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How Airbnb is ducking government regulations with pottery classes and nature walks.

Taking a ferry to Ikea, gallery hopping for the free wine, settling into to an orb of apathy as you stare into the abyss on your subway ride home — these are all authentic New York experiences, and all far from what I’m doing right now. Right now, I’m partaking in an authentic New York Airbnb Experience, which is something entirely different.

Experiences is Airbnb’s most significant effort to become an end-to-end travel seller. The platform displays a slick grid of options like classes, walking tours, and hikes all led by locals. Not only is the company showing you where to stay, now they are showing you what to do.

This, along with Homes and Restaurants (which is born from a partnership with reservation-making app Resy), all fall under Airbnb’s “Trips” umbrella, a product which launched in 2016. Experiences in New York City range from photoshoots in iconic parks to graffiti walking tours to a session with a vintage personal shopper. You know, things New Yorkers do.

This expansion of offerings is not to fill a hole in the market, but an opportunity for Airbnb to provide a more centralized platform for tours, something that hasn’t been done yet. It also could be a way for the company to diversify revenue as they face more and more regulatory headaches with thousands of listings being pulled from the site.

Today, I am throwing pots with Ernesto. I picked this Experience because unlike the aforementioned options, it was something I wouldn’t be embarrassed to do. Joining me are two other locals along with two tourists, and although the class was lovely, it doesn’t feel like a natural extension of the Airbnb brand I frequently patronize.

Airbnb’s company motto once was “Live Like a Local,” so booking a class called “Create Your Own Pottery” seemed a bit strange, even though it was just a few blocks from my home.

Dipping into guided tours

According to Airbnb’s own reports, the company’s step into services has been largely successful. CEO Brian Chesky said in January Airbnb Experiences is growing much faster than Airbnb Homes did and receives 1.5 million bookings on an annualized basis and about 1,200 host applications per week. In February, the company released a report saying bookings increased 2,500 percent over the last year and they plan to offer Experiences in 1,000 cities by the end of the year.

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A craft brew Airbnb Experience in Vancouver.

But others sources paint a different picture: that the company’s biggest project launched since its genesis is floundering. A Wall Street Journal article highlighted a host who listed a night sky photography class on the platform but promptly quit after averaging only one customer a month. According to a pymnts.com article, Airbnb has lost more than $100 million pursuing the project. My own Experience host said Airbnb gives many free passes away to his class, perhaps another sign the service isn’t in demand.

But the company is still charging forward. In January Airbnb sank another $5 million in the program, seeking to add 200 more US cities to the roster. The company predicts it will make $200 million in Experiences revenue in 2018, despite the fact that it only made $10 million in 2017. Just this month, the company announced that a second Los Angeles office will serve as the Experiences hub.

This shift into the world of guided tours doesn’t quite align with the goal of most Airbnb users: to have sincere brushes with local culture. It’s a goal that Airbnb has been good at cultivating. So what encouraged the travel industry’s shining star to produce something not so innovative?

It wasn’t because of demand. Tours are already popular, and there’s no shortage of providers. They also aren’t that cheesy anymore, as travelers are demanding authentic-feeling experiences. Booking.com found 62 percent of people want to experience new cultures, 51 percent want to taste local delicacies, and one-third of travelers embrace meeting new people.

Many of the tours listed on TripAdvisor include “small group” in the title, emphasizing the opportunity for more peer-to-peer interaction. According to a recent survey by TripAdvisor, cultural and themed tour bookings (think a graffiti golf cart tour in Miami or a haunted pub tour in Seattle) in the United States jumped 32 percent for domestic travelers and 62 percent for global travelers from 2017 to 2018. Food tours have also shown tremendous growth, with the amount of booked tours in the US growing 59 percent.

So although the traditional, sterile tour may not jive with Airbnb’s motto, this new kind of tour could.

Travel industry analyst Henry Harteveldt says people are also increasingly looking for niche tours that align with their existing interests but still allow them to experience another culture — a cooking class, an architecture tour, a historical neighborhood walk. And they’re spending money to do it; Harteveldt says that 60 percent or more of the average person’s travel budget is spent on tours, activities, and restaurants.

But the preference for the one-size-fits all double-decker tour has somewhat faded. “It’s formulaic and only focuses on the obvious,” he says. “It can be convenient and helpful, but what Airbnb can do is allow travelers to go further into the detail of interests that they are already passionate about.”

He adds that the inclusion of classes on the platform makes Experiences a competitor to not only tour sites, but event and class sites like Eventbrite or Meetup. When you browse Atlanta’s Experiences, you see mural walking tours alongside a fitness class called The Ultimate Twerkout and a beekeeping class called The Mystique of Bees: Beekeeping 101. My Experience host Ernest said that 60 percent of those who take his class are not tourists.

According to Daniel Guttentag, a hospitality and tourism professor at Charleston College, the tour market is also quite fragmented. There is TripAdvisor’s Viator, Fat Tire Tours, and Peek, along with other local guides who don’t use aggregating platforms. Guttentag says this lack of consolidation may have motivated Airbnb to step into the space and provide a more encompassing platform where experienced and novice guides could exist together.

