Airbnb Plus: A Huge Market Opportunity — But Mind the Pitfalls
Last month Airbnb launched what its CEO Brian Chesky described as the “biggest changes to our platform in our ten-year history”: Airbnb Plus, a higher-level tier of properties with significantly more stringent requirements for amenities, safety, and overall quality. The Plus initiative — initially christened Airbnb Select, but changed prior to launch for not-yet-publicly-known reasons — is an unambiguous salvo aimed squarely at the four- and five-star hotel chains that currently dominate the business- and luxury-travel ends of the hospitality market. Indeed, many of the requisite amenities for Airbnb Plus homes are identical to the ones found in most higher-end hotels: a full array of coffee and tea supplies is mandatory, as are irons, ironing boards, plush bathroom towels, hairdryers, and available supplies of shampoo, conditioner and body wash.
Until now Airbnb’s core demographic has consisted primarily of millennials who view hotels as stodgy and overpriced and don’t think twice about jumping into a rideshare vehicle with a complete stranger behind the wheel — and similarly have no major concerns with staying in what might be a stranger’s personal domicile while on a trip. Airbnb Plus, however, is clearly aimed at a older and more affluent, particular and risk-averse type of guest, and by necessity the company needs to ensure that any Plus stay is as frictionless and comfortable as possible. The risks inherent in targeting these more discerning types of travelers are myriad, and one of Airbnb’s biggest challenges in the short term will involve walking a tightrope of sorts: it needs to fine-tune Plus listings to appeal to this demographic as effectively as possible, while at the same time not imposing any significant new burdens on its existing base of hosts — or at least not any with the potential to alienate them from the Airbnb platform entirely.
This may explain why Plus was under development in various iterations for at least two years, according to Skift, as well as the rationale behind introducing only 2,000 Plus listings in 13 markets at launch — a microscopic fraction of its 4.5 million listings in 81,000 cities across the globe. Even with such restrictions in place, the response among Airbnb hosts to the company’s announcement was apparently far greater than expected: Chesky tweeted on launch day that the company received 1,000 applications to join Plus within the first hour following its introduction — from hosts in their 13 launch markets alone. By the next day the number totaled 5,000, and it grew to 9,000 by the end of the week. As Chesky himself noted, “I wasn’t anticipating this much demand this early from hosts.”
And therein lies the rub, or at least part of it: even well-established, well-funded tech ventures risk fumbling the ball when a new product or service launch proves to be substantially more popular than projected. At any such juncture, upscaling to meet demand — without sacrificing product quality or service caliber — is key, and companies that take too long to do so run the risk of alienating a significant portion of their customer base. Tesla, for instance, continues to struggle with producing its make-or-break Model 3 en masse, nearly nine months after its initial launch. Despite having over 450,000 reservations for the vehicles, Tesla delivered fewer than 1,800 total in 2017, and its seemingly endless array of production issues is finally starting to take its toll: earlier this week a prominent Goldman Sachs analyst reiterated his sell rating for Tesla shares, predicting they will decline 36% in value by year’s end.
To be clear, Airbnb Plus alone is not a make-or-break offering for the company, one that — unlike nearly all of its sharing-economy peers — is already profitable. Plus is, however, a halo product, and as such will likely continue to attract greater media attention than its more standard offerings — thus making correct execution from the get-go an even greater necessity. The potential pitfalls Plus faces can perhaps be best illustrated by example, and I’ll do so using the one universal item in every short-term domicile with the potential to either single-handedly ruin a trip or make it one to remember, regardless of how good or bad the rest of the experience might be: the bed.
While it would be difficult to understate the importance of a good night’s sleep, the subject routinely receives such a massive amount of academic and media attention that I’ll go ahead and assume you’re well-aware of it (and skip the usual rehash). What you may not know, however, is the extent to which the global hotel industry — and its four- and five-star properties in particular — has invested tens, if not hundreds, of millions of dollars over the past 20 years to ensure their guests enjoy as perfect a sleep experience as possible.
For Airbnb Plus, however, the bedding issue presents a conundrum: despite requiring each Plus listing to pass an in-person inspection covering dozens of specific items — bathrooms, for instance, must include shampoo, conditioner, body soap, hand soap, hairdryers, visible toilet paper holders with extra rolls, and “at least” two sets of plush bath towels, hand towels and washcloths per guest — how can Airbnb set standards for bedding that will help ensure a comfortable night’s sleep, but at the same time not require hosts to go out and spend hundreds (or thousands) of dollars on new bedding gear? Is there a happy medium somewhere in the middle? To understand the challenges Airbnb will face in this regard, as well as some potential solutions to them, some background detail from earlier times in the hospitality industry may prove enlightening.
