The Economy of Experience 

December 04, 2019 Admin 0 Comments

As people begin to value “things” less and “doing stuff” more, Airbnb has simultaneously personalized and commoditized the food-related experience

Danielle Oteri has been giving food tours of the Bronx’s Arthur Avenue for more than a decade, but her family’s connection to the famous Italian-American enclave in New York City go back even further: all the way to 1918.

When Airbnb opened up its Experiences tours and activities business to New York City in 2017, nearly 100 years later, Oteri was one of the first hosts to sign on. But now, two years in, Oteri, a seasoned food tour guide, is noticing some copycat tours on the platform. One of them, she suspects, was started by someone just trying to get some money on the side. Another? A major conglomerate that sells its tours on every platform imaginable. She’s even seen some of those bigger players tweak their Airbnb host profiles to make it seem as if their tours are offered by just one person, like a local food blogger, instead of some big corporate entity.

Oteri’s friend and fellow food tour guide, Joe DiStefano, a Queens, New York-based food writer, says he’s even heard of people going on a food tour, asking the guide for the specific prices of each item eaten, and then hosting the same exact tour on Airbnb — for half the price. “When you’re on a platform [like Airbnb], even if you’re successful, it’s very competitive, because you never know who’s going to come in and sell an experience like yours,” says Oteri. “Anyone who does an experience on there is vulnerable to having someone do the exact same experience.”

Welcome to the very competitive, often cutthroat, and ever-growing world of experiences.

It’s been more than two decades since the term “experience economy” first appeared in the common lexicon, and it has since come to define the modern approach to living. While consumer culture is still alive and well, as a whole, millennials and Gen Zers are valuing “things” less and “doing stuff” more — especially when we travel. Today, it’s often perceived to be more valuable or more meaningful to meet with locals and break bread than it is to buy a bunch of souvenirs from them.

This might explain why so many more companies are selling experiences than ever before. According to travel research firm Phocuswright, the tours and activities market could be worth $183 billion by next year. In 2018, we saw a record 1.4 billion international tourist arrivals worldwide, according to the United Nations World Tourism Organization, and those travelers are shelling out more money on things to do than on car rentals, train tickets, or cruises combined. (The only items we spend more money on are airline tickets and lodging.)

Of those activities, eating and drinking are the most prized. In a recent survey by Arival, a resource specifically for the tours, activities, and attractions industry 68 percent of travelers said food and drink were the most important elements of their trips. Another Arival survey of nearly 4,000 American and European travelers revealed that 27 percent had done some type of culinary tour, class, or experience — beyond just dining out. Younger travelers ages 18 to 34 (32 percent) are even more likely to have done some food-related experience during their most recent travels.

It was no surprise, then, when Airbnb recently debuted a collection of more than 3,000 experiences exclusively dedicated to cooking in more than 75 different countries. It was the first time Airbnb had carved out a category of Experiences so specific to a single activity.

And we as customers aren’t just consuming the experiences — in some instances, we’re creating them for those very businesses to sell, as in the case of Airbnb, a $35 billion travel company that’s planning to go public next year. But as a whole, tours and activities are still a highly fragmented part of the travel business, with lots of players, both big and small. It’s still not uncommon for people to book an excursion after learning about it from a brochure they found in their hotel lobby, for instance, or after getting approached by a sightseeing bus company rep. Which is a big reason why Airbnb seized on the opportunity to get into this business three years ago.

In 2008, Brian Chesky and Joe Gebbia, desperate to make some extra money to pay their exorbitantly high San Francisco rent, advertised their air mattresses as overnight lodging options to arriving design convention attendees. By 2016, Airbnb, as a short-term rental service, was valued at more than $30 billion. That same year, Airbnb’s co-founders dove into the deep end of the experience economy by launching Airbnb Trips in the fall. Instead of asking people to share their homes, Trips asked regular people to share their own expertise via publicly offered “experiences,” with Airbnb getting a 20 percent cut.

