Airbnb & Business Travel. Why You Can t Afford to Ignore the Sharing Economy Any Longer

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1 Airbnb & Business Travel Why You Can t Afford to Ignore the Sharing Economy Any Longer

2 Table of Contents Why Read This White Paper?... 2 Where Does the Sharing Economy for Accommodations Fit in a Business Travel Program?. 2 How Airbnb Compares to Traditional Hotels... 3 onefinestay, HomeAway, VRBO and FlipKey Capabilities... 8 What Are Business Travel Peers Doing? 8 Enhancements BottomLine Group Would Like to See. 9 Our Recommendations.. 9 About BottomLine Group/For Further Information. 10 Copyright All rights reserved 1

3 Why Read This White Paper? Travel Managers must have a plan to address the sharing economy ignoring it is not an option. The sharing economy is creating a lot of discussion in the Business Travel industry, with Uber and Airbnb being the most prominent providers. This white paper focuses on business travelers using the sharing economy for accommodations, specifically Airbnb. While other entrants such as HomeAway, VRBO, onefinestay and FlipKey exist, and others like AccorHotels and Hyatt are emerging entrants, we will focus on Airbnb due to their current market dominance and their more recent focus on attracting business travelers. As well, many business travel-focused services offered by Airbnb are not offered by other providers. Business travelers are seeking a consumer experience at work. As companies focus more on traveler experience and ease of travel as a hotel program metric, allowing business travelers more choice in the type of accommodation likely lead to the inclusion of sharing economy properties. Airbnb currently estimates that 10% of the travel that happens through Airbnb is for business reasons, but a lot of which is not managed through Travel Managers. SHARING ECONOMY ACCOMMODATIONS ARE BEING USED BY BUSINESS TRAVELERS, OFFICIALLY OR UNOFFICIALLY. This white paper sets out to explain why business travelers are using accommodation offerings, and what your company should do. We explore several questions for Travel Managers and Chief Procurement Officers to consider, including: What does the sharing economy for accommodations offer and why is there demand? Where does the sharing economy for accommodations fit in a business travel program? How does Airbnb compare to traditional solutions? What are corporate peers doing? What enhancements would we like to see? What are BottomLine Group recommendations? Where Does the Sharing Economy for Accommodations Fit in a Business Travel Program? As explored in the Process Ease section, there are extra one-time efforts required by the traveler to book and confirm the property and to check-in and check out. For longer stays, the effect of the traveler s one-time efforts is balanced out by increased comfort, location and for some, access to kitchen facilities. The most common travel situations where an Airbnb property could be preferred by a business traveler, include: Oversold Situations in a City Instead of cancelling a trip, or having to stay out by a noisy airport, you can find properties close to the place of business. In cities like New York where hotel prices can climb from $350/night to over $700/night when near capacity, Airbnb would be a more convenient and likely less expensive option. Multiple Day Stays The multi-day convenience and comfort factors for an interested traveler would outweigh the extra one-time effort to book and confirm the property and to check-in and check out (see Process Ease section). Multiple Week Stays CURRENTLY, AIRBNB AND OTHER SHARING ENTRANTS DO NOT NATURALLY FIT AS A 1- NIGHT OR 2-NIGHT STAY SOLUTION FOR BUSINESS TRAVELERS. When a traveler is on a location for multiple weeks (for example, a consultant working at a client site), it may be convenient and may even be more cost effective to keep the property through the weekends. This allows them to leave luggage and work materials at the property over the weekend, without having to transport it back and forth as most hotels would require. Copyright All rights reserved 2

