Corruption and Collusion: How Airbnb is selling out timeshare owners.
As the President of Cancel Timeshare, it is part of my job to stay ahead of all the major events in the timeshare industry. Recently timeshare owners have started to feel the pressure applied by Airbnb when trying to rent out their points or weeks through the Airbnb app. It appears that major timeshare developers, including Travel + Leisure Co (formerly Wyndham Destinations), are getting timeshare owner info directly from Airbnb and have used that info to target timeshare owners who are using Airbnb to rent.
Timeshare companies have always targeted renters.
It’s not surprising that the timeshare companies would act to thwart their owners from renting. For the last decade, most major timeshare developers have targeted timeshare owners who rented their timeshares frequently. This practice was done under the auspices of protecting other owners from having inventory taken by what the timeshare industry termed ‘mega-renting.’ However, in reality, the major timeshare companies have discouraged renting because it adds competition for their own efforts to rent unsold inventory.
In reviewing both SEC filings and the program disclosures for each major developer, it’s obvious that timeshare developers rent unsold inventory to lower the carrying cost of their inventory pools (they pay maintenance fees too). Also, renting out to the public creates new-owner sales opportunities (these are travelers who likely do not own a timeshare). In Travel + Leisure Co’s most recent quarterly filing, roughly 21% of reported net revenue fell under “Travel and Membership” programs which include ‘direct-to-consumer rentals.’
The percentage of revenues by each subcategory is not reported. However, I find it hard to imagine that the other components of “Travel and Membership” programs were responsible for significant portions of the close to two hundred million dollars earned over a three-month period. It just doesn’t pass the common sense test. Although we can’t say with certainty how much money timeshare developers earn by renting, it’s safe to assume it represents a large portion of the balance sheet and is of major importance to maintaining consistent revenue streams with lackluster sales post-COVID.
So what has really changed?
With the new collaboration between Airbnb and major timeshare companies, timeshare owners likely will pay a percentage of rental proceeds to the timeshare developer or risk being banned from Airbnb. While this policy hasn’t been rolled out to the entire network of major timeshare resorts, timeshare renters have reported several resorts have already started charging fees for each rental. Specifically, timeshare owners have mentioned Travel + Leisure Co’s South Florida resorts are already receiving nearly 40% of the booking revenue through Airbnb’s Host Fees.
It’s kind of insane to think that not only did the timeshare owner already pay tens of thousands of dollars in buying their ownership but now the one effective tool to help cover the recurring maintenance fee costs is being usurped by the developer. To say this is unfair is an understatement. Timeshare companies like Travel + Leisure Co are truly attempting to make the process of renting out timeshares pointless (no pun intended).
How does Airbnb benefit from helping timeshare companies target renters?
The shocking portion of what’s happening isn’t from the timeshare developer side of the equation. We all expect timeshare companies to act in a way that is bold, slightly aggressive, and what many feel is unethical. Although we probably equally dislike the way these companies do business, I think it’s par for the course and the norm for an industry known for high-pressure sales tactics and leaving buyers feeling burned.
The biggest question from this situation is why a silicon valley tech giant like Airbnb would work against its existing customer base. Why would Airbnb enter the questionable business practice of assisting a timeshare developer in enforcing exorbitant fees on longstanding customers? How do they gain in the long-term from operating against timeshare renters?
💡Our assessment
New Shareholder pressure
As they say, ‘timing is everything.’ I think the timing is exactly why Airbnb is pivoting to this new model. So many factors have changed in the US travel market, but specifically, Airbnb now has to publicly answer to shareholders. In context, Airbnb went public at the worst possible time. After struggling with global travel bans, wide-ranging credit-card chargebacks, new cleaning and safety protocols, and a paradigm shift in American travel- Airbnb (ABNB • NASDAQ) launched its Initial Public Offering (IPO) on December 11, 2020.
Since then, Airbnb’s stock price has increased 28% Year-Over-Year (YOY).
So how did they face the biggest pandemic and make it out ahead? Directly from Airbnb’s 10-Q (Quarterly Filing) for the period ending September 30, 2021:
Restructuring
During the year ended December 31, 2020, the Company experienced significant economic challenges associated with a severe decline in bookings, resulting primarily from COVID-19 and overall global travel restrictions. To address these impacts, in May 2020, the Company’s management approved a restructuring plan to realign the Company’s business and strategic priorities based on the current market and economic conditions as a result of COVID-19. This worldwide restructuring plan included a 25% reduction in the number of full-time employees, or approximately 1,800 employees, as well as a reduction in the contingent workforce and amendments to certain commercial agreements.
In my assessment, the shockwave from COVID19 upended Airbnb’s business model so much, that they had to secure safer long-term partnerships (B2B) to have the foundational backing needed to ride out the pandemic. Without making a play on the B2B market and its offerings, Airbnb would have been struggled to find the operating capital needed to survive (let alone thrive)over the last 12 months. Bulge bracket banks are more guarded now than ever regarding the outlook for the travel industry. It isn’t that travel is up or down, it’s that the travel industry is more unpredictable. Risk has tapered the appetite of investors.
Partnerships mean higher fees.
At its core, Airbnb operates a fee-based revenue model. Without making a strategic play (i.e. partnering with timeshare companies), Airbnb would have increased risk exposure. Major corporate partners can significantly increase Airbnb’s fee sureties while giving their revenue model predictability.