From the beginning, Airbnb’s experiences — of which there were only 500 in 12 cities at the time — were billed as something very different from the double-decker bus tours of old. At the launch, Airbnb CEO Brian Chesky described Airbnb Trips as “handcrafted experiences that allow you to immerse in the local community.” You could go truffle hunting with one of Italy’s best truffle hunters; learn how to master chasu, the Korean art of embroidery, in Seoul; attend a Drag Queens Cooking Class & Dinner Party in Lisbon. Carve a wooden masterpiece armed with nothing but a chainsaw in Salem, Oregon. Or go on an adventure with Mr. Beaches, a San Diego-based Pembroke Welsh corgi who moonlights as a stand-up paddleboard instructor.

Liz Martinez, Airbnb’s global director of food and drink experiences, says that what Airbnb looks for in Experiences host applicants is access, expertise, and connection. It’s a tricky balance — striving for expertise without diverging from the ethos of Airbnb, which is built around prioritizing regular people over seasoned or more professionalized brands, valuing the authority of a local over some official tour guide (even when that local is, in fact, your tour guide, and maybe even a licensed one at that).

Airbnb didn’t invent the concept of selling specialized activities. Sites like Vayable, Eatwith, Withlocals, TakeMeTour, and CityUnscripted, which also offer peer-to-peer tours led by locals, have flourished in recent years, some even preceding the launch of Airbnb Experiences. But Airbnb has more scale than any of those aforementioned sites, and it can go head to head with online travel agency behemoths like TripAdvisor, Expedia, and Booking Holdings, which alone is worth nearly $88 billion.

What Airbnb has that those other online platforms don’t is the brand reputation of being a global community of real people. Airbnb hosts describe themselves as executive chefs, “A Man and His Sandwich,” passionate home cooks, food lovers, and even masters of food identity. These “nonprofessional” tour guides helped position Airbnb as the antithesis of what Expedia, Booking, and TripAdvisor sell as experiences, even though Airbnb, as a corporate behemoth, has the size and revenues to match or surpass them.

Airbnb Trips was officially rebranded as Airbnb Experiences in 2018, and today there are more than 40,000 Airbnb Experiences to choose from in 1,000 cities. Of those 40,000 experiences, food- and drink-related activities are among the most booked, although Airbnb wouldn’t disclose exactly how many of its Experiences feature food and drink. It did say that bookings for these experiences have grown 160 percent since 2018.

According to the Information, Airbnb expects to generate up to $5 billion in total revenues by the end of this year, although it’s still unclear how much of that will come from its Experiences business.

In 2018, the Information reported that Airbnb saw $15 million in revenue from Experiences for the first three quarters of 2018; it’s a decent sum, but still a small fraction of its total earnings. While Airbnb has reportedly been profitable in years past, the Information reported Airbnb recently saw a $100 million loss before interest and taxes in the second quarter of this year, primarily because it’s upped its spending on marketing and advertising in the ramp-up to its direct listing.

The company is also investing in adjacent experience-oriented businesses. In September, Airbnb led a $20 million Series B funding round for Atlas Obscura, a travel media company that’s been offering unique local experiences since it was founded in 2009. Users can book nearly 50 different Atlas Obscura experiences on Airbnb, and that number will only continue to grow over time, says outgoing Atlas Obscura CEO David Plotz. Atlas Obscura also has a dedicated food vertical, Gastro Obscura, and may eventually launch Gastro Obscura-branded experiences soon, although a number of food-focused Atlas Obscura experiences are available now.

New companies are getting into the game as well. Media brands including Afar, Eater, and Fathom are also selling their own branded experiences. In August, Eater announced the debut of Eater Journeys, powered by professional tour operator Black Tomato. Uber Eats is starting to sell cooking classes and dining experiences, too. “‘Experiences’ is the buzzword of the day when it comes to travel,” says Fathom co-founder and CEO Pavia Rosati. “I can see why everyone wants to capitalize on this as a growing trend. Airbnb is no different from any hotel company or anybody else in the travel space.”

While we’re in the midst of an experiences gold rush, the ones making out are rarely the hosts themselves. Demand is high, but all the new competition is tough. Last year, the median total earnings that an average Airbnb Experiences host collected from their Experiences business was $2,500 — not enough income to live off of, but for some, a nice chunk of spare change.

For DiStefano, food tours have actually become his primary source of income. “I’m the world’s laziest freelance writer,” he jokes, but he sometimes hosts as many as three to seven tours a week, and Airbnb accounts for as much as half of his business.