4 Multiple Employees Traveling at the Same Time For example, if 5 employees are working on the same project, or going to the same conference, getting a multibedroom property would be more economical than 5 hotel rooms. It also allows for shared rides and a reduction in meal expenses if a kitchen is included. One caveat here is that every employee may not be comfortable sharing private space, and potentially bathrooms. Corporate Retreats Airbnb reports this as a common usage. When 3-10 employees are doing a retreat, instead of multiple hotel rooms plus one or more meeting rooms in a hotel, you can book a higher quality property with multiple rooms, dining/kitchen tables as meeting space, and entertainment rooms or landscaped outdoor facilities for bonding time. This is potentially a more intimate experience. Temporary Relocation Accommodation This is a great option if someone is moving to a new city or is considering a move. It lets them enjoy the city as a resident, while allowing time to research their options. One to Three Day Stays As Airbnb improves the booking and check-in process (see Process Ease section below), using Airbnb for these shorter stays becomes more practical. We recognize that several of these scenarios overlap with the corporate apartment/extended stay markets, but even those lines are blurring. In October 2015, Bridgestreet Global Hospitality, a serviced apartment provider with 50,000 units, agreed to show some Airbnb properties on its site, and to post inventory from Bridgestreet properties on Airbnb. BottomLine Group also does not believe that leveraging the sharing economy is the same as having an open booking policy, as parameters can be set around the use of Airbnb as an approved accommodation category versus travelers having carte blanche. How Airbnb Compares to Traditional Hotels This paper evaluates Airbnb on six criteria. These are the same criteria Travel Managers typically use to select standard hotels, although with the maturity of the hotel industry, some of these are implied for standard hotels, including: 1. Price Will Airbnb save you money each night? 2. Location Are properties close to the place business will be conducted? 3. Duty of Care Is there incremental risk to travelers? Will providers have required services and amenities? 4. Traveler Satisfaction Will traveler satisfaction increase if this service is offered? 5. Process Ease Booking, Access and Payments Is the process efficient related to location, getting keys, booking effort and time, and payment process? 6. Data Pre- and Post-Trip How do I find travelers or know how much they spent in a property or the company is spending in a city? Price Airbnb is typically less expensive than standard hotels in the same geographic area. While there is no rack rate, flat rate, or pre-negotiated rates for Airbnb, studies have shown that in most cities prices for Airbnb properties are less expensive than local hotel rooms. Something to Watch In January 2016, Airbnb announced they will be starting to rollout a smart pricing feature for property owners. This feature will automatically adjust the price of a property up or down (within a min/max price parameter) depending on demand. So, when New York City is sold out and hotel prices jump to $800 per night, don t expect a favorite Airbnb to still be $189. We still expect Airbnb would have a price advantage though, in high demand times. In March 2016, we confirmed with Airbnb that the smart pricing feature has been rolled out to a percentage of properties. An analysis of 220,000 Airbnb listings worldwide, using data from showed Airbnb properties are less expensive in most cities significantly so in many Copyright All rights reserved 3

5 cases. The caveat is that the properties may not have similar services, locations and amenities as a hotel some much better, some not as favorable. In situations where multiple employees would share a property, the savings rise dramatically. high in major urban centers, in smaller centers or rural areas, availability will be an issue. As of the end of 2015, Airbnb had 1.5 million active properties in 190 countries across 34,000 cities. In September 2015, Airdna estimated that only 20% of active properties were in the U.S., demonstrating Airbnb s global footprint. EXHIBIT 1: AVERAGE COST DIFFERENCE BETWEEN HOTEL AND AIRBNB ACCOMMODATIONS, FIRST HALF OF 2015 Source: busbud.com -- Location With any hotel sourcing project, a key evaluation factor is whether the property is close to the place where business will be conducted. For longer stays, the traveler may prefer a location that is close to a restaurant or shopping/entertainment district. In larger cities, this should not be a problem for Airbnb. For example, as of March 1 st, 2016, New York City 1, had 16,448 active rentals of which 63.5% or 10,400 are for the entire property (not shared). Similarly, Toronto Canada had 5,067 active rentals of which 72% are for the entire property. While availability may be Since Airbnb properties may not be in core business areas, one added inconvenience for travelers is transportation to/from the business location. At an Airbnb property, there likely won t be a taxi waiting at the curb like at a hotel (although Uber makes this less of an issue). The availability of nearby parking (when required) could also be a differentiator, especially if arriving at the property at night. The conclusion? Knowledge of the city is definitely a factor in selecting either a hotel or an Airbnb property. This is especially true when the business location is not in a particularly desirable part of the city. 1 Copyright All rights reserved 4

