• Airbnb signs Olympic deal

Airbnb has signed a multiyear sponsorship deal with the International Olympic Committee, to become its accommodation partner. But the agreement has already sparked opposition from stakeholders in Olympic host city Paris.
The move comes as Airbnb looks to position itself as a responsible, mainstream accommodation provider, ahead of a likely 2020 IPO. The company recently acted swiftly to clamp down on Airbnb listings being used for house parties, after a shooting at a US property left five dead.
The new agreement is for nine years, covering five Olympic events and starting with next year’s Japan summer games. Hailed by Airbnb as “ a win for host cities, a win for spectators and fans, and a win for athletes” the move also aligns with the IOC’s sustainability objective, to reduce wasteful construction activity by host cities. “For the cities themselves, the Airbnb community represents a more environmentally sustainable way of accommodating a surge in visitors.”
Airbnb will make at least USD28m of accommodation available from its platform for athletes, for both competition and training related trips. It also intends to build on its Experiences offer around Olympic events. And its official endorsement will also mean plenty of advertising opportunities across host cities.
The formal partnership follows individual sponsorship deals at both the Rio 2016 games, and the 2018 winter games in PyeongChang. In both cases, Airbnb claims to have delivered accommodation representing many hotels’ worth of rooms, as well as benefiting local economies via rental fees generated.
But the partnership has not delighted everyone in Paris, host of the 2024 summer games. Paris mayor Anne Hidalgo has warned of the “risks and consequences” of the IOC deal. In a letter, she repeated concerns that Airbnb has inflated home rental prices in the French capital, caused nuisance to residents, and provided tough, unregulated competition to the hotel sector.
French hospitality association UMIH called the arrangement “disrespectful to hotel industry professionals”. Laurent Duc, head of UMIH’s hotels division, said 40,000 rooms had already been set aside for athletes and spectators, and so Airbnb’s involvement was unnecessary. The organisation has withdrawn from Olympic planning meetings, to show its displeasure.
Meanwhile, in Japan, there is an estimated shortfall of around 14,000 hotel rooms for the 2020 event, with many hotels in Tokyo having stopped taking reservations a year ahead. Official figures put Tokyo’s current hotel room inventory at 170,000 with potentially a further 20,000 in construction for completion ahead of the games. Of these, the Olympic organising committee reserved 46,000 – though some of these have now been released.
One recent change by the organising committee will see the marathon and walking events shifted out of Tokyo to Hokkaido, following concerns raised about running in Tokyo’s summer heat. The move is likely to dissipate some of the peak demand for accommodation. At least two cruise liners have also been chartered, and will be moored in Tokyo for the duration of the games.

HA Perspective [by Chris Bown]: A smart move by Airbnb. This will set the brand alongside other major credit card and consumer brands, giving Airbnb massive exposure globally around the Olympic events, and by association, presenting them as a legitimate, mainstream accommodation provider.
It also sets out to address that perennial problem, of meeting a massive demand spike for accommodation around a major event. Hotels may have loved being able to turn their prices right up, making superprofits around the Olympics; but the inevitable rush to build new hotels in an Olympic city isn’t really a sustainable solution to the problem.
And for the thousands of volunteers who enjoy helping their city host the event, here’s a new opportunity to take their involvement to a new level, by hosting a participant. Having an Olympic medallist stay in your spare room – that’s going to make for a truly memorable Olympic games.

Additional comment [by Andrew Sangster]: Airbnb is now approaching its difficult teenage years. Founded in 2008, it is about to leave junior school and head to high school with its planned listing next year.
Right now, it appears to be having growing pains thanks to costs increasing faster than revenues. A key reason being a huge hike in marketing, of which this Olympics deal is just part.
Airbnb has been profitable in the past: according to technology trade website The Information it made USD18m in 2018. But in the first half of this year, says the same source, Airbnb recorded a loss of USD300m in Q1 and USD100m in Q2. Revenues are still rising, up 34% in Q2 to hit USD1.2bn, but expenses are growing faster at 47% in the first half.
Airbnb was a disruptor to the travel space, notably existing OTAs such as Expedia and Booking. Whereas the latter two spend more than USD10bn generating demand, mostly via Google in performance marketing, Airbnb gets customers going directly to its website. In addition, Airbnb brought supply to the market which was not readily available elsewhere.
Both these differentiators are wobbling a little. Airbnb is now entering the same space as the established OTAs. Its acquisition of HotelTonight was a clear signal of this and in the first half of this year it announced a new model in which property owners paid its fees, rather than guests paying most of them.
Hosts had been charged around 3% with 9% or so paid by guests. Now Airbnb is offering hosts the chance to pay a 14% fee and guests no fee. With Booking adding non-hotel accommodation at an incredible pace and Expedia expanding its own Vrbo / HomeAway offerings in the same space, Airbnb has some serious rivals. Even hoteliers are getting in on the act with Marriott and Accor being prominent examples.
The challenge for Airbnb is making its dominance of the Long Tail profitable. The small and one-off properties that populate its site are not individually big contributors. One big 200-plus room hotel is going to generate far income more than dozens of smaller hosted properties. Booking admits, for example, that hotels still contribute 90% of its income despite it having more non-hotels listed on its site than its bedrock of hotels.
The answer everyone offers is technology. And it certainly helps reduce costs in servicing these properties. But the same is true for the costs of servicing the big hotels too.
The end result of this looks to me a place where costs, notably commissions, continue to decrease for hotels and the platforms continue to struggle to make money out of non-hotels.
Opening up the textbooks to read up on the Pareto principle would suggest that for hotels the optimum focus ought to be on getting the most profitable guests to book direct and use third-parties for all the rest. It would be crazy not to take advantage of all the funny money being splashed around by the tech titans.

Share →