbnb but it may not be sufficient to produce the same y-o-y growth of the previous years.