Last year, Parisian native Aurore Saint Olive quit her full-time job in private banking to start her own cooking class company, Amour en Cuisine; she began hosting her own Airbnb Experience in November 2018. She hosts four times a week on average, and 70 percent of her business comes through Airbnb.

“I gave myself one year to decide it if I would continue with it, and I’ve already decided I will, because it’s making me happy,” Saint Olive says. “I felt like in my previous job I didn’t always know why I was doing what I was doing. But now I have this mission. I have four hours to entertain a group of people and make them love Paris and French food as much as I do, and to have a special experience. Even if it’s exhausting, this is a feeling I’ve never had before.”

Still, the margins are usually slim. If you don’t book enough people for your excursion, you could very well end up losing money. That’s been the case for Christopher Pellegrini, a Tokyo-based shochu and awamori expert who’s been hosting a “Sake Shochu Showdown” since Airbnb Experiences launched in 2016. Sometimes, Pellegrini has played host for a party of one, meaning he doesn’t make any profit from hosting that experience. Airbnb doesn’t allow its Experiences hosts to set a minimum number of guests for each activity. So if just one person books an Experience, that host can’t cancel that excursion. “Sometimes you feel like they’re always on the side of the travelers,” Saint Olive says of Airbnb. “They can cancel 48 hours before an experience, but if you’re a host and cancel less than a month before the date, you have penalties.”

Pellegrini, however, is also the first to admit that his packed schedule keeps him from hosting as often as he could to turn a profit. “I don’t do it for the money anyway,” he says.

Just getting approved as an Airbnb Experiences host can be a challenge, even though there are now more than 40,000 Experiences in total. Most hosts who apply don’t hear back from Airbnb until at least two to three months after they’ve formally applied. Jo Mae “Jumi” Oraa and Greg Gouras, who take people on moonlit missions to find the best street food in Queens, say it took them at least three months to get their application approved as Airbnb Experiences hosts.

Saint Olive’s original application to be an Experiences host was rejected, but her persistence paid off; a few months later, she reapplied, and this time, the Airbnb Experiences team in Paris contacted her immediately. Once you’re approved, Airbnb may also suggest you lower the price of your Experience — at least initially — to attract more people and generate more reviews that will boost your ratings and chances of getting booked.

That was the case for Oraa and Gouras, who dropped the price of their experience down to $40 per person when they first began hosting. A few months later, however, they brought the price back up to $55 per person. A host doesn’t have to comply with this suggestion, however; they retain full control of the itinerary, schedule, frequency, and pricing of their Experience. Hosts also aren’t required to advertise their activities on Airbnb alone; they can promote them on other sites, too, including their own.

DiStefano, for example, promotes different tours on Vayable and Meetup. But he says that if there’s a benefit to using Airbnb, it’s that it opens up your business to a much more global audience. Airbnb, like other platforms, also takes a standard commission rate of 20 percent from every booking, which some hosts find to be too big a cut.

Longtime Airbnb Experiences hosts like Pellegrini, Oteri, and DiStefano have noted that there’s more competition within the platform than ever before, especially as Airbnb adds thousands more Experiences each year. “The first thing I think is, ‘Can they possibly be all that good? What’s the level of vetting that’s going on?’” DiStefano remarks. As Oteri points out, not all Experiences are necessarily being hosted by locals, or someone who wants to share their passion with others. “[Airbnb] is just an aggregator, despite the fact that it has this distinct culture, brand, and ethos,” she says. “It’s pure capitalism — the good and bad parts of that.”

Airbnb says it has always verified each of its more than 40,000 Experiences for quality, but going forward, it’s also going to verify each one for accuracy, using a mix of “remote technology inspections” and “verifications from our community.” Technically specialized experiences that might pose a higher risk to guests will require proof of applicable permits, licenses, and/or certifications. Airbnb recently issued its new verifications policies for its Experiences and Homes business after a scathing VICE article exposed a nationwide network of scam artists using the platform to sell fake short-term rental listings to unsuspecting Airbnb users.

Fathom’s Rosati, who has not yet booked an Airbnb Experience for herself, says she remains skeptical about the quality of what’s being offered. “Airbnb wants to own the travel experience from end to end, from the moment you think about the trip to the moment you come back home, and yet their content offering is pathetic,” she says. “Once, I was looking for the top things to do in New York City on Airbnb and I’m not joking, three of the top 10 experiences were Whole Foods. That may have been an algorithm problem, but now whenever I think of Airbnb’s relationship to content, that’s what I think about.”

