PropTech Today: Differentiate or die - Airbnb’s messy ecosystem

The rise of Airbnb has been majestic, going all the way from conception to becoming a common noun in less than 10 years. 

You'd be hard-pressed now to find a person who isn’t familiar with the brand. But what has been less publicised is the surge of companies forming to gather the trail of gold left in the wake of its coat tails. 

At my last count, there were literally dozens of companies out there offering services such as property management and key security. 

I don’t know if you’ve been watching the new series of David Attenborough’s Blue Planet, but basically we, the customer, are a whale carcass and Airbnb is the shark that finds us first and gets to eat all of the good stuff we’ve got; the blubber and the flesh. 

These Airbnb side companies are the little fish and the parasites who, once the shark has had his fill, swim in to nibble at any remnants from our bones. 

It’s not as morbid and derogatory as it sounds, that’s nature; that’s business. Airbnb gets most of our money and the side firms arrive to grab a morsel of their own. 

The problem is, because there are now so, so many Airbnb side companies, the table’s getting a little crowded. Inevitably, some of them aren’t going to get fed. 

It all links back to what I’ve been saying about collaboration and consolidation being our escape from The Trough of Disillusionment, but I really do think it’s key to PropTech’s future success. 

With so many companies offering the same service, the market is becoming a mess and nobody knows what anyone is really doing. 

Just a quick Google search throws up the following:

Airstorted; GuestReady: The Air Agents; Hostmaker; Guesty; Airhosta; Bnbsitter; PassTheProperty; Pass The Keys; Hello Guest; Keynest; RentingYourPlace; Happy Guest; Portico; SmartHost; City Relay; Bnbeasy; Airbnbeazy; Airhead UK. 

And that’s just the first couple of pages. Is that not bonkers? Why are there so many? 
Granted, many of them operate in just a few cities, but most of them operate in London and all of them will have aims of expansion. 

The London Airbnb market is huge; the biggest in the world.  According to data provided by AirDNA, the total number of available lettings in London has risen from 13,098 in November 2014, to 57,540 in September 2017. Over the same period, booked listings went from 6,505 to 42,608. 

Compare this to New York, for example, a city with only a slightly smaller population (8.54 million vs. 8.79 million); as of September 2017, NYC had 36,247 available lettings, and 29,870 booked. 

How much funding has gone into this? 

There are too many companies competing, but it’s a huge field they’re playing on. As such, investors and backers seem to be infinitely confident in emerging short-term letting management companies. 

I understand that if the demand is there then there’s money to be made, but I’m at a loss to understand how these companies are managing to differentiate themselves to investors. Looking at their websites, their services, their prices, it’s all very homogenous. Some are branded better than others, that’s for sure, but other than that, I just don’t know.

In attempt to find out, I am going to be undertaking an in-depth study on this sector, and what each company is doing, in the coming weeks, so keep an eye out for that. 

For now, though, all I see is an oversaturation problem, yet the level of investment going into these companies remains high and widespread.

Airsorted has raised £1,880,000; Hostmaker $9,277,526; Bnbsitter $2,500,000; PassTheKeys £350,000; Bnbeasy $1,000,000; and Guesty $4,500,000. 

Then there’s the recent news of GuestReady, raising a further £2.3 million to bring its total to just under £2.9 million. 

At the same time though, GuestReady did something else; something that I believe we should see more often. It acquired Easy Rental Services, a key competitor in the London and Paris markets. For me, it has got to happen more. 

Consolidate and differentiate

It seems we’re losing sight of the fact that it’s the customer that should be benefitting first from PropTech’s innovation, trying to provide the easiest and best experience possible. But the reason we have so many management companies kicking around is purely because entrepreneurs want their own slice of the profits of the Airbnb ecosystem, not because they’ve got an idea, a new way of doing things, that they think the consumer can really benefit from. 

It’s making everything murkey. These companies need to either work hard to differentiate themselves, or start engaging in conversations with one another about the potential mutual benefits of teaming up. I think this is especially pertinent for companies that have a strong hold on one city and are looking to grow in another.

There’s something interesting, in the recent GuestReady funding press release, about this idea of differentiation. The release suggests that GuestReady will use some of its new money to prepare for what Airbnb is calling it’s new ‘Select’ programme. 

It’s an initiative designed to appeal to the wealthiest of Airbnb users who want the freedom and privacy of an Airbnb, but still expect the luxuries and decadence that a 5-star hotel offers. The press release describes these people as ‘more particular’; read into that what you will.

While I wouldn’t want to be the customer services operator put in charge of dealing with those on the ‘Select’ programme, it is definitely something that short-term management companies could look at. 

By moving exclusively into the ‘Select’ market, Airbnb side companies can get the differentiation they desperately need, catering only to the most demanding and fastidious of hosts.   

As the service economy continues to grow, demand for Airbnb side companies, especially property management, is going to be strong. 

In London, more so than anywhere, that demand is being stretched too thin. I hope that before too long we see more collaboration in this this sector, but until then, with all of these companies doing such similar things, it’s got to be a case of differentiate or die. 

Otherwise, the investors fueling this growth will be the first to lose interest.

*James Dearsley is a partner in PropTech Consult, digital transformation specialists for the real estate sector. To sign up to James’ Sunday PropTech Review, click here.