6 Duty of Care Like it is with Uber, Duty of Care and potential corporate liability should be top of mind with Travel Managers when considering their strategy for the accommodations sharing economy. Until basic safety concerns are satisfied, it is hard to consider other decision factors. The recent Corporate Hotel Strategy Research published by the BottomLine Group showed that Duty of Care was ranked as the number one priority for managed travel by most respondents. Airbnb is addressing many Duty of Care concerns by allowing a traveler to filter property characteristics during the property search a subset of which should be mandatory for any business traveler. In an unmanaged online booking environment, each business traveler must determine and set their own filters and selection criteria when searching for a property. In November 2015, Airbnb announced they were rolling out a Business Travel Ready toolset for property listings including classifying qualifying properties as Business Travel Ready. According to the Airbnb website, as of March 2016, Business Travel Ready (BTR) properties must meet the following criteria: Business Travel Ready (BTR) Listings Must be an entire home/apt and an eligible property type (house, apartment, bed & breakfast, townhouse, loft, or condo). The listing must be non-smoking, and can t have pets on the property. Quality Must have at least 3 reviews before they are eligible to be BTR. Once they have reviews, at least 60% of both the listing s primary reviews, and the listing s reviews for cleanliness and accuracy must be 5-star ratings. Access Must have 24-hour check-in (this could be a lockbox, doorman, keyless entry or similar 24-hour access). Continuing Eligibility Listings and their hosts are evaluated for business travel readiness on a rolling basis. Note: Host is the property owner/manager. BLG has not been able to validate the number of or the cities where BTR properties are currently available. In March 2016, Airbnb said this program has great momentum but BTR listings are not yet available in every city. Airbnb also provides Hosts in the U.S. and Canada with $1M (USD or CAD) of Host Protection Coverage (insurance) to protect against third party claims of property damage or bodily injury. For example, if a guest gets injured tripping on a carpet, the host is covered by this insurance. The $1M USD coverage is also available in most major countries (see Airbnb website for a current list). BLG s Perspective We believe Airbnb will continue refining the minimum standard for Business Travel Ready as more feedback is received. A key caveat is that in most cases the Host is self-reporting their compliance the hope is that traveler reviews will clarify any shortcomings. For Business Travel Ready and other properties, the responsibility is on the traveler to read reviews for any additional clues. Of the 16,448 available properties in New York City as of March 2016, 34% of them have 10 or more reviews posted. An additional 43% have 1-9 reviews available. Safety Requirements are entire home/apartment, a smoke detector, and a carbon monoxide detector. Amenities Must have the following BTR amenities: wireless Internet, a laptop-friendly workspace, an iron, clothes hangers, a hair dryer, shampoo, and other essentials (toilet paper, clean towels, and fresh linens). Booking Process Hosts of BTR listings also must have responded to 90% of booking requests within 24 hours (over the last year). Cancellations Hosts must provide a 7-day cancellation commitment to reservations otherwise they lose this status for 1 year. Copyright All rights reserved 5