Airbnb faces a host of regulatory problems

Aside from capitalizing on already popular travel practices, Airbnb was perhaps fueled by its recent run-in with regulatory issues. In most cities, short-term rentals have always been illegal, but because so few people were doing them, there was no push for renters to report their listings to the government. Now, lawmakers are proposing bills that would force renters to register their listing in order for the government can monitor if they are following the rules.

Paris, Airbnb’s biggest market, is aggressively reining in renters, requiring listings on Airbnb to register with the government, and holding Airbnb, not the landlords, fiscally responsible for the renters who don’t. In May, Barcelona forced the site to delete over 2,500 listings that weren’t operating with city-approved licenses. Regulations in San Francisco cut the city’s listings by almost half, and a similar policy in New York could have the same effect.

Despite regulations in major tourism cities, Guttentag disagrees with “any notion that Airbnb will be regulated out of existence,” but each side will have to adjust. Now, policy makers will have to adapt to the “new reality that these services have created in communities.” Meanwhile Airbnb is expanding. “It’s a hedge against future regulations that might restrict growth in the lodging element,” Guttentag says.

Not everyone can afford to rent out their apartment or house, but the barrier to entry for hosting an experience is much lower. And while a user is less likely to book a stay where they already live, if they’re looking for a local class or say, a session with a personal shopper, Airbnb might just be the place they find it. With Experiences, Airbnb expands both the pool of potential hosts and the pool of potential users, without any of the regulatory headache.

The addition of services that duck regulatory issues is a common tactic of disruptive innovations. Uber’s offshoot app UberEATS was a way for the company to diversify income in the face of being partially or fully banned in a handful of regions including parts of Oregon, London, and the countries of Italy and Denmark. For Airbnb hosts whose home listing was taken down, Experiences could offer another revenue stream.

Luxury is getting localized

As Airbnb expands its hospitality services, the industry they disrupted is feeling pressure to adapt as well. According to a report by Skift, more than 50 percent of luxury consumers in the US are more interested in connecting with local people and culture than they were just three years ago. And 60 percent of luxury travelers said they want travel experiences that their friends may not have thought of. Even those using luxury amenities want personal, local experiences.

To satiate those needs, luxury hotels are offering more services that emphasize personalization. Last month, Hilton announced a partnership with Foursquare to create a new feature on it’s existing app which will show you recommendations from local Hilton employees along with the vault of reviews that Foursquare already owns. The Marriott invested in PlacePass, an activity booking service which provides “behind-the-scenes” tours and classes with local crafters and artists.

Casa Bonay, a four-star hotel in Barcelona, is hosting a slew of events including film festivals, album listening parties, and rooftop viewings to make the locals come to them. They also built a coffee shop, co-working space, lounge, and restaurant where both Barcelona natives and guests are welcome.

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A Matcha tea ceremony Experience in Vancouver.

It’s not only hotels. The New York Times recently partnered with Urban Adventures to offer a series of tours based on the Times’s popular 36 Hours series. The tours webpage says it invites travelers to “interact with locals, get hands-on experience, and enjoy exclusive access to places with a local guide.”

Travel review site TripAdvisor just announced plans to roll out a new social feature where users can scroll through a feed of travel content created by publications, influencers, and friends. The app looks like a hybrid of Twitter and Facebook, but only features travel content.

Users can curate the content on their feed by typing a city name into the app, which will result in the app filtering out any posts that are not about that city. The app also allows users to save places, and transfers those places to an easily accessible map that you can also share with friends. For anyone who has ever been asked for recommendations from a trip they took two years ago, this is an extremely appealing feature.

But despite the evolution of their competitors, Airbnb does retain customer trust, which is crucial in such a fragmented market. Right now, there is no activity or tours platform that people swear by. If Airbnb is able to funnel its loyal community of both hosts and users into supplementary revenue streams that aren’t as heavily regulated, then this investment will certainly have been worth it.

Airbnb didn’t turn me into a sculptor

As I’m struggling to throw anything identifiable on this wheel, the man to the right of me has no trouble at all making the perfect ashtray. I ask if he’s ever done this before and he says “no,” then volleys the question back, as if he can’t already tell by my pile of sludge that this is new to me, too.

He and the woman to my left were both visiting from Costa Rica and Los Angeles, respectively. The other two were a local couple, in from the city to celebrate a birthday. Our wheels line the walls and face inward toward a large table in the middle of the room piled high with bowls and cups and vases.

Ernesto hops from wheel to wheel, breaking the focused silence with “what do you do,” and “how long will you be here,” sort of small talk. It doesn’t take long for him to tell us he is also a Home host, and says with new regulations looming, the option to be an Experience host was especially enticing. He talks about how the government regulations are bad for cities and how travelers won’t have affordable accommodation options, all while he’s helping us shape something that kind of looks like a pot.

He’s everything Airbnb wants a host to be: a young artist who is passionate about government regulations that would affect him and, of course, the company. This isn’t an authentic New York experience, but it is the experience Airbnb wants you to have.

Author: Aditi Shrikant


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