In October 2024, Airbnb introduced a new feature, the Co-Host Network, to facilitate connections between new hosts and experienced local co-hosts. