A Travel Agent's Guide to the Sharing Economy

A Travel Agent's Guide to the Sharing Economy

What to know about the rise of Airbnb and the new generation of social travelers By: Meagan Drillinger
Travel agents can utilize the sharing economy to their advantage.// © 2015 Thinkstock
Travel agents can utilize the sharing economy to their advantage.// © 2015 Thinkstock

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Although a home-sharing service, Onefinestay pays travel agent commission.

As social culture has shifted from a technological phenomenon to the new norm, it was only a matter of time before travel agents had to consider how social travel and the new sharing economy would affect their business. 

In today’s world of HomeAway, Uber, Airbnb and other social-sharing sites, a new breed of traveler has emerged, and agents are once again facing questions they thought they had answered 20 years ago with the rise of OTAs. This time, however, instead of fighting the DIY model, agents can work in tandem with these sites to grow their business.

The sharing-economy model is not new, but it has exploded in popularity thanks to increasing awareness and a post-recession shift in travelers preferring access to goods rather than ownership of them. So far, the effect on travel agents and the travel industry has been minimal. 

The demographic using sites such as Airbnb are travelers between the ages of 18 and 34, who are less likely to book a luxury hotel or use a traditional travel agent. But the awareness and popularity of these kinds of websites are mushrooming at a rapid rate, leading to questions about what it will mean for the future of the industry.

The Target Audience
Booking vacation rentals on sites like HomeAway and VRBO (Vacation Rental By Owner) has been popular since the early 2000s. In the beginning, travelers would search a listing, contact the owner and arrange a payment through services such as Western Union or a wire transfer. But what revolutionized the industry were sites that baked booking and payment right into the model. With Airbnb, and what HomeAway is slowly working toward, travelers search for a listing, learn about the owner through peer reviews and often book and pay instantaneously.

“Sites such as Airbnb have streamlined the discovery and booking processes, much more so than the first wave of OTAs like Expedia and Priceline,” said Jason Clampet, co-founder and head of content for Skift. “The path from discovering a place and paying for it is so fast and efficient.”

So does this new model appeal to everyone?

“We know that 14 percent of travelers have used some form of a home-sharing site to rent a house, condo or something similar,” said Henry Harteveldt, founder of Atmosphere Research Group.

Skift’s “2014 State of Travel Report” revealed that 35 percent of travelers using this model are millennials. In the past year, more than one in five travelers under 35 have rented a home, apartment or condo.

According to a survey conducted by PhoCusWright, “Share This! Private Accommodation & the Rise of the New Gen Renter,” there is a rising group of tech-savvy New Gen Renters (NGRs), and they represent 31 percent of all rental travelers. Falling between the ages of 18 and 34, they are active consumers of digital content, harbor a special passion for travel, base their decisions on spontaneity and crave unique experiences and personalization. 

In 2013, the average leisure travel budget for NGRs was $4,338, which is higher than that of other traditional renters. They have money to burn, but don’t want to drop it all in one place. Twenty-seven percent of NGRs are frequent travelers, having taken six or more leisure trips in the last year. Where they stay in a destination is not as important as what they do when they get there.

Though NGRs could be profitable, most agents are not losing existing business, because this type of traveler has never been their target client.

“The people booking Airbnb are mostly people who want a discounted rate, or want the experience of staying in an apartment,” said Karen Magee, director of corporate sales for North America for The Doyle Collection. “These people are booking from a rates perspective and aren’t the clients who appreciate the services or the assets that an agent brings. They aren’t using an agent to begin with. I don’t see a lot of people moving away from the agent model toward Airbnb. Our clients want a hotel and the service aspect that comes with it.”

However, younger agents who are trying to appeal to clients their age may find it more difficult.

“Everyone is all about the sharing community, and I don’t blame them,” said Katelyn O’Shaughnessy, CEO and founder of Tripscope. “When clients ask me about Airbnb, I point them to Onefinestay.com. The site has amazing properties, and it actually has an on-site person who ensures your clients are taken care of, but still offers the home experience and paid commission.”

Traditionally, though, vacation renters were mothers looking to plan family getaways — and in some ways that still remains true.

“Multigenerational travelers are big customers of sites such as Airbnb and VRBO,” Clampet said. “But there is a type of Airbnb stay that greatly appeals to a 20-something, as opposed to a family.”

