How Airbnb is empowering
Boutique Hotels and B&Bs to build their business
Traditional hotel chains and large resorts have long
dominated the accommodation industry because of their strong
brand marketing and distribution channels.
But as with so many other industries, the internet is
disrupting the traveller accommodation industry. With
internet booking platform operators such as Airbnb, Stayz,
eDreams and Bookings.com, the internet is providing small
accommodation providers with easy access to a global market
for travellers, whether it is for business or pleasure.
sharing economy is
In this article we look at how internet booking platform
operators are providing services to small accommodation
providers to help build their business, and the legal
compliances applicable in Australia. We draw upon
information found on Airbnb websites.
How does Airbnb create a
marketing position for small accommodation providers?
Airbnb has created a clear marketing position for its hosts.
Airbnb describes itself in this way:
Airbnb connects people to unique travel experiences in more
than 34,000 cities and 191 countries.
The focus is on local
travel experiences, encouraging guests to
live like a local. This clearly differentiates Airbnb
listings from large hotels and resorts which market their
rooms and in-house dining, gym and business facilities as an
Airbnb encourages its hosts to engage with the local
community by providing:
- Locally relevant or unique amenities, such as local
food or beverage;
- Local maps with personalized recommendations;
- Local tours such as neighbourhood walking tours; and
Airbnb specifically lists these types of accommodation as
suitable for Airbnb listings: Bed & Breakfast; Boutique
Hotel; Nature/Eco lodge; Timeshare; Serviced Apartment;
What four services does
Airbnb provide to small accommodation providers?
Airbnb provides these services to small accommodation
Until recently, it was hard and expensive for small
accommodation providers to market their property for
short-term stays. So the traditional hotel chains, with
their superior marketing resources, dominated the
The small accommodation providers - boutique hotels,
resorts, bed and breakfast establishments and serviced /
holiday apartment owners engaged specialist booking
agents to market their property, and paid a commission
often in the range of 15% to 20%. They advertised in
accommodation directories, in the print media and in
Airbnb gives small accommodation providers access to
a global marketing platform. Airbnb has over 2 million
listings, including 70,000 in Australia. These listings
generate over 60 million guest bookings per year. Hosts
can list on Airbnb free of charge.
In terms of legal compliance, both the host and the
platform must comply with the Australian
Consumer Law by
not falsely advertising or misrepresenting the property
or the price.
Airbnb calls it having
an accurate profile and listing.
The profile is
the host’s profile, where a photo, a description and a
‘fun fact’ are encouraged.
The listing is
for the property, where photos, descriptions of the room
and accommodation type, and the amenities within the
property are required. These photos and descriptions,
and local information such as proximity to transport and
to restaurants, must be accurate.
Airbnb will sanction hosts who do not comply by
removing their listings.
(2) Bookings Management
Airbnb provides a booking platform. As part of its
booking management, it screens both hosts and guests.
It carries out rudimentary background checks on hosts
using available public records to check for criminal
records, sex offender registrations and membership of a
terrorist organisation. These checks are limited and do
not guarantee safety. It obtains information from
guests, such as passport details, before they are
allowed to book.
Hosts have considerable control. Hosts set
availability and house rules. Hosts set the rent for the
accommodation (the ‘price’) which can be adjusted as
desired. Hosts can refuse a booking application, after
viewing the guest’s profile, without giving a reason.
Airbnb encourages both hosts and guests to get to
know each other when confirming the booking, using the
website platform. Various tools are provided, including
reviews from other members, verified ID or other
identity process on arrival, on-platform member
messaging to message the host or guest (with the real
email address anonymized) and reservation requirements
that hosts can set for their guests. After the stay,
hosts and guests are encouraged to review each other –
the reviews must be genuine, accurate and not misleading
to comply with the Australian
(3) Payments Platform
Airbnb provides a secure payments platform. The
payment is made in advance to Airbnb, which then pays
the host. A request by a host to pay outside of the
Airbnb payments platform is a violation of the terms of
service and may result in removal of their listings.
Airbnb charges hosts a host
service fee of
3% of the price for each completed booking. It charges
guests a guest
service fee of
6% to 12% of the price for each confirmed reservation,
the percentage decreasing the higher the amount of the
The price must be transparent: it must include all
compulsory fees and taxes, to comply with the Australian
Consumer Law. For
instance, if a service charge such as a cleaning fee is
charged on all bookings, this should be included in the
price. Any Goods and Services Tax (GST) (i.e. a VAT or
bed tax) should also be included, if it is payable by
(4) Property Damage
Small accommodation providers will have business
insurance. But cover is often excluded for injuries
sustained by guests and property damage by guests, or is
available at extra charge.
Airbnb fills these gaps by providing “Host Protection
Insurance” to cover injuries and a "Host Guarantee" to
cover property damage by guests, at no extra charge, for
bookings made through Airbnb. This is how Airbnb
The Host Protection Insurance programme provides
primary liability coverage for up to AUD$1,000,000
per occurrence in the event of a third-party claim
of bodily injury or property damage related to an
Airbnb stay. It's available to hosts regardless of
their other insurance arrangements.
The Airbnb Host Guarantee provides protection for
up to AUD$1,000,000 to a host for damages to covered
property in the rare event of guest damages above
the security deposit or if no security deposit is in
place. The Host Guarantee Programme doesn't cover
cash and securities, collectibles, rare artwork,
jewellery, pets or personal liability. [It] doesn't
replace your homeowners or renters insurance.
What town planning
compliances are there for small hotels and bed and
Airbnb states that the host is responsible for compliance
with local laws.
In Australia, the zoning determines the use for a particular
property. Generally speaking, the zoning could be a Tourist
Zone, or it could be a Mixed Use Zone, to be a zone where a
visitor and tourist accommodation use is permissible.
If the zoning permits visitor and tourist accommodation,
then town planning consent is required for specific uses,
such as: bed and breakfast accommodation, hotel or motel
accommodation, backpackers’ accommodation, eco-tourism
facilities, farm stay accommodation and holiday lettings.
These are common conditions of consent:
- An On-Site Manager
- A Plan of Management, covering operating standards,
health, amenity and safety standards, staff, guests,
security, waste and water efficiency
- A Noise Management Plan
- Annual Certification, including for fire safety
- An Emergency Management and Evacuation Plan for fire
- Compliance with health standards
- Compliance with rooms, recreational facilities and
Serviced Apartments, including Executive Apartments, are
different. The zoning is often a Residential Zoning because
they are in a building constructed for use as residential
apartments. Town planning consent is still required, but the
conditions are not onerous because the apartment is rented
as a whole (not per room).
If the Serviced Apartments are in block of Strata Title
apartments adjacent to owner-occupiers or long-term tenants,
this can lead to conflict. The conflict arises from
excessive noise at night, and extra wear and tear in the
foyers and the elevators by the travellers.
In a recent decision of the Supreme Court of Victoria, the
Strata Title management corporation failed in its attempt to
bar the use of 14 units in its high-rise building as
serviced apartments. The Court upheld the planning approval
obtained by the serviced apartment operator, and said that
this overrode the by-laws of the Strata Title Apartments
which barred short-term rentals.
Airbnb is empowering short-term rental businesses such as
small hotels and bed and breakfasts to attract bookings from
Airbnb provides these services: marketing, bookings
management, payments platform and property damage cover.
These services are increasing lodging occupancy and pricing
power for small accommodation providers.
Traditional hotels and resorts will be affected by the
increasing popularity of internet booking platforms such as
Airbnb. They are likely to experience slower revenue growth
and weaker profitability.