Airbnb Faces Adoption Slowdown

A recently published report by Morgan Stanley shows that Airbnb's initial utilization rate prediction for 2017 will only be reached by the end of next year. In the light of the platform's struggles to maintain the momentum gained in 2015 and 2016, online travel agencies gain significant ground.

hotel-roomIn its third consecutive annual Internet, Lodging, Leisure report, Morgan Stanley researchers say that Airbnb absorption slowed down in 2017 and the trend is expected to continue in coming years. As awareness reaches a critical point and online travel agencies (OTAs) are becoming stronger competition, Airbnb struggles to maintain the significant increase in usage it witnessed in 2015 and 2016. Morgan Stanley’s report is based on a survey made with 4,000 consumers from the U.S., the U.K., France and Germany.

After suggesting that the room-sharing platform presents a greater-than-expected threat to traditional hotels in its report last year, Morgan Stanley’s new research shows that Airbnb’s growth rate has dropped significantly. Airbnb adoption is still high (25 percent), but its growth (3.3 percent) is nowhere close to where it was in 2016 (roughly 8 percent). The 28 percent adoption rate predicted for 2017 could probably be reached only by the end of next year. The financial services company has also updated its forecast for coming years, reducing the expected absorption rate for 2020 from 43 percent to 31 percent.

Possible explanations

Morgan Stanley analysts consider that the slowdown was caused, in part, by the fact that the platform’s awareness nears saturation in the U.S., the U.K., Germany and France. Roughly 80 percent of respondents say they have heard of Airbnb, 54 percent more than in 2015. Airbnb awareness is higher in France, where it reached 87 percent this year, up by almost 15 percent from 2016 and by more than 65 percent from 2015. Awareness was lowest in Germany, up from 62 percent in 2016 to 73 percent this year (45 percent in 2015). Meanwhile, the U.S. (81 percent) and the U.K. (79 percent) are on par with the overall average.

An unexpected growing concern regarding privacy and safety has also pushed down Airbnb’s potential growth, as more than 35 percent of respondents say these are important issues. This represents a 63 percent increase from the ratio in 2015.

Things looking up for OTAs

After a flat growth rate in 2016, OTA usage is on the rise again. About 58 percent of respondents used this channel in 2017, up roughly 2 percent year-over-year. Researchers suggest that going further, OTAs are becoming threats to Airbnb, not the other way around, as OTAs offer users the possibility to select from both hotels and alternative accommodations.

Meanwhile, hotel websites aren’t doing so well. The usage growth rate has leveled off in recent years. With 66 percent of travelers visiting up to three websites before booking their online travel, the competition between Airbnb, hotel websites and OTAs couldn’t be higher.