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How Airbnb’s Instant Book is Dominating an Industry

The introduction of Instant Book by Airbnb has placed them in a position where they could dominate the OTA industry in the near future. The feature, which improves conversion rates and helps the company to crowd out the market, has grown dramatically with over half (51.7%) of Airbnb’s total inventory now listed as instantly bookable.

 

Given our vast data and insights on the vacation rental market, we’ve taken a look at how Airbnb could be on the way to market domination:

 

The Facts

 

Airbnb has grown enormously over the past few years, increasing from 800,000 total active units in 2014 to almost 5 million active listings today, reaching a total of 4,958,958 units as of June 2018.

 

Since its introduction in 2014, the Instant Book feature has hit the ground running. Instant Book inventory grew 103 percent in the year 2017, and it now stands at just over 2.5 million units as of June 2018. This means that over half of Airbnb’s total inventory is listed as instantly bookable – and this has happened in a very short space of time. Given the rise of Instant Book, it’s likely that in the future an even larger proportion of listings on the site will be instantly bookable.

 

 

Defying Market Saturation

 

While Airbnb continues to grow at a healthy rate – total inventory increased by 27.4 percent in the year 2017 alone – the pace of the addition of new inventory has slowed as it climbs towards saturation point. The instant book trend has proven to be a great tool to combat market saturation. The amount of units switching to Instant Book has grown dramatically, rising from 923,990 units in January of 2017 to 2,561,632 units as of June 2018.

 

The feature’s popularity can be explained by its potential to improve online conversion rates. Instant Book makes the process of booking a home rental much easier and much faster. With just one click, a booking can be secured.

 

 

Why is Instant Book so Popular?

 

Instant Book generates greater interest in listings, as units that are listed as instantly bookable are given better placement on Airbnb searches. Properties listed under Instant Book are viewed more, increasing the chances of conversion and therefore helping property owners to optimize utilization. Instantly bookable units can experience an increase in occupancy rates from 5.0% to as high as 20.0%.

 

Additionally, Instant Book allows sites like Airbnb to more effectively and efficiently bid on Google Adwords, which allows for efficient marketing spend and positive ROI. Airbnb can acquire a customer via Google Adwords and with only one click, the customer is on the site and able to immediately book a place to stay. In the original model, which uses the formal inquiry process, where the customer and the host communicate, it was easier to lose the customer earlier in the process, as the time between communicating and confirming a reservation could take up to several days. The original model therefore has a much higher slippage rate – the communication with the host delays the closing of the transaction, and results in the customer potentially going somewhere else.

 

For travelers looking for a place to stay, there’s the option to filter the site just for Instant Book properties. This means that if you’re a traveler in need of finding a place immediately, this is the go-to filter. Consequently, Airbnb is offering a similar service to traditional OTAs, where customers can secure a place to stay immediately.

 

In the past years, there has been an overwhelming trend in the industry of a shift toward mobile usage. Travelers are using their mobile device, whether through an app or a phone’s browser, to book their next stay when they are on the go. We are living in a culture of immediate gratification and the Instant Book feature caters to this. It skips the formal inquiry process, and helps save precious time: guests can spend more time planning their trip instead of being involved in a thread of messages with the owner. In turn, this also saves the host time as they don’t have to respond to each booking individually.

 

 

Guests versus Hosts

 

For some hosts, Instant Book is a contentious topic, with a section of property owners feeling that it favors guests, rather than the hosts. For example, the host loses control of their calendar and cancellations. However, there are ways to maintain control of the host calendar, such as to introduce a minimum amount of night’s stay. On the plus side, moving away from the traditional model of a formal inquiry process means that the interest of a traveler might not be lost during the messaging process.

 

Crowding out the Market

 

Because of Airbnb’s decision to up-rank properties listed under Instant Book, many homeowners may be tempted to advertise their property as instantly bookable. This positions Airbnb in a place to crowd out the market – if a property owner is listing their place on Airbnb as instantly bookable, they can’t be instantly bookable on other vacation rental sites. Homeowners will have to choose between being instantly bookable on Airbnb or listing on more traditional sites. In turn, if the Instant Book feature proves to increase conversion rates, more and more homeowners will be keen to turn their backs on traditional OTA sites and add their property to Airbnb, listing it as instantly bookable.

 

What’s Next?

 

It is undeniable that the instant book trend has been a huge success for Airbnb. Not only have they converted half of their total inventory to the feature,  they are also in a position to crowd the market, increasing the possibility that property owners will move away from traditional OTAs and add to the already booming Airbnb inventory.

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