Case Study: How Airbnb Can Add $10 Billion To Its Annual Revenue With Long-Term Furnished Hosting

TLDR

Due to short-term rental (STR) laws in NYC and Philadelphia, I have had to switch my Airbnb properties to longer-term hosting.
Better facilitating longer-term furnished housing will keep hosts in markets with STR bans or restrictions using Airbnb
Scaling better to facilitate longer-term furnished housing, such as corporate housing, is a market that has increased by 12% between 2014 and 2018 and has grown to a $101 billion market compared to the 3% growth of hotels. Corporate housing is only 13% of the furnished housing market.
Airbnb can add a growth lever to its revenue by gaining a 10% market share in the furnished longer-term housing market such as corporate housing, which equates to adding up to $10.1 billion to its annual revenue based on the 2018 corporate housing market.

Background

I own two Airbnb properties, and I’ve been a Super Host continually since the second evaluation period in 2014. My family and I live in our two-family townhouse in Brooklyn within the duplex unit, and we rent the one-bedroom rental on the ground floor. After short-term rental laws were enacted in NYC, I reinvested profits into buying a 3-bedroom, 1.5-bath townhouse in South Philadelphia located strategically close to the stadiums, the Children’s Hospital, and Universities such as UPenn. Philadelphia also initiated short-term rental regulations two years after I purchased the property, making it difficult for hosts like myself to get a permit. I’m still trying to get a variance to continue short-term hosting, an ongoing process with a lawyer. Due to the changes in laws and difficulties obtaining permits, I have switched both properties to long-term furnished rentals. This strategy does not require changes to the setup of either property. In both places, I tend to host digital nomads, corporate clients, relocating people, or property owners needing a place to stay during remodeling or repairs. I also tend to get construction workers and families with a patient at a local hospital in the Philadelphia market.

The Market Opportunity

I believe Airbnb can add a significant growth lever to its annual revenue by gaining a 10% market share in the monthly furnished housing market, which can add $10 billion to its annual revenue. From 2014 to 2018 alone, corporate housing experienced a 12% combined annual growth rate from $64 billion to $101 billion compared to the 3% hotels experienced in the same timeframe. Of the furnished housing market, corporate housing makes up 13% of the market. I could not get an overall view of long-term furnished housing related to overall market numbers, so I’m using corporate housing as the baseline.

How Will I Know this Effort is a Viable Opportunity?

Before implementing new product features, I want to do some initial groundwork to be assured that the opportunity is worthwhile. In this regard, I would create a survey and then invite participants to opt into a follow-up focus group or user testing on design prototypes. I would target hosts in markets that have banned short-term rentals or have significantly restricted them. I would also target users who have had extended stays of longer than 30-days. Part of this process will be designed to validate my initial assumptions. I would limit a focus group to no more than 20 of the most intriguing hosts who left the most detailed, engaging feedback. There would be no limit to surveys as I would be able to capture more overall data.

Personas

Based on my understanding, this is what I know of the personas of an extended stay guest and a host who can no longer host short-term stays.

Long-Term Guest

Payment/Budget
- May have a stipend or a monthly budget. When using Airbnb may need to try to negotiate to get a place within their budget and target area.
- May be a corporate guest where a broker or company is arranging their stay and paying the host
Amenities
- May have preferences in amenities to save money such as a full kitchen and in unit laundry.
- May be a digital nomad working remotely and may need a dedicated workspace and high-speed internet
Timeline/Schedule: May not have a set schedule, so may have an open-ended end date for their stay.

Host Impacted by STR Laws

Impact of Laws: Can no longer host short-term guests who are more lucrative due to a change in laws and being unable to get a license. Must host extended guests for at least 28 days.
Pro-Tenant Municipalities: May have concerns about hosting longer-term stays in pro-tenant cities due to the arduous process of evicting a tenant who stays for more than a month and stops paying. Needs to feel comfortable trusting long-term tenants, particularly if they will not be signing a lease.
Converting STR Setup: Are looking for ways to monetize their property. The easiest way is to keep things the same but switch to extended stays or furnished month-to-month rentals. Hosts who make a more permanent change may opt to sell off items and clear their space for tenants who sign an annual lease.
Off-Platform Rentals: May rent to long-term monthly tenants off-platform using sites such as FurnishedFinder or TurboTenant that help facilitate longer-term stays with lead capture, leases, maintenance, and payment processing.

