Ten years back, who was to say that a colossal disruption is coming for the accommodation industry? Nobody in their imagination would have anticipated that hotels will have to face competition not just from other hotels, but from anyone with a spare room in their home. But then, nobody could have either thought there were ways to find a taxi other than waiting for one on a roadside, or that your favourite restaurant will deliver to you and you would no longer have to go out on a rainy Sunday to get the most delicious items from its menu. All this has now become a habit for most people. It’s almost tough to imagine a time when we once lived, and happily too, without these conveniences. That’s the things about disruptors. They come, they disrupt, and they stay for a very long time (until the next one arrives).
Airbnb started in the time that saw new trust building with peer-to-peer networks, and a plethora of companies acting only as a platform for people to engage, and not directly providing any services. The attitude of home-owners has witnessed a change. They have opened their doors to welcome guests, and sufficiently earn in the process. It has tweaked the notion of tourism altogether. The idea of not staying in a hotel but putting up with some unknown locals on a trip seems normal. The hotel industry sees it as its one of the strongest competitors. In a decade, it could change the perspectives of people around the world, how is it doing in some of the nascent ecosystems? Let’s take a look.
The ABC of BNB
Airbnb is a San Francisco-based online marketplace and hospitality platform which began its operations in 2008. It currently boasts a presence in 191 countries worldwide. The company can be considered a disruptor of the traditional hotel industry as it is believed to have around 4.85 million listings worldwide and perhaps to a slightly less impressive extent, around only 100,000 of those in Africa.
With those figures in mind, it could be surmised that Airbnb doesn’t quite have as much a stronghold or as loud clout in Africa as it does in some other parts. And it may be construed that Africa doesn’t quite cut it as a significant revenue stop for Airbnb or the company just hasn’t gained as much ground in the African hospitality market as it has in some others — a claim that might become quite evident when comparisons and juxtapositions are made between facts and figures from Africa and those obtainable from the more established hospitality destinations. This factor can be thought to not exactly be doing justice to the company’s plans of establishing a strong presence in every part of the world.
Nevertheless, Airbnb’s apparent shortcomings in Africa do not necessarily take away all the gloss from the shine that it has reflected off the continent’s hospitality market so far. In spite of all there is to be done and the lot that is still left to be desired, it is undeniable that the growth has been tremendous and it will be utterly unfair to assert that the company hasn’t come mostly good in these quarters. Referring to some of the recent numbers does a good job of underlining just how much progress has been made.
What do the figures say?
For starters, out of the 3.5 million guest arrivals in Africa that have been recorded on the Airbnb platform since its founding, around half that number has occurred during the last year. Of the eight fastest-growing countries in the world in terms of guest arrivals on the platform, three are from Africa. These include Africa’s most populous nation; Nigeria, which is believed to be witnessing a triple-digit YOY guest arrival growth of around 213%, their Western African neighbours, Ghana; which is also on a roll with a growth rate of 141%, and Mozambique making up the top three with a respectable 136%.
South Africa, Airbnb’s largest African market, is still waxing strong and going steady at a growth rate of 65%; a feat that is made all the more glaring by the fact around 2 million of the total 3.5 million guest arrivals in Africa have been in SA alone. Now, if we attach some credence this one time to the notion that numbers don’t lie and they don’t, perhaps we can suffice it to imply that Airbnb is doing a satisfactory job in Africa. But is that the case?
Gaining strong foothold
With multiple initiatives in Africa and policies that might be suggestive of an onslaught on the market, Airbnb’s posture depicts an interest making the most of the tremendous opportunities that are available in African hospitality industry. A good illustration of this improved posture can be cited in its collaboration with the Mother City, Cape Town. This example is unique in that it represents Airbnb’s first partnership with an African city, even though the company is known to have already collaborated with over 300 governments worldwide.
