Case Study: Why Engagement Doesn’t Always Equal Higher Sales

Travel

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In 1946, Juan Trippe established the InterContinental brand and opened their first hotel in Béllam, Brazil. Since then, the InterContinental Hotel Group has become the largest hotel company in the world with over 675,000 rooms in over 100 countries. In 2008, Brian Chesky, Nathan Blecharczyk, and Joe Gebbia founded Airbnb in San Francisco, CA. Since then, they have expanded to 34,000 cities in 192 different countries and offer over 500,000 rooms. With this in mind, it’s no surprise that hotels are lobbying against Airbnb and any company like it.

I myself am a staunch supporter of Airbnb. Their platform and similar crowdsourcing platforms like Dog Vacay, Zipcar, or Kickstarter, are what I think will be the future of many different areas of business. A few weeks ago, I heard the founder of one of those companies, Robin Chase of Zipcar, speak about the idea of excess capacity and how it can be applied to many unexplored niches. Although that got me thinking about what some of these unexplored niches might be, it also got me thinking about how these companies might compare to the companies that use the traditional business model they are disrupting. Thankfully, using Compete PRO and Online Conversion Insights, I can see exactly that.

To do this, I decided to look at Airbnb and two of its most similar competitors: Booking.com and Hotels.com. The reason why I chose those two over the more popular travel booking sites (Expedia, Priceline, Travelocity) is because they focus primarily on hotel rooms—where the other sites also include airfare, car rentals, and the like.

First stop: Engagement

Average Stay: Airbnb, Booking.com, Hotels.com Pages per Visit: Airbnb, Booking.com, Hotels.com
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As you can see from either of the two charts above, Airbnb has a very wide margin above the competing sites. Averaging a 70% higher average stay and 80% higher pages per visit over the past year, there is no doubt that Airbnb is succeeding in engaging their visitors.

There are many reasons why Airbnb might be consistently more engaging. The most glaring of these reasons being that it is a novel service, one that visitors have not engaged with previously (or at least often). Other reasons might be more obvious after browsing the listings on their site.

Firstly, each property listing is different than the next and each have their own points of differentiation. For example, one listing could be above a restaurant, have a dog that freely roams throughout the apartment, and owners that are willing to show you around the city. The next listing? An entire home with three bedrooms, a pool, and deck with a view. When renting a traditional hotel room, as long as you’ve been in one before, you know what you are getting and there aren’t many points of differentiation. With Airbnb, each listing is unique and worth checking out.

Additionally, because of the fact that you are renting from real people instead of large companies, prospective customers are much more apt to read the reviews of their potential host. Although it is arguable that visitors of hotel sites are just as likely to read the reviews of hotels they are interested in, most of of the more savvy travelers will do so on a separate site, such as TripAdvisor.

Most of the time, we find that higher engagement equals higher revenue. Or at least that is what we are told by major, industry, thought leaders. Although we know that Airbnb, with only a fraction of the traffic, is nowhere close to passing their competitors when it comes to revenue, the next best thing would be to check the rate at which they convert their visitors.

Next Stop: Conversion Rates

Airbnb Conversion Funnel Booking.com Conversion Funnel Hotels.com Conversion Funnel
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Using Online Conversion Insights, we are able to find the conversion rates of the two primary steps in converting the visitors to the selected sites. Above are the conversion funnels for each of the three sites. The numbers that you see are the aggregates from the most recent 12 months of data (November 2012 – October 2013).

According to our assumptions about how engagement affects the bottom line, one would expect Airbnb’s conversion rate to be somewhere around 75% higher than their competitors. Unfortunately for Airbnb, this is not the case. In fact, they don’t even have the highest overall conversion rate of the three.

Conversion Rates: Airbnb, Booking.com, Hotels.com

This is not to say that Airbnb is far behind though. As you can see in the chart above, Airbnb has been right behind Booking.com for the past year—earning a higher conversion rate three times in the past year, with two of those times being in the most recent months. Additionally, Airbnb is on an upward trend where Booking.com seems to have plateaued over the past 12 months, seeing a decrease any time they saw an increase. This is especially noticeable when you aggregate the past 12 months into quarters—as shown below.

Aggregated Conversion Rates: Airbnb, Booking.com, Hotels.com

It’s hard to say what hotels.com is doing differently regarding the conversion of their visitors. They have comparable traffic numbers and similar engagement metrics to Booking.com yet they have half the conversion rate. Although their checkout process differs slightly from Booking.com, I don’t think it is enough have such a drastic effect. But as we’ve seen before, even the smallest changes can have a large effect on conversion rate.

Last Stop: Cross-Shopping

Cross-Shopping Same Month Cross-Shopping Same Session
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Online Conversion Insights can also be used to find the rate of cross-shopping between the three sites. The cross-shopping rate is defined as the percentage of a site’s visitors that visit the other sites as well—either in the same session, or the same month. Cross-shopping is an excellent indicator of brand loyalty and market awareness.

In the case of Airbnb and their competitors, about one in ten of their visitors will visit the other two sites during the same month. In the same session? Right around one in fifty. This could be looked at in a number of ways. For one, Airbnb has seen a 72% increase in traffic over the past year, chances are some of this traffic is coming from their competitors. This is strengthened by the slight upward trend in the cross-shopping rates of Booking.com and Hotels.com. Another explanation, a more negative one, is that Airbnb’s visitors are becoming more dissatisfied with the listings offered on their site and are beginning to seek alternatives. Though both are possible scenarios, the former is more likely the case, especially after taking into consideration Airbnb’s rising conversion rate.

Engagement doesn’t always mean higher conversion rates.

Although we can’t say definitively that higher engagement doesn’t equal higher conversions (I’m sure there are a lot of examples that prove and disprove that statement), we can certainly say that it is the case for Airbnb. With their engagement metrics averaging around 75% higher than their competitors’, you would expect their conversion rates to be higher. But as we have found, this is not the case. However, Airbnb is still a young company and is still very new for some people. Although the near double engagement rates aren’t doing anything for the site right now, it is very likely that with time, and sustained engagement, Airbnb will have a very loyal customer base. One that will not only convert very easily, but one that will act as an ambassador of the brand—arguably the better of the two.

By using your competitors’ conversion rates to benchmark your performance, not only will you have an edge over them, but you will be able to identify problematic areas in your conversion funnel, realize your recognition in the market (using cross-shopping), and help you shift focus from areas you are doing well into areas that you aren’t. If you would like to see your competitors’ conversion data please contact us. No matter what you identify as a conversion, we will be able to track it every step of the way—for any site. So, how will you benefit from knowing your competitors’ conversion process?

About Zach Eberhart:
As a senior at Northeastern University, Zach Eberhart is thrilled to join the Compete team as the new Social Media / Marketing Co-op. Majoring in marketing and management information systems, Zach loves everything marketing and technology and has experience in both the agency and startup world. If you like what you read, you can connect with him on Google+ or LinkedIn.