This isn’t a new concept. B2B partnerships have been a major part of the travel industry. Reward and loyalty programs, online travel booking engines, and parity rate models are all examples of longstanding B2B cooperation and partnership in the travel industry.
What’s different now is that the timeshare industry coming aboard does not improve the user experience (UX) or add any real customer value. This is simply an exploit of the absolute power timeshare developers hold to regulate their resort networks. This affiliation allows for both Airbnb and the timeshare developer to extract increased fees on timeshare owners without recourse.
This isn’t speculative. Airbnb notes the details of its revenue model’s inner workings and its belief that fees should vary based on the rental scenario. From Airbnb’s latest 10-Q:
Revenue
Our revenue consists of service fees, net of incentives and refunds, charged to our customers. We consider both hosts and guests to be our customers. For stays, service fees, which are charged to customers as a percentage of the value of the booking, excluding taxes, vary based on factors specific to the booking, such as booking value, the duration of the booking, geography, and host type. For experiences, we only earn a host fee. Substantially all of our revenue comes from stays booked on our platform. Incentives include our referral programs and marketing promotions to encourage the use of our platform and attract new customers, while our refunds to customers are part of our customer support activities.
To summarize:
- Airbnb states it makes money from both sides of the deal and does so through fees. Hosts and Renters can be charged fees by Airbnb (although not always).
- Airbnb’s fees are subjective and are based on criteria set by Airbnb.
- The fees from bookings, not experiences, comprise the majority of its revenue.
So thinking through the timeshare affiliate scenario, it is rational and logical for Airbnb’s revenue model to seek partnerships with host-side companies to extract an even larger net fee per booking.
So what can timeshare owners do?
The first and most obvious answer is to stay off Airbnb’s booking platform when renting out timeshare properties. By agreeing to Airbnb’s Terms of Service and Privacy Policy, timeshare owners have waived any right to opt-out of their new partnership model.
Data sharing with ‘corporate affiliates’ is clearly outlined in Airbnb’s Privacy Policy. I highlighted relevant clauses that make sharing your data indemnifiable per their policy:
4.10 Corporate Affiliates.
To support us in providing, integrating, promoting and improving the Airbnb Platform, Payment Services, and our affiliates’ services, we may share personal information within our corporate family of companies that are related by common ownership or control. Some examples are:
Sharing with Airbnb, Inc. Even if your country of residence is not the United States, your information will be shared with Airbnb, Inc. which provides the technical infrastructure for the Airbnb Platform.
Sharing with Airbnb Payments. In order to facilitate payments on or through the Airbnb Platform, certain information as described in the “Outside of the United States” section, will be shared with the relevant Airbnb Payments entity.
Public data. Information you share publicly on the Airbnb Platform.
Host Services. If you book a Host Service located in China, information shared includes: (i) your name, phone number, and email address (ii) booking and check-in information, including dates and time, (iii) messages between the Host and you or other Guests on the same booking, and (iv) the names, nationalities, gender, date of birth, and passport/ID details of any Guests. Learn more
The data sharing described above is necessary for the performance of the contract between you and us to enable you to list or book Host Services in China and connect with Members in China, and vice versa. Where required under law or if you have expressly granted permission, Airbnb China will disclose your information to Chinese government agencies without further notice to you. We’ll notify you in advance in specific situations where we apply any practices that differ from what is described in this Privacy Policy (including practices pertaining to disclosures to government agencies).
The other component that timeshare owners should contemplate is whether or not to continue owning the timeshare. Without the ability to offset maintenance fees and increased restrictions on the reservation system, it is becoming less and less beneficial to own a timeshare.
Getting out of a timeshare contract will likely become harder as the timeshare industry adds more and more restrictions to prevent a mass exodus.
In addition to this latest assault on owner rights, Travel + Leisure Co made new rules this past summer restricting VIP Benefits for resale timeshare contracts. Their new rule meant ‘VIP’ Owners who purchased a contract on the third-party (resale) market would no longer receive ‘VIP’ benefits on the resale contracts.
What other peer-to-peer (P2P) rental marketplaces could timeshare owners flock to?
The most recent report on Airbnb’s market share estimated Airbnb held about 20% of all vacation rental bookings for 2019. It’s safe to assume that has certainly increased since 2019. While they are the largest player in the market, there are other venues to rent your timeshare:
- Flipkey, owned by TripAdvisor, is another large P2P marketplace for vacation rentals and offers a lot of built-in features that make it easy to create a timeshare booking like already having resort photos available.
- Booking.com is a massive online marketplace that offers travelers a one-stop-shop for flights, hotels, and vacation rentals.
- Vrbo is another giant marketplace for vacation rentals.
However, it is unknown if these other options will share your data with timeshare companies. So while these might be good for the short-term, I think it’s likely that we will see more affiliate partnerships between P2P vacation rental marketplaces and large timeshare companies.
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A note from the author:
Dear Reader,
I hope this article helps you in your struggles with the timeshare industry. I also hope a new option to rent your timeshare effectively comes to fruition. I know first-hand the perils of the timeshare industry. If you or a loved one would like a safe and effective way out of your timeshare, please reach out to our team at Cancel Timeshare. The only timeshare exit company with transparent, standardized, and affordable pricing.
Respectfully,
Charles R. Howard
President | Cancel Timeshare
