Airbnb has a new, old plan to eat into hotel business

By Emily Bary

Airbnb will promote private rooms more, with its CEO highlighting lower prices relative to hotels

Airbnb Inc. Chief Executive Brian Chesky knows that accommodations on his platform have gotten "expensive," and he's hoping the company can get back to its roots more.

The company got its start as a way to make travel cheaper: Instead of booking hotel rooms, consumers could rent out space in others' homes and save money. But Airbnb (ABNB) has since expanded into more elaborate rentals, and nowadays its value proposition versus hotels isn't always there.

Chesky admitted at a Tuesday media presentation that the company has been fielding complaints about the costs of its lodging. He hasn't been particularly shy in the past either about acknowledging that prices have gotten out of hand or saying that the company was looking for ways to make stays more affordable.

Part of Airbnb's strategy doesn't involve actually lowering prices, but rather giving more play to options deemed to represent good value, namely the ability to book a private room in someone's home. The CEO said he thinks his company's accommodations offer compelling advantages to hotels, and part of Airbnb's plan going forward will be to emphasize its original business more.

The company rolled out a series of product improvements this week, including a revamp of the private-room interface. The move is intended to make this option, called Airbnb Rooms, more visible and appealing.

With the update, users would be able to sort through private-room accommodations better with a designated category for this type of lodging. They'll also be able to see a new host "passport" that conveys both the basics and fun facts meant to humanize the hosts.

The ability to stay with hosts "offers two really clear benefits," Chesky said at Tuesday's event. "The first is you've experienced a city like a local ... but just as importantly, especially now, staying with a host is often more affordable than the hotel."

Chesky compared several Airbnb Rooms options to basic hotel rooms. A nondescript room at a Mexico City Sheraton costs $144 a night on average, he said -- and compared it to a room in a host's house. That room, priced at $124, comes with a fireplace and the benefit of being away from tourist traffic.

Airbnb shared in a release that more than 80% of its private rooms cost under $100 a night, with a $67 average nightly rate.

"We think this idea is much more important than ever," Chesky said, noting that the timing was ripe for Airbnb to promote shared accommodations more. Consumers are less wary of communal spaces than they were during the height of the pandemic, Chesky said, but travel costs have risen.

Still, there are downsides to staying with strangers. Hotel rooms offer the benefit of privacy, but Airbnb Rooms place travelers in the homes of local hosts they don't know.

People "have to feel comfortable staying with a host," Chesky said, and he thinks that the new host passports will help. Passports will show that hosts have verified identities and highlight elements of their character.

The company also asks hosts for information about the privacy of their homes, such as whether bedrooms have locks. The goal is to make that information clearer for travelers before they book.

See also: Hotel housekeeping jobs have fallen by 102,000 during the pandemic. What happened?

Airbnb said it plans to promote Rooms with a new ad campaign highlighting the charm of local homes and showing episodes like travelers learning to make sushi in Japan with their hosts.

Beyond improving the Rooms brand, Airbnb will emphasize affordability across its broader portfolio, including by rolling out an option for users to see the true cost of stays inclusive of fees, which had previously been in beta mode. Hosts will also have a better sense of what they'll earn from a stay, and what consumers will be paying. Chesky thinks that by giving hosts more information about traveler costs for stays, hosts may be less inclined to tack on major cleaning fees.

Additionally, Airbnb will give travelers booking monthly stays the ability to pay by bank account and save money accordingly, as Airbnb won't have to pay card-processing fees on such transactions.

-Emily Bary

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05-03-23 0811ET

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