This is why Airbnb killed group payments after only one year
In late 2017, Airbnb’s global roll-out of group payments received widespread news coverage. TechCrunch and The Verge were among the media outlets that covered the big launch. This level of coverage highlighted the perceived pain of group payments in travel. And yet, Airbnb quietly killed the feature after less than a year. What happened?
The pain of group payments in travel
In early 2017, Airbnb decided to invest in the feature after its CEO Brian Chesky asked for input from the Airbnb community on what new functionality the site should develop. The most requested feature, according to the company, was the ability to split payments for group trips.
Per an online survey of 2,000 travelers conducted by the company and shared in the official announcement of group payments, nearly 80% of people had been on multiple group trips in the last five years. The survey also discovered that many organizers were not getting repaid for trip-related expenses: 43% lost at least $1,000 in unreimbursed costs, while 18% absorbed a loss of at least $10,000. In addition, 29% of the 2,000 adults surveyed said they had experienced conflict with friends over group trip repayments.
Group trips are undeniably painful for organizers, especially on the payments front. The financial burden placed on trip organizers is a hurdle that discourages more group trips, which is what Airbnb was solving. During the pilot phase, the group payments solution was used by 80,000 people in 175 countries and 44 currencies.
The feature had limitations for guests
While the benefits of splitting payments within a group were obvious for organizers, the limitations in Airbnb’s design were less so. Airbnb would only allow split payments under the following criteria:
- The reservation had to start at least ten days from the time of the booking.
- The stay had to be for less than 27 days.
- The group size had to be under 16 people.
- Each member needed an Airbnb account to pay.
Only once those criteria were met could the trip organizer request to book a listing that allowed for split payments. At the time of booking, the organizer’s portion of the payment was processed, and the remaining group members had three days to pay their share. If all the payments were not received within this timeframe, the reservation would be cancelled.
Most organizers found that the three-day window for payment was too short. The organizer had to aggressively chase payments to prevent losing the reservation because Airbnb’s system didn’t do an adequate job of following up with invitees. Moreover, the requirement to create an account for non-Airbnb users introduced massive, unnecessary friction into the experience. The longer a user must invest in a payment flow, the harder it is to entice them to complete the action.
Hosts hated it
Perhaps more indicative of the functionality’s limited lifespan was how negatively hosts responded to it. There was an underlying sense of confusion among hosts that affected their willingness to accept group payments. For some hosts, it felt like the option simply appeared in their booking flow without warning.
For example, in this post, a host called group payments a “cool feature” and then went on to express surprise at the new payment option – and consternation at how it affected his calendar. Asking if the feature was “fair to hosts,” he continued:
“Here’s the problem. The guests have 72 hours from booking time to complete the group payment, if not 100% paid after 72 hours the booking will be canceled. There is no fee to the guest for holding my calendar hostage for 72 hours.“
Most hosts have limited inventory. The 3-day hold (plus one day grace period) felt unfair, as the host may lose out on bookings to other listings. Even though it’s hard to say definitively whether this is the case, it’s a valid argument. Hosts may be disadvantaged when a group booking cancels within the window. Since there’s no penalty, such as losing a deposit, there’s no recourse to the host for the potential lost bookings.
During the survey mentioned earlier, Airbnb asked travelers how they were currently sharing group trip information with friends and family. Email came out on top, followed closely by copying a link to the reservation and then sharing via Facebook Messenger.
To become a widely adopted and accepted solution, Airbnb neglected to market it effectively. Besides the initial announcement, there was little marketing effort put forward to promote the tool more broadly to both hosts and guests.
For example, a key selling point was the ability of group organizers to book a more expensive listing without having to front the whole cost. This would also resonate with hosts, who may benefit from a higher-priced booking thanks to the functionality.
“Groups will have even more listings to choose from that often fall outside of what an organizer can afford to reserve if they had to front the total cost.” - Airbnb
A concerted marketing push could have moved the feature from niche to mainstream. If 4 out of 5 U.S. travelers have done multiple group trips in the past years, as Airbnb’s survey found, then the potential market is massive. Guest awareness could have changed the way hosts perceived the feature; if more bookings came in at higher values, then hosts would surely have come around to the power of group payments in travel.
How to do it right
To apply these lessons from Airbnb’s group payments experience, here is what marketplace merchants should do:
Protect the supplier if you are going to put inventory on hold while waiting for payment. This could be in the form of a cancellation fee, a deposit, or some guarantee from the company itself.
Use your data. Cancellation rates from groups of similar size can accurately forecast how cancelled group bookings affect revenue. Such information would have helped Airbnb develop a cancellation policy that balanced the needs of hosts and guests.
Buy it, don’t build it. When investing company resources in new payments functionality, consider the opportunity cost of launching internally versus integrating an industry-validated, external solution that keeps functionality current and up-to-date with a lower upfront investment. This approach lowers risk and increases agility.
Avoid band-aid solutions. Integrating a P2P payment app or digital wallet doesn’t necessarily address the structural needs of groups: reservation viewability, tracking who has paid, and reducing overall admin time by group organizers. Groups have specific needs best served by a dedicated solution.
Offer flexibility. Each group organizer deserves tools to make their job easier. An effective group payments solution should allow the organizer to do things like: take deposits from members, move a group’s commitment from one property to another if needs change, selectively refund one member without losing the booking, and even allow members to pay in installments.
The best way to serve groups well is to consider them as a standalone demographic. An unfussy and straightforward solution to their pain points is the most effective way to improve the group booking experience – and turn group organizers into loyal, repeat customers.
Pay By Group makes it easy for your users to split payments. No limitations, simple to use, straightforward to integrate. Contact us for a consultation today.