Hotel Beds: An Abridged History
For reasons I’ll explain a bit further down, the major hotel chains of the world have established a notably high bar for bedding that Airbnb Plus needs to at least meet, and ideally exceed. As far as five-star hotels go, plush bedding is nothing new; indeed, it’s been an expected element of the experience for at least the past two centuries, despite mattress designs having evolved significantly in the interim. What hasn’t changed much, however, are sheets; fine Italian linens are effectively de rigueur, unless of course a hotel has its linens custom-made. Arguably the most well-known supplier of fine linens is Frette, an Italian concern that’s been supplying the likes of the Ritz Paris and Claridge’s in London with bedsheets since the 1860s. In more recent times, Frette apparently decided its hotel linens — originally an industry-only product — might appeal to a broader consumer market. If so, they significantly underestimated their appeal: the concept of “hotel collection” sheets has been appropriated almost to the point of farce.
The most notable evolution in the hotel industry’s standards for bedding, however, has transpired at a more plebeian level: the four-star hotel — and more specifically at chain properties like Hyatts, Hiltons and Marriotts that were once almost uniformly viewed as soulless temporary homes for itinerant business travelers. The industry’s tipping point arrived nearly 20 years ago, and practically everyone in the hospitality business knows exactly what it was (and still is): the Westin Heavenly Bed. Without question it’s proven to be one of the most influential hotel innovations in modern times, excluding changes stemming from general societal innovations like high-speed internet access and HDTVs. One could even argue it’s been the most influential of the bunch.
Before the Heavenly Bed was introduced, generic four-star hotels usually had equally generic bedding: thin polyester sheets and similarly lackluster foam pillows; standard-issue beige blankets; and ubiquitous polyester bedspreads that weren’t yet known as nightmarishly filthy Petri dishes of germs and dried bodily fluids. The Heavenly Bed changed all of that, and in the process converted the Westin brand from a lackluster also-ran into an industry leader. Credit for conceiving the Heavenly Bed belongs to Barry Sternlicht, who at the time was the unusually young (mid-30s) CEO of a REIT known as Starwood Capital. Starwood acquired full ownership of Westin in 1998, and Sternlicht almost immediately began R&D on the Heavenly Bed.
After spending over a year testing dozens of beds from every major chain, Westin introduced what quickly became its signature product: a ten-layer haven of billowy bliss. Polyester bedspreads went the way of the do-do: the Heavenly Beds featured down blankets and down-filled duvets, with crisp white covers replaced after each stay — as was the entire matching-white sheet set. Thin foam pillows were banished as well, replaced with a total of five thick feather-and-down pillows, with down-alternative versions available upon request. The Heavenly Sheets had both heft and breathability, fabricated with a cotton-poly blend extensively tested for both softness and resilience. Finally, the physical beds were custom-designed specifically for Starwood, featuring a then-novel pillow-top mattress and all-new box spring.
The Heavenly Bed was an immediate hit, generating an onslaught of media attention and PR, and Starwood quickly expanded variations of it to its then-stodgy Sheraton brand as well as its other signature innovation: the boutique-style W Hotel chain. The global hospitality industry most definitely took notice: today, you can walk into any four-star chain-hotel room, basically anywhere in the world, and almost invariably find a variation of the Heavenly Bed in it. Even three-star hotels now routinely feature upscale bedding, albeit not quite at the Heavenly Bed’s level (for obvious reasons). As for Starwood, its hotel innovations paid off to a remarkable degree (by non-Silicon-Valley standards): it spun off Starwood Hotels and Resorts into a separate entity, and in 2016 Marriott acquired it for $13 billion — roughly a 20x return on Starwood Capital’s original acquisition price. Which brings us back to…
Airbnb’s Bedding Conundrum: Part 1
Perhaps ironically for a company that literally got its start using air mattresses, Airbnb now faces the problem of how to appeal to more affluent guests who are likely already well-acquainted with the Heavenly Bed and other chains’ variations of it. Complicating matters further, a core element of Airbnb’s brand identity is explicitly centered on it not being a cookie-cutter hotel chain with “reliably boring” rooms and unpleasant-surprise-free stays.
If you’re not yet convinced bedding can readily be a “dealbreaker” as far as an Airbnb booking goes, I’ll describe two cases in point that are quite literally close to home: separate listings in my own apartment complex. Both are one-bedroom units with panoramic views of downtown Austin.
