Over the past few months, I’ve looked at nearly a dozen Airbnb-like startups. And like many investors, I’m typically pretty skeptical about consumer travel companies.
Travel is an infrequent activity and after spending a few years at Expedia, I can tell you that there’s a big gap between what we see on Instagram and how people actually travel.
Consumers want unique experiences, but typically make booking decisions based on price, availability and convenience.
When it comes to short-term accommodations, Airbnb and Expedia are likely to own global network effects in this space for three reasons:
- Homeowners and property managers are incentivized to cross-list on major platforms
- Consumer usage is episodic and driven by paid marketing spend
- Highest CAC/LTV wins based on conversion rate and market liquidity
To break this network effect, I believe any new company will need to offer highly differentiated inventory or a stronger value proposition for property owners.
In this post, I’ll cover demand-side differentiation and present a market map for evaluating inventory. In future posts, I’ll spend more time on supply-side services like Pillow and verticalized software like Hostfully.
When evaluating inventory, it’s important to look at both single properties, which emphasize loyalty programs and exclusive upgrades to encourage direct bookings and aggregators which provide a better search experience with a higher volume of available inventory. 
When it comes to demand-side differentiation, new players won’t be able to compete on total number of listings, however they can create competitive advantages through differentiated inventory and improved services. Hipcamp is a great example of differentiated inventory such as traditional campsites (high availability rate and high margin) and more premium inventory type such as yurts and cabins.
Demand-side differentiation can be created with one or more criteria:
- Gaps in inventory type such as campsites and non-traditional accommodations such as Hipcamp and niche communities with social proof such as Overnight
- Gaps in inventory location & availability such as unique advantages during peak travel seasons or high volume of available inventory in high demand location
- Unmet audience segments such as kid-friendly travel, accessible-friendly travel (Accomable, acquired by Airbnb) or baby boomers.
Let’s look at two examples of possible demand-side differentiators.
Business travel is one segment with higher frequency and lower price sensitivity. Compare to other segments, business travelers are more likely to prioritize convenience over all other criteria.
They will pay a premium to be walking distance to a conference and close to the office. Due to the nature of the trip, a business traveler will look for amenities such as laundry service, free breakfast, daily newspaper and a mini bar for late night snacks.
Business travelers typically join a loyalty program and prefer a consistent experience in every city. This is an unmet need with the average Airbnb experience: finding keys can be a hassle, communicating with the host is time consuming and homes are unique by design.
Some companies that are tackling the business traveler segment:
- Sonder: nightly bookings in Airbnb-like properties with hotel-like amenities.
- Zeus: monthly bookings in fully managed units
- Outsite: group accommodations with a large common room to accommodate offsites
Extreme last minute is another interesting segment where travelers are willing to compromise on inventory quality and services to accommodate extreme last minute bookings.
Three types of extreme last minute inventory:
- Remnant inventory is last minute available inventory sold at a deeply discounted rate. For example: HotelTonight generates revenue by taking a cut of each transaction—about 20-30%.
- Opaque inventory offers deep discounts by specific suppliers (i.e. hotel, airline, etc.) however the specific name remains hidden until after the purchase has been completed. For example: Hotwire.com provides a neighborhood level map with proof points such as star rating and peer reviews to help ensure customer satisfaction.
On-demand inventory is another segment where short-term accommodations can be booked instantly.
Overnight is a good example where users can instantly book a friend’s home on the platform.
Recharge is another example where users can instantly book luxury hotels by the minute.
For hoteliers, this is a highly valuable model to increase occupancy rate above 100%. The only consideration is additional labor costs required for housekeeping outside of the traditional daily checkout time.
In closing, this analysis is intended to serve as a primer for evaluating short-term accommodations. This is not an exhaustive list of recent startups in this space, it’s simply a framework for evaluating differentiated inventory.
If you’re a founder working on a travel-related company, say hi! I’d love to learn more about what you’re building.
Follow me on Twitter: @briannekimmel