Airbnb, which has admitted it misled consumers in Australia by not making it clear prices were in US dollars and not local Australian currency, is a firm believer in brand marketing and the value of public relations.
The home stay booking platform had told consumers that they had themselves selected for prices to be in US dollars. However, competition watchdog ACCC found that some users never made that selection.
This meant that those making a booking paid significantly more than they expected to pay because of the USD/AUD exchange rate at the time.
To settle the Federal Court case, Airbnb agreed to pay $15 million in penalties and offer up to $15 million in compensation to 63,000 consumers.
The online marketplace for homestays, which disrupted the hotel industry, gets most of its business not via online advertising or performance marketing but by word of mouth.
Brian Chesky, the CEO and a co-founder, says the vast majority of first-time bookers come directly to Airbnb.
“The number one reason people come to Airbnb is because a friend or a family member told them about Airbnb,” he told analysts in a briefing. “And so we primarily grow through word of mouth.”
Airbnb in the September quarter reported revenue up 18% to $US3.4 billion, driven by growth in nights booked and a modest increase in Average Daily Rate numbers.
The company spent $US403 million on sales and marketing over the quarter, a 5% rise on the same three months in 2022.
PR, or earned media, is important to Airbnb. “We have 500,000, 600,000 press articles a year,” Chesky told a briefing of analysts.
“The share of voice of Airbnb compared to most travel companies is overwhelming. We have a greater share of voice than almost all the other major travel brands combined.
“We also have a huge amount of presence on social media. You might have heard a few months ago about the Barbie house rent in Airbnb or the Shrek house. And so we get a lot of earned media.
“And then beyond that, we do these pretty big brand campaigns and the vast majority of our marketing spend that we do spend on advertising is not performance marketing, it's brand marketing.
“It's really marketing education around our unique product offering. So we do do performance marketing, but we think unlike other travel companies, it's not necessarily a way to buy customers. It's literally more like a laser that we use to hone in on balancing supply/ demand and we really can use it to optimise certain markets. So a lot of it remains direct.”
About 90% of online traffic is direct or unpaid.
CFO David E. Stephenson says Airbnb isn't shifting more to demand side marketing.
“The vast majority of our traffic is direct or unpaid,” he says. “The first reason why people come to Airbnb is they're referred to us by family and friends. They come directly to us.
“The brand marketing certainly kind of helps talk about all the features and benefits of Airbnb, and we use our search engine marketing as kind of a laser to focus on areas where maybe we have less demand than we have supply or in specific countries where we want to focus and kind of grow the overall kind of pie for us.
“So it is not the primary driver, but this overall strategy of leading with brand and then following with surgical on our search engine marketing continues to work really well for us.
The latest advertising campaign is called Airbnb It, contrasting the benefits of an Airbnb versus a hotel.
“Based on our research, one of the things we've noticed is that a lot of people that stay in hotels don't understand some of the unique benefits of staying in an Airbnb and why it is better for certain types of trips,” says Brian Chesky.
“And one type of trip that Airbnb is almost always better is when you're travelling with three or more people. If you're with a family or a group, why do you want to stay in different rooms … then the only place you can meet is these crowded lobbies, when you can get a whole home all to yourself?
“So we've been running these digital campaigns. It's the highest performing digital campaign we've ever done, and this is going to be the basis for a major new marketing campaign next year.
“If we just keep focusing on reliability, making sure that when you book, you know what you're going to get, and if there's ever a problem, you have an excellent customer service that is nearly as good as the front desk or as good as the front desk, than I think there could be in the years to come a tipping point where many people could choose Airbnb.
Nicholas Jones, an analyst at JMP Securities, asked whether consumers view Airbnb as a premium or a discount offering?
Brian Chesky says the original Airbnb tagline was a cheap, affordable alternative to a hotel.
“And the primary reason people chose us in the early days was price,” he says.
“We used to say money is the hook but the experience is the reason you keep coming back. Because it also turns out when you stay in Airbnbs, you're often typically in a real neighbourhood, not a hotel district, you have this really cool space, you can make a meal, you have a lot more equipped home.
“Sometimes, there's a local connection to the community, if that's what you're looking for. But affordability has always been one of the most important benefits that we have in Airbnb. And I do feel like we still have opportunity for our prices to be even more competitive.
“There's a really interesting thing we discovered. Within reason, generally when hosts lower the prices, they tend to make more money and this is typically not true with hotels, right?
“Because if you're running at 80% occupancy and you lower your prices per night, you typically don't have a lot more room to make up the lower prices with higher occupancy and so you'll typically lose money. But many of our hosts run at low enough occupancy and they always have that if they lower the price just a bit, they can sell more nights.
“And so we think there's a win-win where if we continue to encourage hosts to offer more competitive pricing, it's a win for guests, but it's also a win for many of the hosts. And I would also just point out that in addition to pricing tools, you need to have ample supply.”
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