Airbnb says that more than 90 percent of its Experiences have five-star reviews, but it’s widely understood that guests and hosts are often reluctant to rate one another harshly. “Even the guests I thought would give me a bad review gave me a very positive one,” says Saint Olive, who hasn’t had any negative reviews to date. “It might be because even if they are not completely satisfied, they feel that I’m trying my best to have them spend the best time that they can. Maybe they’re touched by this intention of mine, even if it’s not always perfect.”

Gouras, who took the extra steps to become a licensed tour guide two years ago, works in data entry, and his partner, Oraa, works full time as a nurse. While they aren’t planning to quit their day jobs anytime soon, they say that eventually, becoming full-time food tour guides isn’t out of the question. They chose to sell their tours on Airbnb because “What Airbnb does is attractions that aren’t tourist traps,” Oraa says. “Your guides are locals. This generation of travel is all about going off the beaten path.”

That’s sort of true. But what’s also true is that some people continue to want more traditional experiences and sightseeing excursions, too. Globetrotters are still making pilgrimages to those tried-and-true attractions and activities. “The era of the big bus tour isn’t dead at all,” says Atlas Obscura’s Plotz. Just like everyone who posited that Airbnb signaled the death knell of hotels, those who assumed Airbnb Experiences would kill the traditional tours and activities business would find quite the opposite: Since 2010, hotels have thrived, and more traditional tours and activities are also flourishing.

And don’t be surprised if you see those more traditional or mass-market experiences on Airbnb in the next few years, just as we’ve seen actual hotels show up, too. Airbnb even bought HotelTonight, a last-minute hotel booking platform, earlier this year. Already, as Oteri noted, you’re seeing mainstream tours and activities flooding the Airbnb platform under the guise of being hosted by everyday folks. In October, Airbnb led a $60 million investment round in a Dutch company called Tiquets, a ticketing platform for major attractions like the Empire State Building, Sagrada Familia, and the Vatican. Perhaps, soon enough, you’ll be able to book your ticket to go to the Sagrada Familia and your dog-and-human Barcelona beer tasting all in the same place.

In the end, there’s room for everyone, and the appetite for experiences of all kinds remains, even though it may not hold out for long. “The global recession is what’s going to be dangerous for all the folks who are in this field,” Plotz says, “but I think there’s plenty of room for differentiation and uniqueness and distinct experiences as long as people have the money to travel.”

On October 8, news broke that longtime Airbnb employee Joe “Joebot” Zadeh was leaving his post as the head of Airbnb Experiences to take on a new role in which he would focus on getting the company ready for its IPO. A successor for Zadeh has yet to be named, lending doubts as to whether Airbnb can turn a profit from selling experiences, especially if or when a recession arrives. But for hosts, the economics may not matter anyway. “I don’t think most people think of this necessarily as a career,” says Plotz. “I don’t think everyone will become a tour guide, but for lots and lots of people, it’s going to be about sharing what I know, and I can make some money doing it and feel a connection to other human beings. How nice is that?”

Plotz, in fact, knows firsthand what it’s like to be an Experiences host. Although he’s leaving his post as CEO of Atlas Obscura once his replacement is hired, he plans to continue giving tours of a “secret fort” in Washington, D.C. As for the demand for this kind of excursion, and the ability to access it? That’s what companies like Atlas Obscura and Airbnb, and hosts like DiStefano, Gouras, Oraa, Oteri, Pellegrini, and Saint Olive, are investing in.

“Will there be enough people who are in that particular city on that particular day to make it worth it for everyone’s while?” Plotz asks. “That’s where the tremendous scale and technology of a company like Airbnb comes in. There’s the ability to target people and make sure they are seeing things they are most likely interested in. I would bet on it; I am betting on it.”

Deanna Ting is a New York-based writer, editor, and photographer who’s covered the travel and hospitality industry for the past 14 years. She was recently hired as the Senior Platforms Reporter for Digiday.
Carolyn Figel is an illustrator and animator based in Brooklyn, New York.