The Airbnb Challenger You’ve Never Heard of (by Name)


There is a travel story that Glenn Fogel, CEO of Booking Holdings, formerly called Priceline, likes to tell. While planning a recent family trip to Iceland, his wife wanted to check out “another site,” which Fogel carefully avoids naming, but is clearly Airbnb. The home rental she found there looked good, so she tried to book it. “Back and forth, back and forth, back and forth with the emails, like bah-bah-bah, bah-bah-bah,” Fogel says, describing the booking process with his typical high-energy intensity. “Like a week and a half later, the person says, ‘Okay, I can’t rent it to you,’” he says. “What a waste of energy and effort.”

Fogel likes that story because it shows off one advantage Booking.com has against its startup competitor. Every one of Booking’s home listings—5.4 million, he reminds me on a recent morning in New York City, more than Airbnb’s nearly 5 million—is instantly bookable. “The friction is so much less,” he says. (Three million of Airbnb’s listings are instantly bookable, up from 1 million 18 months ago.)

Tech companies are often timid about trash-talking competitors; the industry is small enough that a competitor one day can be a partner or acquirer the next. But as Airbnb prepares to go public, the stakes are high and the blood-lust is growing. Airbnb’s IPO, expected by 2020, will help it win even more of a key asset—its ability to drum up free free publicity. That advantage has proven critical in an industry that’s notorious for aggressive advertising spending.

Renting out an extra room and turning that into a business, against all odds, led Airbnb’s founders to tremendous success. That appealing narrative aligns with the American dream and lends itself well to the company’s business model. Now, the story goes, Airbnb allows anyone with a home or extra room to be their own entrepreneur, and create their own wealth. The startup, valued at $31 billion, emphasizes themes like community and connections and belonging, and the resulting halo of good vibes makes it a starting point for many people booking travel. Airbnb has reportedly only spent $300 million on marketing since its inception in 2008. “We don’t acquire customers by buying them. We acquire customers by providing a superior experience and having offerings around the world,” a spokesperson emailed.

Booking spent $4.5 billion billion on marketing last year alone. Yet Fogel admits that it still lags in consumer awareness. The brand is much better known in Europe, where it was founded. “The product is just as good here as anywhere else … and therefore we should have much more [awareness],” he says, noting that Booking.com only came to the US in 2013. Booking Holdings’ other brands, like Priceline and Kayak, have loyal bases of users, Fogel says. But Booking.com makes up the vast majority of the company’s revenue, and the name change from Priceline to Booking Holdings shows what executives consider their crown jewel.

Fogel is spending money to change the awareness gap. Online travel aggregators, or OTAs, as Booking and its peers are known, are among the biggest digital advertisers. The vast majority of Booking’s ad spending goes to highly targeted search and banner ads, but last year the company upped spending on awareness-raising TV ads for Booking. It also created a marketing program called the “Book It List” to promote its most unusual listings, like a treehouse, a lighthouse and a South Carolina shrimp boat. To drive attention to the listings, the company offered contests and pricey stays in rare, exclusive accommodations, like the farm featured in the movie Field of Dreams.

That may sound familiar to Airbnb, which built a replica of one of its many treehouse listings in its old headquarters. The company has long faced copycats and competitors, including HomeAway, VRBO and OneFineStay. But Booking’s aggressive push into home listings may be its most formidable adversary. Booking is the world’s largest online travel company by revenue, reporting $12.7 billion last year with profits of $2.3 billion. Boasting a market cap of $100 billion, Booking has bested many better-known tech industry names, including Apple, Amazon and Netflix, in earnings growth over the past decade. Last year The Economist declared it the best-run internet firm after Amazon. In February, Booking hired Olivier Grémillon, Airbnb’s former director of global strategy, to lead its homes and apartments division.

Fogel believes Booking has other advantages over Airbnb; it lists hotels and homes side-by-side in one place, for example. “Many times the person does not know yet the type of accomodation they want,” he says.

And then there’s the fee issue. Both companies charge hosts a fee when a room is booked through their platforms. Booking’s fees average 15 percent. Airbnb charges 3 percent, a fact it eagerly promotes. In March the company ran ads on a hotel-industry trade site promoting its low fees compared to Booking, Expedia, and other peers. In tandem, the company commissioned a survey of 49 boutique hotel and bed-and-breakfast owners, showing that the hoteliers believed the fees charged by Booking and its corporate peers were too high. Alongside the survey, Airbnb published an open letter to hotel owners welcoming them to Airbnb, a platform that has historically competed with boutique hoteliers.

But Fogel is quick to note that Airbnb also charges customers a fee, called a guest fee, that averages 9 to 12 percent, meaning its take is roughly on par with Booking’s. “Together, I think that’s 15! How’d that work out? That’s amazing math, isn’t it?” Fogel muses.

To ramp up competition, Fogel plans to expand Booking’s offerings in tourism activities. In April, Booking acquired a a 200-person Colorado company called FareHarbor, which sells booking software and services to tourism and activity companies. Many travel startups have tried to aggregate the market for experiences, but struggled to expand locally focused businesses to a national or global level. Fogel believes FareHarbor, which integrates activities into the Booking platform, can do that. “We think it’s one foundational building block in what will be a very, very big building—this attractions and experiences area,” Fogel says.

Airbnb is fighting back with two high-end tiers of hotel-like offerings and luxury accommodations, Airbnb Plus and Beyond by Airbnb. The company emphasizes that 3.5 million of its listings are exclusive, and that business travel now makes up 15 percent of its bookings. Beyond that, Airbnb has been selling tourist activities to its customers through its “Experiences” product for two years. But Fogel will not concede the point that Booking has followed his competitor’s lead. He points to reports that speculate that Airbnb is testing charging hoteliers more to remove the guest fees, and its push to make more of its inventory available for instant booking. “So it seems to me they’ve been following us,” he says.


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