The first one, shown at left, rents for an average of $179 per night. Its description explicitly notes that the bed “features a top-of-the-line featherbed layer and white goose down duvet, along with Frette sheets and a handmade coverlet.” The listing features ebullient, uniformly five-star reviews for both the apartment and its host, one who has been selected for Airbnb’s tier of elite Superhosts (as indicated by the medal next to his profile picture).
The second one, shown below, is another story entirely, however, despite costing over 50% less, at an average of $79 per night. (Note that it’s also mislabeled: the unit is in a standard apartment complex, not an aparthotel, and the entire apartment is available, not just a private room.) Over a dozen reviews — even for a significantly “lower-rent” listing — cite problems with the bed and bedding:
The place is not cared for or maintained well. It does not have the amenities of a home or even a hotel room. The bed has a fitted sheet, covered wimpy pillows and a duvet. No top sheet. No duvet cover…
Nice place. Shame that not all of the details were thought through. You need to at least provide sheets and pillow cases for the beds…
The comfort and cleanliness was not up to the standard of a hotel though. I️ hope that by the time you stay there he buys an air filter for the AC, upgrades the shampoo from the dollar store stuff, and gets a bath mat, top sheet, and duvet cover for the bed…
[N]o extra towels, sheets or pillowcases for the extra pillows. The bedding is minimal with only a fitted sheet, no duvet cover, and two very small and flat pillows. Nothing is comfortable.
Suffice it to say the second flat isn’t likely to make it onto Airbnb Plus in the foreseeable future, but my point is a basic one: guests at all price points expect comfortable bedding, and on a site like Airbnb where reviewing one’s stay is the norm, they’re not at all shy about calling out homes that lack it — and these are ostensibly Airbnb’s unfussy variety of guests.
Airbnb’s Bedding Conundrum: Part 2
Airbnb Plus is undoubtedly an integral part of the company’s plan to embrace an “infinite time horizon” — and, in the process, shift its extant identity in order to bring guests with thicker wallets into the fold, as was presumably also the reasoning behind its acquisition last year of Luxury Retreats, an ultra-high-end vacation rental company.
By most accounts, Airbnb Plus is intended to be much like the existing Airbnb millions of happy guests know and love — except nicer. And equipped with a full array of coffee, tea and bottled water supplies. And “clutter-free interior design.” And wifi — or, rather, fast wifi (5 Mbps minimum). As for bedding: the company hasn’t yet revealed any new strategies specific to Plus offerings, aside from the requirements on its checklist given to all aspiring Plus hosts:
- Comfy mattresses that are flat and clean
- Soft matching bedding sets (sheets and pillowcases) without stains or holes
- Two fluffy sleeping pillows for every guest
- Top cover that’s washable, and not worn or dated (for example a duvet with a cover, or a comforter, quilt, or blanket)
One can reasonably describe this list as lacking in specificity. For starters, many of these descriptors are subjective, e.g. “comfy,” “soft,” and “fluffy,” and clearly difficult to quantify. Further, even Superhosts may have their own opinions regarding what does or doesn’t constitute something like a “dated” coverlet.
A bigger problem, however, may be the fact that — based on accounts I’ve heard from every Plus host I’ve spoken with thus far — Airbnb’s inspectors don’t physically check beds, linens or pillows for “softness” or “comfort.” All but one of them failed to even look at a given bed’s sheets, and instead simply took photographs of the pillows and duvets/coverlets. (This is also arguably part of a much broader problem: Airbnb has given an unknown number of its sizable team of freelance photographers dual duties as home inspectors for Plus, a job well outside the scope of their typical skill set.) As such, Airbnb Plus guests may lack even a clue of what their bed(s) will be like until after their stay has begun.
Fixing the “Known Unknown”
Airbnb’s bedding conundrum could be fixed in a number of ways, though executing them will require some deft handling of the differences between constructive criticism and offensive criticism. To be fair, the homes selected for Plus — or at least per every account I’ve heard thus far — have already been deemed the cream of the crop by the most important parties of all: their guests. Further, every Plus listing I’ve seen to date, including homes selected for the program but not yet formally added to it (according to their owners), has featured nearly uniform five-star ratings for both homes and hosts, along with what appear to be unusually well-conceived interior design schemes, ranging from luxurious to charmingly quirky.
Still, it’s reasonable to assume guests will expect more from Plus listings — particularly if they’re priced well above comps for the area, as has been the case for most of the listings I’ve seen. It’s similarly reasonable to posit that Plus will attract new users to the Airbnb platform who would’ve previously stayed in a hotel — one likely equipped with either a Heavenly Bed or one of its myriad copies.
As for potential solutions to the conundrum: feel free to ask.