But there is more to indicate that the company may indeed be shaping up for major investments in Africa. In 2017, Airbnb announced USD 1 Mn in investments through the year 2020 to promote community-led tourism on the continent. Following in a similar narrative, the company is also known to have held a conference tagged: Airbnb Africa Travel Summit, which was a 3-day event that drew to a close on 13th September 2018 in Cape Town — a feat that might indicate the company’s renewed interest in the African market. The summit is believed to have brought together over 200 travel and tourism delegates from the continent that connected to exchange ideas and information on such details as ways through which the industry can be made more profitable, as well as the intricacies related to accelerating tech-tourism in Africa.
Another initiative from the company is the Airbnb Africa Academy (the first session took place in August 2018 in Johannesburg, followed by Cape Town); a free hospitality program for people from rural and under-resourced communities which seeks to provide them with tools and information that can be utilized in their spaces for the creation of unique listings or Experiences on Airbnb. From the Airbnb perspective, Experiences can be thought of as activities or excursions organised by local hosts to familiarise guests with the cultures of the city. This can range from indulging in urban farming to enjoying the city’s best nightlife. The service was first launched in Africa in Cape Town in 2016. It is now open to all hosts across South Africa.
From those last two words in the preceding sentence, perhaps from the last three paragraphs too, and even from data that is soon to follow, putting two and two together might suggest that Airbnb’s presence in Africa is largely concentrated or centred around South Africa as it is evident that the country is seeing most of the action. While this trend may be founded on legitimate business reasons, the lopsided nature of the development does stick out like a sore thumb and considering the sheer amount potential in a number of other African destinations, doesn’t that provoke thought?
Here are some statistics of Airbnb’s Africa business as of September 2017, to give our readers a deep insight into the company’s presence on the continent, and reflect what a growing market Africa is for the travel industry.
Not everything is hunky-dory!
Airbnb’s success across the world is attributed to its innovative model where users can experience the cultures and the traditions associated with the place, and the competitive pricing it offers. As can be deduced from its business model, Airbnb targets tourists who do not want to enclose themselves in the four walls of a hotel while on a visit to a destination but would instead move about and engage in what the local community has to offer. The platform can be said to give travellers and holidaymakers the opportunity to experience the destination truly.
Examining the data available, however, does reveal a something of a worrying bit in terms of the earnings of hosts which can be perceived as quite low in some quarters. A typical host in South Africa, for example, was found to be earning USD 1.9 K annually for giving out a property on rent for an average of 19 nights a year. When juxtaposed with the popularity of the platform, and the fact that 47 percent of the hosts are using their Airbnb earnings to help afford staying in their homes (according to Airbnb), that figure may come across as somewhat negatively-skewed.
What Murray Cox, the founder of AirDNA and InsideAirbnb, had to say about this is quite interesting. To quote him,
“Airbnb understates the earnings of hosts primarily, in my opinion, to make a case with cities, states and regions that they should be unregulated.”
According to his survey, hosts in Cape Town were making USD 3.36 K annually on average for around 38 nights a year. The apparent discrepancy in the values could be attributed to the fact that Airbnb tends to adopt medians and not averages as its preferred measure of central tendency, and this may, perhaps, have something to do with minimising the commercial nature of their business. From a statistical standpoint, calculating central tendencies using medians have a tendency to mask the figures on the higher side.
Taking a brief look at the rental housing industry, there appears to be an issue in South Africa with Cape Town facing a shortage of what is believed to be around 100,000 housing units. In other words, middle and working-class residents are having a hard time finding affordable houses to rent there. And part of the reason for this challenge could be connected to the fact that more and more homeowners are registering on Airbnb, and in the process, are taking away with them the quality and prime location houses available in the market as is dictated by Airbnb’s standards. This is believed to leave a significant number of residents with the unsavoury option of settling for low-quality houses at far away locations, and at prices that are really high.
