Terrie's Take 949 (Tourism Edition) - Airbnb Meltdown, Losing Sight of What Makes a Company Successful

Terrie's Take terrie at mailman.japaninc.com
Mon Jun 18 00:35:11 JST 2018

* * * * * * * * TERRIE'S (TOURISM) TAKE - BY TERRIE LLOYD * * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie 
Lloyd, a long-term technology and media entrepreneur living in Japan.

Tourism Sector Edition Sunday, Jun 17, 2018, Issue No. 949

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+++ Airbnb Meltdown, Losing Sight of What Makes a Company Successful

I wasn't going to write about Airbnb again, I really wasn't. But the 
meltdown of the firm's business here in Japan over the last 2 weeks has 
been so spectacular, and the reasons for the meltdown so core to the 
future of Japan's inbound travel economy, that I couldn't ignore it.

In case you haven't been following the news, although everyone knew that 
the home sharing "Minpaku" law was going to go into effect on June 15th 
(last Friday), Airbnb Japan received sudden and unexpected 
administrative guidance from the authorities at the end of May that it 
had to remove ALL listings on its site by June 1st AND to show sincerity 
about it - in the form of emailing customers that their host had been 
removed and that they would have to find alternative accommodation. 
Chaos was the result, and Airbnb lost at least 80% of its online listings.

You see, originally Airbnb was going to give existing hosts the 
opportunity to stay listed until the 15th, and more importantly to have 
the option for those hosts delisted to continue at their option to host 
customers who had already booked - as a kind of wink-wink, nudge-nudge 
approach to the new laws. But somehow the government got wind of the 
intended process and issued its very explicit directive. The outcome was 
pretty shocking both for both the hosts and for the tens of thousands of 
people who'd been booked for holidays from now through to the end of the 

The situation also shows that  Airbnb lacks the deep communication 
channels needed to read and negotiate the government's true intentions. 
This is ironic considering the company is staking its future in Japan by 
lobbying for basic law changes.

Anyway, the damage was done and Airbnb to its credit set up a US$10m 
emergency fund, to help holidaymakers find alternative accommodation or 
even to cancel flights and get refunds. But even as Airbnb sought to do 
damage control with its customer base, it curiously chose to ignore the 
other key stakeholders in its business - the hosts. In fact, the company 
did nothing other than some system messaging to tell hosts they were 
being de-registered, and it wasn't until a week after the shock decision 
that the company even bothered reached out personally to its Super Hosts 
- those people at the top of Airbnb's supplier network who had done 
everything right at least 50 times over in order to earn that rating. 
Unfortunately, the reach-out was done by a very clueless outsourced call 
center - which gave the impression that Airbnb doesn't really care about 
its hosts.

[Continued below...]

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Now, if there's one prime directive of business, it's that there are 
four stakeholders and you have to pay attention to all of them if you 
want to stay in that business. The four being: shareholders, customers, 
staff, and suppliers. As a result, there are many p**sed off hosts out 
there (think thousands, at least), who could have been helped across the 
regulatory lines if Airbnb had thought to try to keep them onboard. 
What's especially weird with ignoring them is that it's these individual 
hosts, the families, the single professionals, and the little old 
ladies, who make Airbnb's model so compelling. The business is not just 
about cheap accommodation, it is about experiences with local people. 
Airbnb is frittering away this important asset in its pursuit of a 
bandaid new direction that may or may not work.

It appears that Airbnb's pivot will be three-fold. Firstly they have 
announced an attention-distracting partners program with a grab-bag of 
the usual suspects in Japan. Not only am I underwhelmed by the partners, 
few of whom have any competence in the Inbound travel market, but the 
list says to me that the partners were selected purely from a Japanese 
viewpoint to create a belated veil of respectability. This approach 
totally ignores the elephant in the room, which is the shortage of 
inventory created by the new rules.

Secondly, the company appears to be making belated efforts to reach out 
to hosts - but mostly the focus seems to be training new hosts how to 
look after foreigners - a useless activity given that tens of thousands 
of hosts have already figured that one out. Once again, the program 
ignores the elephant in the room.

Thirdly, and this is just my speculation after seeing the list of 
"partners", I believe that Airbnb will start selling its inbound traffic 
flow to third-party corporate holders of room inventory (hotel chains, 
apartment building owners, replacing individuals), so as to stay in 
business. This will allow them to continue clipping the ticket, the same 
as they've been doing since becoming a first-mover in the sharing 
economy, just the margins will be lower and there won't be the local 
hosts. Once Airbnb customers figure out that they are not getting a 
genuine local experience any more, I suspect many people will simply go 
to Booking.com - who have a better selection.

In fact, when it comes to just purely cheap accommodation provided in 
antiseptic packages, Airbnb is not a natural winner. Rather, there are 
already tons of Japanese companies who can do the job way better - 
ranging from capsule hotels and backpacker hostels to share-house 
operators. They have the capital, facilities, local connections, 
long-term commitment, and cleaning crews that Airbnb do not. Instead, 
Airbnb is about community, and the company needs to remind itself of 
that fact quickly and come up with a strategy that pushes this aspect in 
community-respectful Japan. Interestingly, apparently there are groups 
of hosts who have banded together in various localities to lobby local 
authorities to reduce their draconian ordinances. Airbnb should be 
funding these grass roots efforts and leading the education process for 
these host groups. Maybe it is.

Since Airbnb is an American company, and given that to date they have 
taken advantage of their size and fame to milk Japan's grey zone 
approach to home sharing, the firm should also try to leverage 
"gaiatsu". Namely, with Trump penalizing the Japanese with various 
tariffs (and many more to come) over market access, Airbnb should be 
lobbying as hard as possible with the U.S. government to put pressure on 
the Japanese one to intervene and quash the local anti-Minpaku 
regulations. Despite protestations to the contrary, the Japanese central 
government has many ways to bend local authorities to their will - not 
least of which is tax income redistribution.

The only catch with going to the US governemtn is that Airbnb has been a 
vocal critic of Trump and even took out a million dollars-plus ad on 
cable networks to riff off Trump's "s---hole" comments regarding Haiti, 
El Salvador and Africa. Then of course there is the fact that Airbnb 
does leach paying customers away from hotel chains, including those 
owned by Trump - which makes them a natural enemy of the current 

Yeah, so local community building is probably going to be a more 
rewarding course of action for Airbnb.

...The information janitors/


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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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