Vacation Rental Sites Build Upon A Business Model Established Early In American History

In Colonial America, travelers needed a place to sleep. But there were not many lodging establishments: So, some Americans opened their homes to travelers seeking to get some rest.

Americans opened their homes once again to earn some much-needed income during the Great Depression. Following those difficult economic times, however, staying in someone else’s home conjured up the image of drifters or lower income travelers.

That attitude changed when middle-class Americans began traveling to Europe, where some stayed in bed and breakfasts (B&Bs). Following their experiences abroad, travelers were inspired to open bed and breakfasts of their own.

Around this time, new laws help fostered the growth of such establishments by encouraging people to keep and renovate old homes. The National Historic Preservation Act of 1966 fostered historic preservation in the U.S., and the Tax Reform Act of 1976 gave many tax incentives to homeowners who decided to restore their homes.

In the 1980s and 1990s, bed and breakfasts became even more upscale: Historic mansions were renovated and luxuriously decorated. And then, the internet arrived.

Online Directories

Despite the rapid growth of bed and breakfasts in the 1980s and 1990s, bed and breakfast operators faced some marketing challenges. They received media coverage, but they found that advertising could be costly.

Those who did wish to get the word out about their bed and breakfast found timing to be challenge: It could take a year or more to get a listing in a bed and breakfast guidebook, after all.

But the internet served as a boon to the industry. Bed and breakfasts were able to better compete with hotels by posting listings on online directories.

In 1995, for example, a husband and wife team launched an online directory for bed and breakfasts and inns called InnsandOuts.com. In 1998, Inns and Outs expanded by purchasing the domain name of BedandBreakfast.com — and became a global platform for discovering and booking B&Bs.

The website would go on to offer many marketing opportunities, from gift certificates to “featured property” listings, to give its properties more advertising opportunities. It would also go on to offer a “hot deal” and an “inn of the month” to give advertisers more exposure.

The site was able to gain even more exposure for its members by partnering with Expedia in 2006. That move made its member inns bookable on travel agency websites for the first time. A few years later, their listed properties would appear on Priceline.com as well.

The World Meets Airbnb

Over time, the bed and breakfast concept has evolved from quaint historic buildings to, well, living rooms and everyday houses.

In 2007, roommates Joe Gebbia and Brian Chesky were struggling to pay rent. They discovered that lodging was in high demand, as hotels in their city were booked for a conference, so they laid out three airbeds for guests and cooked breakfast. More notably, they started a website called airbedandbreakfast.com. That name would be shortened to Airbnb.

The business truly started in the summer of 2008 in Denver. When Barack Obama was expected to speak at the Democratic National Convention, there was, again, a shortage of hotel rooms. As a result, Airbnb took off: It had nearly 800 listings within a week of launching.

But Airbnb still needed to make money: So, the site began handling payments. It ended up taking a 15 percent cut of the reservations, with the host paying 3 percent and travelers paying between 6 and 12 percent.

Since then, Airbnb has grown to accommodate all sorts of travelers. The company has even slowly been gaining traction among business travelers, with data from U.S. travel and expense management company Concur tracking its progress. In Nov. 2016, Concur reported that the frequency with which business travelers expense an item from Airbnb increased by 32 percent between 2015 and 2016.

The site has even tried to reach its most dedicated travelers when they aren’t traveling by offering “Experiences” offerings and by partnering with restaurant reservation app Resy to power dining and other experiences, both at home and away. In February, Airbnb announced news that it’s debuting new tiers on its platform geared toward travelers looking for higher-end lodging.

In a corporate blog post, Airbnb said the new tiers are called “Airbnb Plus” and “Beyond by Airbnb” and are aimed at broadening the appeal of the platform to more guests. The two new levels will recognize hosts who provide hospitality that goes above and beyond. The travel booking company said it will personally inspect properties for quality as well as comfort.

Today, Airbnb has several competitors, such as VRBO, Home Away (the parent company of VRBO) and FlipKey.

The Next Generation of Home Rentals

Beyond Airbnb, several startups have taken the bed and breakfast model and made it their own — and they’re not necessarily offering rooms in historic buildings.

Stay Alfred, for example, leases a large number of units in apartment buildings before they open. Then it transforms them into boutique hotel-like rooms. Guests, too, get access to amenities.

Like a property management company, Stay Alfred conducts background checks on the people who check into its apartments. The company also pays taxes in the municipalities in which it houses guests, according to GeekWire.

“Travelers want a local, immersive experience with a neighborhood feel,” Stay Alfred Founder and CEO Jordan Allen said in a statement to Geekwire. “We’ve pioneered an ecosystem that gives guests the experience they want, while providing developers and owners a proven, turnkey way to eliminate lease-up risk.”

In the future, perhaps, more “home shares” may become more like boutique hotel rooms and less like those historic experiences that harken back to the colonial days.