Other BriefingsAirbnb’s Contribution to India’s GDP Highlights New Trends in Travel and Hospitality Industry
Airbnb, a disruptive force in the global hospitality industry, has revolutionized travel and accommodations through its online platform, generating revenue via host and guest fees, experience charges, and additional services. We look at key findings of a recent report from Oxford Economics on Airbnb’s contribution to the Indian economy, which highlights how new entrepreneurial and investment opportunities are emerging in the post-pandemic environment. Hospitality businesses that provide or facilitate local experiences, personalized travel packages, health and well-being, sustainable tourism, technology-enabled transactions, and regional community development, will benefit greatly from the transformative shifts being observed in travel practices across India.
According to a study by global forecaster, Oxford Economics, between April 2022 and March 2023, hospitality giant Airbnb added over US$920 million (INR 72 billion) to India’s gross domestic product (GDP) and supported almost 85,000 jobs in the country.
According to the study, the American enterprise has performed a substantial role in sustaining India’s tourism industry. Despite the Covid-19 outbreak and international border constraints, the GDP contribution and jobs supported in India has more than doubled since 2019.
The multiplier effect
The report also said that Airbnb guests reportedly spent a total of US$815 million (INR 64 billion) in India on transportation, restaurants, and retail stores—more than double of the fiscal year 2020 levels.
Domestic Airbnb guest spending totaled US$670 million (INR 52.6 billion). This was about 82 percent of the total amount spent by Airbnb guests in India, which is about a threefold increase from 2019.
In India, Airbnb’s presence was the highest in Goa, where guests spent close to US$190 million (INR 14.8 billion). This was followed by guest spendings in the metropolitan cities of Bengaluru, Delhi, and Mumbai and the hill station, Manali.
Pandemic-driven shifts in travel behavior
The study also notes two significant shifts in travel patterns brought about by the pandemic: the shift of tourists away from urban centers and the surge in demand for extended stays, driven by the emergence of flexible work arrangements.
On a travel podcast, Amanpreet Bajaj, Airbnb’s country manager for India, Southeast Asia, Hong Kong, and Taiwan, explained how the company was seeing broad shifts in the sector, beyond tourism hotspots, to benefiting a broader range of cities and neighborhoods. According to him, communities have taken center stage, playing a vital role in bolstering regional economies and even the national economy.
Shaping tourism trends and sustaining local economies
James Lambert, Director for Economic Consulting in Asia for Oxford Economics said that Airbnb has clearly played a major role in the resilience and rebirth of the Indian travel and tourism sector in the wake of the Covid-19 pandemic. According to Lambert, Airbnb has played a central role in shaping several trends within India’s travel and tourism industry, including the shift from urban to rural destinations and the growing demand for long-term stays, exemplified by the ‘live and work anywhere’ phenomenon. He also highlights the essential role domestic travelers have played in the industry’s resilience over the past three years. Indian travelers have increasingly explored domestic travel as an alternative to international holidays, with a rise in self-drive and regional trips. This trend has led to a more widespread distribution of tourism spending beyond the conventional or popular destinations in India.
Meanwhile, Airbnb’s Bajaj adds that the economic impact of Airbnb travel in India, contributing to both GDP and job creation, has generated substantial economic ripples. It has fostered the growth of local businesses, including shops, restaurants, bars, and cafes—often integral to travelers’ experiences in a destination—and has opened up job opportunities for locals. Travel is now more evenly spread, resulting in economic benefits reaching a broader array of destinations, thereby making a significant economic contribution to rural and regional areas. This is facilitated by Airbnb Hosts, creating economic opportunities for various communities. As India’s travel destinations continue their recovery, the company is seeking to collaborate “with governments and communities to rebuild their tourism economies in a way that is equitable, inclusive, and sustainable.”
What is Airbnb?
Born in 2007, Airbnb is an online marketplace and hospitality service that allows people to rent or lease short-term lodging, including vacation rentals, apartment rentals, homestays, hostel beds, or hotel rooms. The company does not own any real estate themselves; instead, they act as a broker, receiving commission from each booking.
Hosts can list their properties on Airbnb’s platform, providing details about the space, amenities, pricing, availability, and house rules. Guests can browse these listings, make reservations, and communicate with hosts through the platform.
Airbnb has become a popular alternative to traditional hotels and accommodations for travelers seeking unique or more personalized experiences. It has also provided an opportunity for individuals to monetize extra space in their homes or properties.