Survey

These are the segmentation characteristics that I would target for the survey: hosts impacted by STR Bans, hosts now forced to host for 28 days or longer, impacting their income, and top hosts who are less engaged due to STR Bans.

Host Characteristics for Survey

Segmentation		Characteristics
1	Short-Term Rental (STR) Ban Hosts who cannot get a license and continue legally hosting short-term stays	Hosts that do not have a license inputted into their account and has their minimum stay set to 31-days by default
2	Monetary Hosts who may be worried about not meeting their minimum monthly threshold	Hosts who allow extended stays but have turned off instant book because they are concerned about not meeting their monthly minimum margin.
3	Top Hosts Who Have Less Engagement The top performing hosts in their market who are less engaged after a STR ban	Hosts who are Super Hosts or the top 25% in their market related to guest stays, ratings, and/or revenue weighted against losing Super Host due to hosting fewer stays/guests, or making less revenue after a STR ban

These three buckets would give me the highest probability that a host was impacted negatively by a STR ban and changed how they use the platform. If feasible, I would focus on segmentation number 3, the hosts who were the top-performing hosts before a STR ban and have lost business afterward since they probably add the most value to Airbnb’s bottom line.

With the survey, I would want to learn the following:

Why have they stopped STR in their market?
What does the status of their property and rental business currently look like?
Have they used Airbnb for long-term stays?
What their outlook on using Airbnb for long-term stays?
What other platforms they use for long-term stays, if at all?
How Airbnb measures up to the other rental platforms that they use for long-term stays?
What if anything, would make them more likely to use Airbnb for long-term stays?

I will know I’m on the right track if I’m seeing characteristics similar to my journey where I’m hearing other hosts feel that Airbnb is not an ideal platform for longer stays, STR laws have impacted them, and they have been forced to move their business elsewhere such as platforms that are more geared towards long-term furnished housing.

Scaling the Platform

Airbnb can scale its platform for longer-term rentals without much friction, with a limited scope to build off their existing UIs. I have broken the features by use case (host and guest) and the effort it will take to implement by shirt size (S - days, M - weeks, & L - months). In a corporate environment, I would check in with engineers and the design team to confirm how much effort each would take.

Host Product Features

Feature	Priority	Effort
Long-term amenities The ability to call out amenities for long-term stays to their listing, such as desk space, onsite laundry, full kitchen, or ongoing housekeeping.	P1	S
Lease agreements The option for lease agreements is an extra form of protection for hosts. Guests with at least 1 negative review, less than 5 reviews, or an overall rating of less than 4.5 stars will not be able to skip signing a lease.	P2	M
Additional tenant screening There will be additional screening for tenants who cannot pay for their stay upfront, including employment verification, proof of funds, and a credit check. Additional incentives such as additional discounts can be applied to incentivize paying in total upfront.	P2	M
Scheduling services The ability for guests to schedule services, such as when they want periodic house cleaning for their long-term stay.	P3	L

Guest Product Features

Feature	Priority	Effort
Filter by Extended Stay Amenities The ability to default filters for extended stay amenities that can be overridden by guests. (i.e. desk space, onsite laundry, or full kitchen)	P1	M
Stellar Guest Badge The ability to earn a “stellar” guest badge that hosts can see that confirms that they have not received any negative reviews, have at least 5 reviews, and a rating of at least 4.5. This can be a guest/tenant’s version of Super Host.	P1	S
Financing a long-term stay Using services like Affirm to pay upfront for a long-term stay and get a discount on the total fee and then pay back the financing provider over time.	P1	S
Additional Profile Verifications The ability to add additional verifications to their profile such as a credit score and a solid rental history with no evictions, to earn a “vetted” badge that hosts can see and help them feel more comfortable for having the guest for more than a month.	P2	M
Scheduling services The ability for guests to schedule services such as when they want periodic house cleaning for their long-term stay.	P3	L
Corporate Profiles & Validation Corporate profiles and validation for corporate stays where a company is paying on behalf of guests.	P3	L

The MVP Pilot Features

The goal of the MVP pilot is to launch with as many low-lift, high-impact features as possible without changing the UIs and tech stack too dramatically, so it is not a heavy lift. In that regard, I've included the lowest lift features in the table below.

