On January 2nd, I made a bold prediction in Forbes that Airbnb would change the way we travel in 2025. And on Valentine’s Day Airbnb’s stock surged 14% in a single day. For a larger travel brand that’s an unusual jump in market capitalization.
AI Will Create Increased Growth In Consumer Discretionary Travel
Can AI allow consumers increased access to localize their journey? You bet. It can increase the total size of the travel pie and potentially enable consumers to shift more easily from one brand to another.
According to Kayak’s CEO Steve Hafner, 2025 is expected to witness a pivotal shift where the first successful commercial agreement between an AI engine and a major travel player could act like “a dam breaking.” Disruptor brands have the potential to take share as the adoption of new technology increases access.
Marriott Is A Strong Brand With A Long History Delivering Value To Business Travelers
According to NerdWallet, Marriott is one of the best known loyalty brands in the world. I’ll confess I have been a heavy Marriott user and so are millions of Marriott loyalists. With over 210 Million members in the aggregate their size in numbers would approximate the country of Brazil which is the 7th largest country in the world. Brazil’s population and Marriott’s membership are similar.
But am I truly loyal? I stay at Marriott on probably 80% or more of my travel. I am paying for that with a company credit card or rebilling my clients. My stays are usually 1-3 nights and the brand nearly always delivers a great customer experience in a location that matters a lot at a price point that is less important. I don’t want to overspend but I have relatively high price elasticity.
What happens when I want to stay somewhere 4-7 nights and don’t require the restaurant and pool at the hotel?
I am paying for all of the overhead at the hotel I really like. If I’m staying longer and want to explore the local environment the location matters just as much but the price starts to become a bigger factor.
Airbnb Is A Trusted Brand Not Just A Leisure Travel Brand
My thesis is a bit different than many on Airbnb.
As a strategy and innovation professional I like to look at brand permission.
A brief explanation on brand permission is “would consumers trust your brand and how far will that trust extend?” When you innovate on need states, use cases, palette states, dayparts or other factors specific to travel, brand permission becomes a critical factor.
For example, I may trust Nike to introduce a new running shoe or even apparel, but I may not consider Nike if they create a financial planning service. Nike’s brand permission is high and certainly allows them to move from athletic shoes to apparel and even to hard goods. But it doesn’t mean Nike can just open a bank, operate an airplane or buy a beer brand that their raving fans will trust.
Factors Influencing Travel & Lodging Purchases Diverge By Occasion
In the case of a younger consumer, Gen Z often looks at the following factors related to travel and travel lodging:
- Price – is this a great value relative to the direct and indirect competitive alternatives? Can I save a little more on lodging to afford a little more on other things I am hoping to see/do while I’m on my trip?
- Location – am I near the “action” including attractions, restaurants, public transport? Proximity to things I want to do and access to public transit will matter.
- UX – is it easy to engage the brand from my mobile phone? Do they have a killer mobile app?
- Absence of things I don’t value – if I don’t value a restaurant in the hotel and I don’t use the pool but know I am paying for both these amenities I may try to avoid these “unneeded” features. They add to the cost of delivery without materially adding to the guest experience in some cases.
“AI can help travelers quickly sort through their preferences and seamlessly stitch together what has traditionally been a very siloed experience into a cohesive plan,” said Mindtrip CEO Andy Moss. “In 2025, this capability will be supercharged as we enter the early days of agentic booking and voice-to-voice interactions, making anything possible.”
Brand Partnerships Will Give Airbnb An Unfair Advantage
I love brands that have the potential to create an unfair advantage. Think about brands that often create unfair advantage by building a more unique business model: Apple, Nvidia, Amazon, Chewy and others. Brands that have more indirect competitors and fewer direct competitors often fit the category of “unfair advantage.”
So while I’m open to the idea of couch surfing to save a lot on my lodging expense I haven’t pursued it in my decades of business and leisure travel. My alternatives are largely hotels, VRBO or Airbnb.
I think it would be super inexpensive to couch surf. I also absolutely relish a stay at a Ritz Carlton but would I stay for a week if the cost was materially different, I’m paying for it and the location was materially the same as the indirect alternatives?
In my view, Airbnb will create high value-added partnerships that are both innovative and align to the brands value proposition.
Imagine if Airbnb could help you:
- Get a little better deal with Uber or Lyft
- Partner with an rental car brand with a strong local network like Enterprise so you can access a car for a subset of your trip as appropriate
- Help you get concert or sporting tickets in the local market
- Give you access to some local restaurants that are often hard to get a reservation at.
- Find you a modest discount at the museum, Zoo or other interesting place near you.
- Make it advantageous to explore the local area and collect points (like a scavenger hunt) when you shop, dine and find local cultural experiences
- Partner with a travel credit card company to give consumer extra points and exceptional incremental value when they purchase with Airbnb
Airbnb doesn’t have to build out all the technology, but they have to “localize” the brand and help the consumer achieve a better experience, save them a little time, put a few extra bucks in their pocket and have a more local and authentic experience.
“Airbnb has a unique opportunity in that their brand is ultimately ‘controlled’ by more than 5 million hosts. This gives them the opportunity to win or lose based on how well they deliver on their brand promise and localize the experience. As we move into more shared brand models, this will become crucial.” Nancy A Shenker, Publisher of BleisureLiving.com.
“Our strong Q4 results are a testament to a ton of hard work from our teams,” remarked Dave Stephenson Airbnb Chief Business Officer. I think in addition to hard work Airbnb has built an unfair advantage that will appeal to discretionary, leisure travelers.
Time will tell but I’d bet on Airbnb’s ability to leverage their brand permission as well as localize the consumer journey. With the AI tail winds creating a bigger travel pie as well as increased access for tech savvy consumers, we may be hearing from Airbnb again.