7 Traveler Satisfaction The demand for Airbnb within corporations is being driven by consumer travel experiences. When a traveler has a good personal experience, they want to replicate this experience when travelling on business. Many travelers like having a kitchen, like a place to sit other than the side of the bed, not be in a cookie-cutter hotel room. EXHIBIT 2: IF PEOPLE HAVE USED A PEER-TO-PEER (P2P) ACCOMMODATION, THE LIKELIHOOD THAT THE PREFER TRADITIONAL HOTELS IS HALVED Question: When factoring in everything from price to location to quality, do you prefer P2P accommodations or traditional hotels? Respondents limited to people familiar with these accommodations; stayed in P2P accommodations ; cohort has stayed in one in last five years as of 4Q15. ONCE A TRAVELER TRIES AIRBNB, THEY ARE MORE LIKELY TO PREFER TO STAY IN AIRBNB PROPERTIES AGAIN. Survey results from 2,000 U.S. consumers released by Goldman Sachs in February 2016, showed that peer-topeer (P2P) accommodations have been used by 67% of year olds, 75% of year olds, and 65% of year olds. Usage among travelers older than 45 dropped to about 25%. The study also found that "If people have stayed in peer-topeer lodging (P2P) in the last five years, the likelihood that they prefer traditional hotels is halved (79 percent vs. 40 percent). "We find it interesting that people 'do a 180' in their preferences once they use P2P lodging. They move directly from preferring traditional hotels to preferring P2P accommodations." Note: The term peer-to-peer or P2P used in this study is another term for, and is equivalent to, sharing economy. The minimum requirements for a Business Travel Ready property do provide travelers with many of the hotel-like amenities they want. The two biggest personal advantages travelers give up by using Airbnb properties are: 1. The ability to collect Loyalty Program Points to be used for future personal stays. 2. The ability to order room service on demand, or in some cases walk downstairs to a nearby restaurant. Process Ease Booking, Access and Payments A traditional hotel stay booked through a business travel program comes with conveniences a simple booking and payment process, and an easy way to check-in and access the room 24 hours per day. In the Airbnb world, there are different processes that the traveler needs follow to Source: Survey of 2,000 U.S. consumers Goldman Sachs Global Investment Research confirm a booking, pay, and have convenient access to their accommodation. Booking While there is an instant booking option for some properties, most bookings require an exchange with the property Owner/Host. In this process, the Host has the right of refusal. This exchange delays the ability to confirm accommodations for a trip. There is also the risk that the Host could cancel a reservation after booking, the equivalent to overbooking at a hotel. Also, if you request a booking, and the Host does not respond within 24 hours, the booking is cancelled and never happened the Host must confirm. The learning? Travelers need to stay on top of booking requests to ensure the host has confirmed their booking. If the traveler has to change their trip for any reason, they must login to Airbnb and click the cancel button. Cancellation policies vary and are at the discretion of the Copyright All rights reserved 6

8 Host, so travelers have to focus reviewing on this during booking. Business travelers are used to a 24-hour cancellation policy, which is not typical with Airbnb properties. There are several mandated cancellation policies that an Airbnb Host can choose from: Full refund 1 day prior to arrival, full refund 5 days prior to arrival, 50% refund up until 1 week prior to arrival, 50% refund up until 30 days prior to arrival, except fees, 50% refund up until 60 days prior to arrival, except fees, and for long term stays, first month down payment, 30-day notice for lease termination. Note: For Business Travel Ready properties, a 7-day cancellation policy is the maximum that can be imposed. Property Access Hotels have a clear advantage. You walk up to a 24-hour front desk, complete the check-in process and receive one or more keys. With Airbnb, the method of obtaining a key varies from arranging to meet at a specific location, knocking on a neighbor s door, finding the building concierge or locating a lockbox near the property. This impacts traveler flexibility if they have to be somewhere at a specific time, or have to make sure they don t arrive too late at night. One promising announcement from Airbnb is keyless entry using Host Assist. Host Assist allows for easy key exchange and keyless entry without the need to manually schedule anything. Soon Hosts can connect their Airbnb accounts with electronic lock partners. This easily coordinates guest entry without the need to wait for guests, hide keys, or manually schedule and send virtual keys. However, this will require a $200-$500 investment in new locks by the property owner, and will not be appropriate for multi-unit buildings where there is also a secure main building door. Payment Payment can be made using a corporate credit card. Unlike a hotel where payment is due and processed upon checkout, payment is processed by Airbnb upon reservation confirmation (when the Host accepts the request). Airbnb holds this payment and doesn t pay the Host until 24 hours after check-in, in case issues arise. This means that any change or cancellation to a reservation will result in a separate card transaction, which is different than hotels. Data Pre- and Post-Trip Currently, if a traveler books using their personal Airbnb profile and uses a personal credit card, there is no way for Travel Managers to capture the data related to the booking. If the traveler uses their corporate card for the booking, posttrip and potentially pre-trip, corporate credit card reports can be run to view Airbnb spend by supplier or cardholder. Each transaction amount will be the total spend over the full stay, similar to traditional hotel s card data. The Merchant Category Code (MCC) used consistently is Lodgings/Hotels (check with your Card provider for actual MCC Code). Since the purchase is processed through the Airbnb site, the Merchant Name field will typically appear as Airbnb xxxx, where xxxx is a regional identifier or modifier, for example Airbnb.com or Airbnb Australia. Two things to recognize are: the transaction date on the card is the booking confirmation date (similar to flight bookings), not the check-in or check-out date; and, you will not be able to determine the property city. If a company uses an Expense Management System, travelers may input check-in dates and city as part of their input, making this data available through Expense system reporting. Travel Managers ideally require more data than card reporting provides to support accommodation sourcing, compliance management and security reporting: Pre-Trip Who is booked where? What daily rate did they pay? How do I find the traveler in an emergency? Post-Trip How much did I spend with Airbnb? How much did I spend on accommodation in a city/region? What was average price paid in a city to Airbnb, or at the transaction level? Airbnb is working to improve data access for businesses but still has more work to do. Current offerings focus on getting data into expense solutions, but not into travel booking solutions or travel reporting data. To address this, Airbnb has launched new features for business travelers, such as: Companies can create a corporate account code within Airbnb. Business travelers can create a separate business account in Airbnb for themselves, linking it to their company s business account. This is not linked to their personal account. A Travel Manager can login to Airbnb at any time to see dashboards of all bookings under their account summary and detail data. This data can be exported. Copyright All rights reserved 7