Who are the key partners of Airbnb?
Airbnb collaborates with several key partners to enhance its services and provide a comprehensive experience for both hosts and guests. Some of the key partners of Airbnb are listed below.
Hosts: Hosts are central to Airbnb’s business model. They provide the properties and accommodations that guests rent. Airbnb works closely with hosts to provide support, resources, and tools to help them create appealing listings and deliver unique guest experiences.
Guests: Guests are the users who book accommodations through the Airbnb platform. Airbnb partners with guests by providing a user-friendly platform, facilitating secure payments, and offering customer support to ensure a positive experience.
Payment processors: Airbnb works with payment processors so that deals on its site are safe and easy. These relationships make sure that payments go through smoothly, keep private financial information safe, and give both guests and hosts a trusted way to pay.
Technology partners: Airbnb collaborates with technology partners to enhance its platform and provide innovative solutions. This includes partnerships with cloud service providers, data analytics companies, and software development firms. These partnerships enable Airbnb to leverage advanced technologies, improve user experience, and scale its operations efficiently.
Insurance companies: Airbnb collaborates with insurance companies to provide hosts and guests with protection and coverage. These partnerships offer insurance policies tailored to short-term rental scenarios, safeguarding hosts against potential damages and liability issues. Guests may also have access to travel insurance options through these partnerships.
Investors: Investors play a vital role in supporting Airbnb’s growth and expansion. Venture capital firms, private equity investors, and strategic investors provide funding and financial resources to fuel Airbnb’s operations, innovation, and global expansion efforts. These partnerships enable Airbnb to invest in technology, marketing, and customer acquisition strategies.
Impact on the hospitality sector in India
Airbnb has had a notable impact on the hospitality industry in India. It significantly expanded the range of accommodation options available to travelers in India and allowed visitors to choose from a diverse array of listings, including apartments, villas, heritage homes, and even unique properties like houseboats.
Airbnb owes its popularity to matching contemporary tourist demands for localized experiences, cheaper rates, longer stays, sustainability, resource conservation, customized services, and technology-enabled methods of booking and payment. The Airbnb format is perceived to be resource friendly and environmentally conscious.
Furthermore, hosting on Airbnb provides an opportunity for many individuals and families in India to generate additional income by renting out their properties or spare rooms. It has also helped in spreading tourism beyond major cities and popular tourist spots in India. Hosts in smaller towns and off-the-beaten-path locations can list their properties, attracting travelers to explore fewer mainstream destinations.
Airbnb has also presented competition to traditional hotels—pushing them to improve their services, innovate, and sometimes even lower their prices to remain competitive.
Business outlook of India’s hospitality sector
The success of Airbnb in India has highlighted the demand for diverse accommodation options beyond traditional hotels. This presents an opportunity for entrepreneurs to invest in unique and specialized lodging experiences, such as boutique hotels, homestays, and themed accommodations.
The hospitality sector can further leverage technology to enhance guest experiences and streamline operations. This includes implementing digital check-in/check-out processes, smart home features, and utilizing data analytics for personalization. For startups, exemptions under the Digital Personal Data Protection Act, 2023 can also be leveraged to take steps towards success of the enterprise.
Moreover, with an increasing awareness of sustainability, there is a growing demand for eco-friendly accommodations and experiences. Entrepreneurs in the hospitality sector can explore opportunities to adopt green practices, from energy-efficient technologies to sustainable sourcing of materials.
Standout marketing and branding are also crucial for visibility in a competitive market. Entrepreneurs can offer services that help hosts and accommodations establish a strong online presence and reach a wider audience. Moreover, Post-COVID-19, health and safety have become paramount concerns for travelers. Entrepreneurs can explore opportunities in providing cleaning and sanitization services, as well as implementing health protocols in accommodations.
Conclusion
Airbnb has established itself as a disruptive force in the hospitality industry by revolutionizing the way people find accommodations and travel experiences. Through its innovative platform, Airbnb generates revenue through host and guest service fees, experience fees, and additional services. The company’s wide reach, diverse accommodations, and emphasis on trust and community have contributed to its success.
Airbnb’s significant contribution to India’s GDP underscores the potential of platform-based business models in generating economic value. By promoting local experiences, sustainable tourism, and regional development, Airbnb has brought forth a paradigm shift in the way people travel.
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India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in India.
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