Airbnb Expands Local ‘Experiences’ Despite Reported Turbulence

Airbnb reports that its “Experiences” division, a major growth initiative launched in November 2016, has expanded its footprint from 12-to-60 cities worldwide, and is slated for rapid growth. The Wall Street Journal, however, suggests that Experiences has run into some turbulence, and after spending $100 Million, is being reconfigured.

Providing local experiences isn’t new to the hospitality industry, or for local-oriented websites. Hyatt, Hilton and other hotel chains have sought to complement user stays with local experience events, such as Luaus in Hawaii, sailing classes on the eastern shores of Maryland, hot yoga classes in San Diego, etc.

On the digital side, Living Social spent millions curating and selling tickets to experience events as a core part of its growth strategy. Another company, Goldstar, curates events – mostly concerts — for its middle-aged members. Closer to the Airbnb vision, Groupon Co-founder Andrew Mason’s Detour – a partner of Airbnb Experiences — provides curated GPS-driven audio tours of interesting cultural areas and landmarks.

In the early 2000s, city guides like Sidewalk and Digital City sought to promote experiences as a way to become indispensable lifestyle resources.

I certainly have bought into the vision. As I prematurely noted in year-end predictions in 2016, “Experiences, not goods, represent the big bang for marketers in 2016-17.” In this case, experiences were broadly defined to include everything from events and classes to Virtual Reality travel transactions.

Airbnb is the first to try to standardize paid experience events on a worldwide basis. The company prides itself on attracting users and hosts that are comfortable off the typical tourist path. Its Experiences program, accordingly, was seen as a natural complement, bringing in extra revenues for hosts, many of whom would be seeking to professionalize existing hobbies, such as photography, music recording, cooking, paddle-boarding, yoga, jewelry-making and local cultural and eating tours.

With an average cost of $200 – less than half the industry average for a typical travel experience — Experiences are seen as bringing in extra revenues for hosts, longer stays, and of course, more commissions for Airbnb. They also represent a new revenue stream that could be highlighted in a potential 2019 IPO. The Experiences roll-out was said to be Airbnb’s “biggest product unveiling since our founding in 2008.”

Indeed, The Journal cited internal Airbnb projections of “$200 million in annual gross sales by year-end, which would translate to about $40 million in revenue for the company after its 20% commission.” Instead, the company – which expensively primed the pump by guaranteeing sales to its hosts — one was report to have been promised a minimum of $2,500 a month — captured just $10 Million from Experiences in 2017, or $2 Million in commissions.

According to The Journal, the volume of booking for Experiences has been lower than expected for the providers it contacted — sometimes slipping to one or two bookings a month. A dozen or more were expected.

The article notes that one problem has become quickly apparent to Airbnb: many of the “experiences” were developed as multi-day events. Most customers didn’t want to dedicate themselves to more than a single day. Another problem: the experiences have been seen as too intimate for many travelers, who might prefer the anonymity of using local vendors.

Despite the initial turbulence that The Journal reports, Airbnb remains publicly confident in Experiences, and said it expects the division to be profitable by the end of 2019. VP of Trips Joe Zadeh told a conference today, in comments reported by CNET, “we’re going to put our foot on the gas. This year we’re going to expand to 1,000 cities.”