9 If a corporation has the Concur Expense solution, and has licensed Concur TripLink, a company can link the solutions. When a booking is made on an Airbnb Corporate Account set up for TripLink, the booking is sent to Concur via TripLink. It is then accessible to the Expense System for import to Expense Reports. As of February 2016, TripLink is available in U.S., Canada, UK, Australia, Germany and France only. Airbnb also states that for a few companies they are passing booked data to International SOS (isos), a leading medical and travel security risk services company. The current isos feed functionality is a custom feed offered to almost all business clients. They are working to make it more standard. onefinestay, HomeAway, VRBO and FlipKey Capabilities The other leading sharing economy for accommodation providers have not yet built explicit functionality for business travelers. Vacation travel is still their primary target market, though they may be a fit for business travel in certain circumstances. They have also been acquired by hotel chains or consumer travel internet sites. We have not explored these providers in detail as part of this whitepaper. onefinestay, recently purchased by AccorHotels, focuses on short term rentals of luxury homes by their owners. Each property is reviewed by onefinestay before it can be listed. onefinestay is unique in that it handles the entire transaction from property setup, handing over keys, dealing with problems, cleanup and turnover. It has properties available only in London, New York, Paris, Rome and Los Angeles with over 2,500 properties 2. For Business Travel they do have a Work Folio set of properties with the criteria only being access to transit, suitable workspaces and Wi-Fi. onefinestay may be suitable for high end, higher priced business travel, but duty of care issues are not explicitly addressed. HomeAway, owned by Expedia, is focused on vacation rentals of entire apartments or homes only. It has more than one million vacation rental listings in 190 countries. It does offer limited property filtering options for business during booking, specifically Wi-Fi or book now. It does not promote a business travel offering. VRBO, owned by HomeAway, has a similar target market. It does offer limited property filtering options during booking, specifically Wi-Fi or book now. business travel offering. It does not promote a FlipKey, owned by Trip Advisor, is a vacation rental marketplace that lists more than 300,000 homes and rooms across the globe. It also does not promote a business travel offering. What are Business Travel Peers Doing? A recent research paper titled The Evolution of Travel Policy from ACTE and Amex Global Business Travel, surveyed Travel Managers about emerging policy trends. Related specifically to the Sharing Economy for accommodations, they found that 13% of respondents have implemented accommodation options, and 8% plan to implement in the next 1-2 years. Fifty-six percent of respondents rule out shared accommodation options all together. Security was the biggest concern. To gather more insight, BottomLine Group recently spoke with several Travel Managers within large global corporations. Highlights of their comments include: What Travel Managers Are Saying We already provide quality and approved hotel options in most travel locations, why would these not be good enough? We know there is demand, but Duty of Care and liability is our primary concern. Are the properties safe, in good locations, and do they have smoke detectors installed, etc.? I haven t seen the data to show it is actually cheaper. I haven t been hearing travelers demand this option, so we have not researched or taken any action. We see significant volume through card reporting and we haven t stopped it. We are approving expense payments for these transactions but we decided not to take an official position. We expect that in smaller corporations where price is more of a factor, and less formal compliance tools/ policing exist, 2 International Traveler, Home Sweet Home, September 2015 Copyright All rights reserved 8