But unlike long-term rental industry, Airbnb does require a lot of time and effort (in terms of managing bookings, catering to guests, handling check-ins and check-outs, etc). The more common practice, especially in long-term rentals, would be to hire managers for this, but that also comes with its own cost implications. In a survey conducted by WeeTracker, one of the respondents from Lagos, Nigeria, who previously had 9 listings on Airbnb, and has now brought them down to two (the rest of them are now tied up in long-term rentals), remarked; “After the initial excitement around Airbnb wears off, it becomes clear that long-term is far more profitable.” If the claims of the Nigerian host do hold water, this could imply that Airbnb might have its work cut out for it in the area of making itself more profitable and attracting top-notch listings from hosts in this region who appear to be disenchanted with the current mechanisms and are exploring other routes and channels.
It is a contrasting narrative from South Africa where it would seem Airbnb has somewhat set up shop and is doing pretty good. The country currently boasts the largest number of Airbnb listings in Africa, which in turn boosts its tourism sector significantly. South Africa generated USD 247 Mn from hosts and guests activity in 2017. This number has seen a phenomenal jump in 2018 as it now stands at USD 678 Mn — roughly a three-fold increase. South African hosts have earned USD 260 Mn since Airbnb made its first foray into the country’s hospitality and tourism market.
Interestingly, these earnings from South Africa alone account for a whopping 65 percent of what the hosts across Africa have earned till date (USD 400 Mn). And to further buttress the point that Airbnb has a roll in SA compared to other African countries with, arguably, just as much tourism and hospitality potential, Cape Town, which lays claim to one-third of SA’s listings, is known to offer over 100 Airbnb Experiences, of which 30 percent is focused on social impact. 100 percent of the revenues generated are believed to go to NPOs. But in any case, South Africans are still making a lot from such services. Someone hosting Experiences 6 times a month in SA is known to be earning up to USD 14 K annually. The relative success which the company has enjoyed thus far in SA, which sort of eclipses what is being done in other parts of Africa and blows everyone else out of the water, might indicate that Airbnb has had its foot on the gas in the country for so long, and it’s about time it started paying attention to other markets if the apparent disparity is to be addressed.
The disproportional popularity of South Africa as a market, according to Velma Corcoran, Airbnb’s SA manager, who revealed in an interview with Business Insider, is hinged on the idea that “Airbnb has a very compact team, which created the need to focus only on strategic markets like SA. The company’s next step is to spread across Africa while driving sustainable growth in tourism.” When questioned about the challenges and drawbacks hampering the ease of its spread throughout Africa in the same interview, she offered that the biggest hurdle is to change the perception of foreigners towards Africa. To quote her,
“It is important for us to help people understand that Africa is a continent and not a country, and for them to grasp the breadth and depth of what the continent has to offer.”
This appears to be another area where the company has its work cut out for it as it would seem the company might just be guilty of a lighter version of the same sin — the sin of thinking Africa a country — especially since it is beginning to increasingly seem like Africa has been somewhat reduced to South Africa in the measurement of its business on the continent. It is true that so much has already been done but looking at the big picture; it would seem like a “tiny blue dot” compared to what is yet to be done, which could be thought of as all that matters in the grandest scheme of things. So, perhaps the company needs to take a break from SA where it appears to have steamrolled thus far and intensified its efforts in other parts of Africa. This could do it a whole world of good especially as it isn’t precisely hegemony and it doesn’t exactly hold a monopoly over the market since there are other platforms like SleepOut.com, TravelGround, and Afristay among others, which could serve up stiff competition both within and outside the continent.
One Last Glance!
The total contribution of the travel and tourism industry to Africa’s GDP is estimated to grow at 3.8 percent in 2018, escalating it to around USD 120 Bn. The growth rate for the US will be somewhere around 3.2 percent. This may, in some ways, reflect how the absolute numbers (bookings/guest arrivals) might not be so impressive for Africa today and perhaps still leave a lot to be desired, but the growth potential it holds cannot be overlooked. As the contribution of the travel and tourism to the global economy continues to grow, emerging tourist destinations are expected to expand at the double the rate than the established destinations.
Data Source: Airbnb report