And according to Skift’s 2014 report, 48 percent of affluent business travelers plan to use peer-to-peer sharing alternatives in the next year.

Of course, big groups and time-strapped travelers typically have the most to gain from an agent.

“In this economy, there is so much information that anyone can do anything,” said Michael Holtz, owner and CEO of New York-based travel agency SmartFlyer. “When we look at the DIY component, what we are concerned about is that the client thinks that they can be their own agent. They can, but they don’t have the resources we have.”

Hotels vs. Rentals
The rental market has always been part of the typical vacation model. Vacation rentals earn $24 billion annually, according to a 2008 PhoCusWright survey. But the big question for hotels to answer is whether short-term private rentals are snatching up customers or generating a new demand.

“Airbnb and its imitators are expanding the idea of renting beyond the scope of traditional vacation rental destinations and leisure travel,” according to the PhoCusWright study. “They are increasingly swaying travelers to consider private accommodation as a viable option for all destinations and types of travel, and as a more distinctive and less expensive alternative to traditional hotels.”

In April 2014, The Economist pointed to cities in which Airbnb has a significant presence, showing that revenue at budget hotels decreased by 5 percent over a two-year period ending in 2013. The publication predicts that the amount of business that Airbnb takes away from low-end hotels could increase to an estimated 10 percent by 2016.

Luxury hotels, however, seem to be doing just fine. The PhoCusWright survey concluded that average daily rates and RevPAR at upscale and luxury hotels are at an all-time high since pre-recession days. Travelers typically booking through sites such as Airbnb would not be traditional luxury hotel guests, so the hotels in that segment are not taking a hit.

“From an accommodations standpoint, we have seen the growing prominence of ‘vacation rentals’ as terminology, which is somewhat different than the ‘sharing rentals’ category,” said Donna Wheeler, director of sales and marketing for Destination Resorts Hawaii. “And while there might be a certain percentage of the population that doesn’t mind sleeping on people’s couches, sharing a bathroom or sharing rides to save a buck, the experience at vacation homes is much more than that. I have not perceived a lot of business lost to Airbnb in the luxury resorts of Wailea and Makena.”

But what may have started as something for cash-strapped travelers looking for a cheaper alternative is gaining interest among high-end travelers looking for local experiences. In 2013, Airbnb generated $632 million in revenue in New York City. In Paris, it generated $240 million in revenue. Peer-to-peer sites offer travelers opportunities that hotels cannot, since a good portion of Airbnb’s business comes from those looking to experience different neighborhoods.

In a “CBS This Morning” interview from July, Marriott CEO Arne Sorenson admitted that peer-to-peer sites “do some things that we can’t do.” Referring to New York City, Sorenson said the mentality is, “I want to live in the East Village for a while, or I want to live on the Upper East Side for a while, and see what it feels like.” But he also added that this model is not for everyone, and that the hotel industry is enjoying watching this as an “interesting experiment.” Sorenson believes the long-term effects will be minimal.

“Home-sharing will always be part of the mix,” Harteveldt said. “But it will never replace hotels for every stay. The 18 to 23 age group is most likely to use these sharing sites, but renting will always be a part of what they do. Renting is ideal for three or four nights. Between one night and three nights, I think traditional hotels are fairly safe.”

The Agent Advantage
While sharing sites may not be robbing agents of business, there is opportunity here to use the new technology to their favor.

“Agents are not shut out from Airbnb,” Harteveldt said. “The challenge is that these sites don’t pay commission. But an agent could credibly recommend Airbnb to a client and charge a service fee. That’s no different than how an accountant charges for doing someone’s taxes.”

After all, agents nowadays are not operating so much as a storefront, but as an expert advisor, said Skift’s Clampet. Understanding clients’ needs is the essential element of being a good travel agent. And for certain clients, what they might need is a great Airbnb.

Agents should take it upon themselves to learn the ins and outs of these sites. A client looking for an Airbnb can come to an agent to inquire about that particular neighborhood, or book activities in the destination.

“Do I look at these sites? Absolutely,” said Hope Smith, owner of Born 2 Travel. “I think it helps me educate myself, maybe about something that I wasn’t aware of or about something my client is asking me about. We all want to make money, but sometimes you have to throw in a freebie. It builds trust and loyalty. At the end of the day, that’s what it’s all about.”