Ben Williams looks deeper at premium offerings on peer-to-peer platforms
In the new sharing economy, consumers interact constantly with a newer concept: peer-to-peer platforms. Popular examples include ridesharing services like Uber and Lyft, car rental sites like Turo, and vacation rental marketplaces like VRBO and Airbnb.
Within each of these platforms, companies have introduced new elite offerings that go beyond your typical experience. Maybe it’s a bigger or nicer car, or perhaps a professionally designed and maintained vacation rental.
Can these companies differentiate their offerings without marginalizing the non-premium services they provide? Daniels College of Business faculty member Ben Williams recently published research that dives deeper into Airbnb’s exclusive offering, Airbnb Plus, to answer that question.
Williams, an assistant professor in the Department of Business Information and Analytics, partnered with three other professors from around the country to publish the research, which was accepted by the journal Management Science. Former Daniels faculty member Karen Xie was part of the team, which titled its work, “Quality Differentiation and Matching Performance in Peer-to-peer Markets: Evidence from Airbnb Plus.”
Williams said he and Xie first collaborated on the research through a shared interest in the unintended impacts of these premium offerings. They chose to pursue Airbnb Plus, in part, because of widely available listing data that tracks Airbnb properties over time in cities around the world. From there, the research team set out to see who truly benefits from premium listings.
“Airbnb Plus is a differentiation tool that says the properties are high quality listings in some fashion. We said, ‘Is that actually helpful to the entire platform?’” Williams said.
Airbnb Plus listings differ from traditional listings in the quality of the property and the services provided by the host. According to the company, every home designated Airbnb Plus “is unique and meets a certain set of standards and guidelines, and those were generated by observing the behaviors of our best hosts.” Each home is inspected and verified in person and ranked on a 100-point checklist that considers design, amenities and hospitality.
“I think there’s various ideas around if you say these [properties] are the best, is that only going to benefit them? Is that actually hurting the properties that are not the best?” Williams added.
Combining listing data and U.S. Census Bureau data from the American Community Survey, the research team was able to see ZIP code-level impacts to help support its research. During the study period, the team looked at over 236,000 Airbnb listings in 773 ZIP codes and analyzed individual listing-level performance metrics, including number of booked nights, nightly price and more. They looked at performance in the six months leading up to the rollout of Airbnb Plus and the year following.
What they discovered is that a program that seems, on its face, to be exclusive, is actually helpful for all users.
“By having this set of homes that are distinct and marked as different, you are allowing folks to search quicker for what they are interested in. If I want to stay at a really nice luxury, everything-included listing, I’ll just click the button that says ‘Plus’ and I’ll only see the Plus listings. I don’t have to search through hundreds and hundreds of listings,” Williams said.
On the flip side, people looking for a cheaper alternative don’t have to wade through listings outside of their price range.
“It works for everyone in the entire market,” Williams added. “It’s especially beneficial in markets with lots of listings because it takes users so long to search through and identify the match. This [research] extends to all these matching platforms, it’s one argument.”
Williams and the research team concluded that matching makes or breaks peer-to-peer platforms and differentiation in offerings is one way to reduce search friction.
“These search frictions are often regarded as a primary hurdle to matching, which is why P2P platforms are actively combatting them,” the report stated.