TripAdvisor suffers as Airbnb grows

TripAdvisor CEO Stephen Kaufer interviewed by Skift CEO Rafat Ali. Source: Wikimedia Commons

Airbnb is taking over the accommodation booking market – and companies such as TripAdvisor and Priceline Group are suffering the effects from the success of the short-term rental platform.

Priceline group, which runs travel comparison and booking sites such as Kayak, Agoda, and Booking.com – as well as car rental and restaurant booking services – is seeing a profit decrease as Airbnb implements an innovative disruption to the longstanding online booking platforms.

TripAdvisor and Priceline group took a bashing from investors this week. Tripadvisor’s share value slipped 23 percent, while Priceline’s decreased 13.5 percent. Other competitors such as Expedia Inc reported weaker-than-expected third quarter results too.

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These poor investment figures reflect the changing times of the accommodation booking market. Those business models, which were once considered innovative, are being outperformed by new models which are more accessible to a wider number of travelers.

Airbnb offers customers the opportunity to stay for longer periods of time, for a lower rate, than if they were to opt for a hotel. Roughly 20 percent of all Airbnb stays are longer than 30 days.

Rates of growth for Airbnb over the last 12 months and projection for next 12 months source: BusinessInsider.com

However, Airbnb does struggle in the business sector. Seventy percent of all hotel stays in the US are booked for business travelers. However, and unlike current hotel booking sites, Airbnb is working to innovate the business model to ensure business travelers consider the short-term rental platform as an option.

Priceline chief executive officer Glenn Fogel said on the group’s third-quarter call: “We’re a big business now, and as one finds in large numbers, (growth) rates naturally slow down.” The group did not meet investors’ expectations of US$35.22 per share, instead, achieving just $34.25. This caused a fall in shares immediately after the announcement.

TripAdvisor’s chief financial officer Ernst J. Teunissen informed investors a decrease of 11 percent in year-to-year revenue occurred in the third quarterer.

But it is not all Airbnb’s doing. Hotels seem to be wising up to the fact that, through strong advertising campaigns and incentives such as free Wi-Fi, they can get customers to book directly with them, rather than through online travel agents. That has contributed toward Priceline and TripAdvisor’s share-fall.

“The hotels have been fairly effective at recapturing some of the share that would have gone to an online travel agent,” Raymond James and Associates analyst Justin Patterson told Channel News Asia.

Airbnb, though, is creating disruption in the online booking sphere. The company now has a US$31 billion value, and while it is in no rush to push an initial public offering (IPO), a new deal could see investors purchase $200 million in stock for Airbnb employees, propelling it into Unicorn status.

Airbnb is just one of the major industry disruptions that have occurred in recent years. Spotify transformed the music streaming industry. Likewise, Netflix made movie streaming much more accessible, and nobody wants to think of a world without the convenience of Uber.