Airbnb Acquires Hotel Tonight, Yawn!
When I was first introduced to HotelTonight (HT) I thought it was an interesting and creative new model, a mobile only play focused on last minute bookings with relatively low commissions. When I first spoke to the hotel market manager for HT they had a compelling case. While the markets I was in were not great last-minute markets, even selling a few rooms that would otherwise go unsold for low commissions struck me as a positive (of course I would match those rates on my own site as not to undercut, or at least I would hope the revenue managers would).
As I was talking to the market manager, we spoke about HT and the overall space and I asked him; how long before the commissions rise, and they start offering hotels outside of the last-minute space? He was confident that this would not happen because this was their USP. I bet him a Mai Tai (as you do when you live in Hawaii) that commissions would creep up and they would lose the last-minute limitations. As expected, growth of the last-minute, low commission model was not enough to satisfy the investors and commissions quickly shot up and the booking window was slowly expanded to eventually reach 100 days out, which I am sure will soon expand beyond this. What was once a novel idea was quickly becoming another boring OTA (with weaker connectivity, making it harder to manage). In case you are wondering I am still waiting for my Mai Tai.
When I was first introduced to Airbnb, I also thought it an interesting and creative new model. Initially renting the spare room, I could see that this would quickly become a huge distribution channel for alternative inventory (vacation rentals/condos) which was sorely undeserved from a distribution standpoint, with antiquated craigslist-type sites that required incredible effort to make a booking (VRBO built this category but never took it to the next obvious level of taking the friction out of the process). Airbnb quickly grew well beyond the spare room and the traditional vacation rental markets (think sun and snow destinations) and expanded into major cities and every nook and cranny on the map and truly created a new category. With residents and cities up in arms and lots of litigation the hockey stick growth of new inventory slowed. Like HotelTonight, with an IPO pending and investors looking for growth, they began looking for ways to grow and began signing up “boutique” hotels to add to their inventory and the writing was on the wall, Airbnb was also creeping into becoming another OTA. Where Booking.com was a hotel booking site that also had alternative inventory, Airbnb was going to be the alternative inventory site that also had hotels (is there a difference?). If this is the how they intend to grow, which has been clear to anyone in the industry for a while, buying a small OTA certainly makes sense as it could help them boost their speed to market.
So two really novel and clever ideas are heading towards being homogenized into the same boring old OTA. I totally understand the need for growth and the need satisfy the investors but why be so obvious? Why be so boring? Amazon started off as a book seller, when their growth peaked they did not decide to double down and open book stores, they looked at what they had and decided to grow horizontally and not vertically. I am not sure if this is the right approach or not, but it would be much more interesting for me (and maybe the investors) if these companies looked vertical instead of horizontal.
What if: Airbnb saw itself as the tool of the sharing economy and power the sharing of not only homes but cars, meeting spaces, power tools, etc. Anything that is not being utilized could be “shared” when it is not in use. Wasn’t this the promise of the shared economy?
What if: HotelTonight saw itself as the tool to sell last minute “perishable” inventory, air tickets, event tickets, empty seats at restaurants, and so on.
Maybe these business models wouldn’t work but I can’t help from being disappointed that these creative business models did not stay creative, YAWN!