10 the approach to shared economy solutions will be more liberally applied. Enhancements BottomLine Group Would Like to See Based on the insights above, we encourage Airbnb and other providers to consider implementing the following enhancements: Ability to see property reviews just from business travelers or specifically from travelers in their corporation. Ability for a Travel Manager to preset filters on the properties a corporate traveler can select. Ability to specify corporate favorites e.g., near a plant or office. Ability to set and communicate rate caps for specific cities, if not already in place for other reasons, to help ensure bookings through Airbnb do not exceed expected hotel daily rates. More instant purchase properties to reduce the need for direct communication with the Host. Continue to evolve how Airbnb can appear on travel itineraries with air bookings as a passive segment (e.g., punch outs). Make a data extract available post-trip so the transaction level business-related spend could be pulled into travel data warehouses, if authorized. Ability to promote the flexible cancellation policy on Airbnb s Business Certified Properties. Note: About 7-10% of business trips are canceled or changed. For the travel industry to establish a minimum standard, with traveler safety and security in mind, against which all shared economy propositions will be evaluated. Lastly, we hope that other Sharing Economy Accommodation providers, such as HomeAway, will start a business-focused offering similar to Airbnb to accommodate the needs of business travel programs. Our Recommendations Each company needs to take action now. At a minimum, they must confirm their strategy for Airbnb, determine current spend, and determine how the use of the sharing economy should modify upcoming hotel sourcing process. BottomLine Group believes that most companies already have Airbnb spend coming through. Travel Managers must take action to evaluate what is right for their respective organizations across the lens of financial benefits; traveler demand/satisfaction; and most importantly, traveler security. We believe Airbnb is a fit for many corporate programs based on the evaluation criteria we have discussed. While we provide our assessment, each company needs to do their own across these decision criteria: EXHIBIT 3: BOTTOMLINE GROUP S ASSESSMENT OF AIRBNB S READINESS FOR BUSINESS TRAVELERS CRITERIA Price Location Duty of Care Traveler Satisfaction Process Ease Data Preand Post- Trip KEY QUESTION Will Airbnb save you money each night? Are properties close to the place business will be conducted? Is there incremental risk to travelers? Will they have required services and amenities? Will traveler satisfaction increase if this service is offered? Ease of location access, booking effort and time, payment and cancellation. How do I find travelers or know how much they spent in a property or the company is spending in a city? CAPABILITY TODAY IN 1-2 YEARS Be specific in any review / action whether it applies to Airbnb alone, or to all accommodations providers. The other sharing economy providers do not yet have explicit business travel functionality, so travelers will have more responsibility to make an acceptable booking decision. Like other aspects of a travel program, companies will have to trust business travelers to spend money wisely and make choices that protect their personal well-being. Travelers will, or should, look at the cost, and select locations that make sense for themselves and the business. However, having an action plan doesn t mean a full green light. Examples of travel policy options are: Copyright All rights reserved 9

11 About BottomLine Group 1. Not allowed and not reimbursed; 2. Not part of formal program, but we will allow only if the following reason for travel/ property criteria is met; and 3. Approved for use if booked under corporate account code, the property is Business Travel Ready, and is not more expensive than a preferred hotel. For companies that do want to formalize their position, they must create clear policy language that establishes minimum criteria, including possible rate caps. We also recommend a phased rollout by market e.g., select a key market(s) where the price is right, and where there are Airbnb properties near the business location, and then solicit feedback from travelers who use this option An independent North American based consultancy focused on helping clients manage expenses Extensive travel knowledge + objective, consultative approach For further information: For more information on BottomLine Group, designing an Accommodation Policy, obtaining material for internal presentations, or for help elevating the success of your Travel Program, please contact: BottomLine Group, Travel Team at: info@bottomlineconsulting.com Website: LinkedIn: We advise clients primarily in the following areas: Hotel Sourcing & Optimization Assessment Sourcing and Negotiations Benchmarking Optimization and Supplier Management Airline Sourcing & Supplier Management Assessment Sourcing and Negotiation Benchmarking Optimization Travel Strategy & Policy Travel Program and Category Strategy Travel and Meetings Policy TMC Sourcing & Contract Management Performance Audit Online Tool Review Strategic Sourcing Copyright All rights reserved 10