Pilot Features by Persona and Use Case

Persona	Feature	Use Case
Host	The ability to set monthly pricing exclusive of fees	Pricing
	Adding call outs for long-term hosting amenities such as full kitchen, restocking, ongoing housecleaning, or dedicated workspaces.	Amenities
	The assurance that a guest is reliable to stay beyond 1 month in areas with strong tenant rental laws without a lease and pay on time (i.e. No negative reviews, at least 5 reviews, a minimum of 4.5 stars, and being fully verified)	Security
Guest	The ability to filter/search for long-term stays with a monthly budget	Search
	The ability to filter for amenities for long-term stays	Filter
	The ability to use financing as a means to pay for a long-term stay up front	Payment
Host & Guest	The ability to view long the monthly and full stay breakdown of pricing with fees include	Pricing
Host & Guest	The ability to see scheduled payments during the course of a stay	Pricing

I would work with project managers to put a project plan together. I suspect the MVP features could be designed and developed within a quarter of work. I would also scope in testing in the form of user tests on clickable design prototypes and focus groups on the target hosts to gauge if everything is optimal before the pilot launch.

UI Notes

I like to leverage my information architecture and UX design skills to assist design team members with potential options. I have experience in team ideation sessions and running design sprints.

Landing Page

Adding an additional filter for business travel or extended stays
Selecting that filter will repopulate the view to business traveler views such as dedicated workspaces
Special pricing callouts for hosts offering fixed monthly pricing

Guest Duration Views

The ability to default an extended stay by adding an additional “Extended” option to the Flexible stay view.

Guest Trip Filters

The ability to override extended stay or business traveler pre-populated filters:
Hi-speed wifi
Full Kitchen
Laundry

Host Monthly Pricing Settings

Giving hosts the option to set a monthly minimum price which will set a monthly flat rate. The host will also have the option to set a minimum duration to trigger a flat monthly rate.

Guest Pricing Views

Monthly price consistency with hosts who set a fixed monthly price for business travelers who meet their minimum stay duration.

Running the Pilot & Determining Success

Post-launch, I suggest running the pilot for a quarter to determine its success before scaling to add additional features. It makes sense to run the pilot in a few markets where STRs have been impacted, such as New York City, San Francisco, CA, and Miami, FL. Success metrics will center around increases in guests who want to stay long-term, hosts who accommodate long-term stays, and increased revenue from long-term stays to counteract revenue losses from STR bans.

Use Case	Metric/KPI	Success Outcome(s)
Hosts who can no longer host STR stays of less than a month	Engagement	Reactivating a dormant account set to “Deactivated”
		Willigness to turn on instant book for long-term stays
		Setting a minimum monthly price threshold
	Revenue	Increased guest bookings
	Revenue	Increasing host revenue
	Loyalty & Outside Engagement	Reduced metrics related to outside bookings synced to block Airbnb Calendar
Long-term guests	Revenue	Increasing revenue in markets that have banned or curtailed STR Choosing to pay up front for the entire stay rather than paying monthly for their extended month-to-month stay
Long-term guests	Engagement	Usage of filters for monthly pricing and long-term stay amenities

Next Steps

If the pilot succeeds, the features can be rolled out to the entire target market of cities that have banned or curtailed STR, impacting Airbnb’s revenues to gauge if it can succeed in more markets. The Airbnb Early Access program can be utilized to further try the features with additional hosts and guests. If all goes well, the features can be released to the entire user base before scaling to add additional functionality for long-term hosting, such as lease agreements and additional vetting tenants.