Airbnb's unique demand driver
Traditional travel accommodation is still quite search driven. You go to Google or an OTA website/app and insert some details from the dropdown menu (destination, travel dates, number of guests, budget etc.) to pick your accommodation. But ever since going public, Brian Chesky has been highlighting that they would rather be in “inspiration” business i.e. it’s okay if you don’t know where you want to go, Airbnb can inspire you to find your perfect spot. This “browse and discovery” mode is quite unique to Airbnb, and this behavior may be reaching an inflection point among Airbnb users. From the recent earnings call:
We're seeing a giant uptick in the number of people that are booking a home from the homepage on Airbnb. So this has been a major behavioral change from basically the last 17 years of Airbnb's history. So if you go to most apps, especially OTAs, you open the app and every single person goes essentially to the search box. they type in something in the search box and they enter dates and then they get a bunch of search results. And this is how everyone search for travel over the last 20, 25 years. The holy grail is to get more and more people to be in browse and discovery mode, almost like on Netflix or say DoorDash. DoorDash was very search-driven. They're now more of a browse and discovery application. And it's been a really hard not to crack within travel, but we think we've done it because what we've seen is that increasingly more and more guests are engaging not just the service experience from a homepage, but with homes. Now this is very strategic. Why is this strategic for us? The reason why is if people can engage with our homepage rather than typing in a destination, then we can divert travel more broadly to where we have available supply, thereby increasing conversion rate of our traffic, if this makes sense.
Indeed, that’s exactly how I found the most recent Airbnb we stayed last week. On Wednesday, my wife and I felt we would like to go somewhere for a couple of days. So, I started browsing the Airbnb app, and this particular listing caught our attention. And the next day, we were there! See (at 3x speed) video below:
Airbnb has been sitting on this unique demand driver for a while, but I do believe the best days of generating and extracting value from this demand driver is ahead of them. One of the key value propositions for Airbnb is for majority of their listings, you cannot find on Google or any other OTA websites. An AI powered search (instead of a dropdown menu) can really turbocharge this behavior. Imagine if you could ask an “Airbnb AI” which has access to all the listings, availability, reviews etc. and provide a much more expansive query such as “I am planning to do some focused work for the next couple of weeks while on an Airbnb. I would like to be surrounded by enchanted trees, the sound of water streaming downhill, and a morning sun that can peek through my window. I would like some decent restaurants within 3-5 miles from the place. I also would like to have the option to go for a couple of unique local experiences e.g. sightseeing or some local activity to get a feel for the place. Please show me listings within 3-4 hours of driving distance from my address.”
This will likely become a reality sometime next year. From Airbnb’s 2Q’25 call:
Next year, we're going to bring AI into travel search. So all this brings us back to the question you asked about travel planning. Over the next couple of years, I think what you're going to see is Airbnb becoming an AI-first application. And this leads to the bigger question around AI. Over the last almost 3 years since ChatGPT spin out, if you look at the top 50 apps in the App Store, almost none of them are AI apps. The #1 app in the App Store, I think, as we speak, is ChatGPT. And if you go through 2 through 50, maybe only 1 or 2 others are AI native applications. So you've got basically AI apps and kind of non-AI native apps. And Airbnb would be a non-AI native application. Over the next couple of years, I believe that every one of those top 50 slots will be AI apps. either start-ups or incumbents that transform into being AI native apps. And I think at Airbnb, we are going through that process right now of transitioning from a pre-generative AI app to an AI native app. We're starting to customer service. We're bringing into travel planning. So it's really setting the stage.
I think that the key thing is going to be for us to lead and become the first place for people to book travel on Airbnb. As far as whether or not we integrate with AI agents, I think that's something that we're certainly open to. Remember that to book an Airbnb, you need to have an account, you need to have a verified identity. Almost everyone who books uses our messaging platform. So I don't think that we're going to be the kind of thing where you just have an agent or operator book your Airbnb for you because we're not a commodity. But I do think it could potentially be a very interesting lead generation for Airbnb.
Airbnb likely spends more on R&D than all other OTAs combined. Of course, higher R&D dollars doesn’t necessarily mean better output, but Airbnb does have a compelling opportunity to re-imagine the core travel search experience on the website/app in the AI world much more than any other competitor out there. A superior execution here can truly unlock new demand which may lead to higher occupancy rates for Airbnb hosts. Higher occupancy rate can then move the needle for ADR, and if existing hosts make more money, that will inevitably unlock even more supply over time.
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