2017: Business as Usual or Year of Reckoning for Airbnb

This coming year will be key to Airbnb’s success in many important markets in North America and Western Europe. But it is also likely to be the year where we see a step change in the focus of the company in regions where short-term rentals are set to grow strongly, like Asia Pacific and Latin America.

Was 2016 the tipping point

As Airbnb has grown over recent years, it has lost its image as a technology start-up and peer-to-peer platform championing the right of homeowners to make some additional income. The company is attracting more than just private homeowners, with independent hotels, serviced apartment operators and estate agents showing an interest in using the platform to rent out properties. Property consultancy firm Knight Frank, for example, notes in its 2016 Cities Report that “for investors and landlords, there are clear long-term rewards in the world of short-term rental accommodation”.

It has taken a few years for legislators to catch up with the strong rise in short-term rentals, but many local and national governments have now set out their policies towards Airbnb and its competitors. The increase in professional renters on Airbnb can be described as the “corporatisation” of its platform, and this has impacted the response of legislators towards Airbnb.

After a spate of European cities clamped down on Airbnb (including Barcelona, Madrid and Berlin), 2016 saw the European Commission release a document urging its member states to only ban players such as Airbnb and Uber as a last resort, but the mood remains hostile in some European cities. 2016 also saw Airbnb take New York, Chicago and San Francisco legislators to court after the cities tried to pull Airbnb inside the regulatory framework.

Not only do these cases show that resistance towards Airbnb is growing amongst regulators, it also shows that Airbnb is not afraid to use legal suits to fight its corner. The battles are likely to smoulder on in 2017, which might distract the company slightly from focussing on areas where growth prospects are still high.

Recent Legislative Activity in US Cities Impacting Airbnb

Source: Euromonitor International

Emerging markets provide opportunities

While Airbnb has been experiencing more headwinds in Western Europe and North America, 2017 will be another year of increased focus, and increased competition, for consumers in emerging markets. Especially markets in Asia Pacific and Latin America are expected to register strong growth in short-term rentals in 2017, but across the board, short-term rentals will outperform other lodging segments more often than not.

Japan is expected to see the strongest growth in 2017, with the Japanese government focusing strongly on increasing the number of inbound tourists in the build-up to Tokyo hosting the Olympic and Paralympic Games in 2020. Strong promotional campaigns, a weak yen, easing visa regulations and the October 2014 deregulation of tax-free shopping will all attract increasing number of (mainly Asian) tourists to Japan.

Expected Growth in Lodging Categories by Country 2017

Source: Euromonitor International

Diversification could lead to success

At its annual conference in November 2016, Airbnb launched Airbnb Trips with a lot of fanfare. The service, which lets local people offer their local knowledge, services, and time to travellers, has been on the cards for a few years. It was clear from the start that Airbnb would never remain just a short-term rental platform.

Trips is not as revolutionary as Airbnb makes it out to be; there are many traditional tour operators and local guides that have offered their services to travellers for many years. But then, the homestay concept has been around for centuries, but it took Airbnb to turn it into a multi-billion dollar industry. Who is to say that it cannot do the same with Trips, shaking up the tour guide industry, and allowing travellers to truly immerse themselves in cities, while allowing locals to increase their incomes?

One thing is for sure, 2017 will be another turbulent year for Airbnb and all its competitors.

You can read more about Airbnb’s performance in the global company profile.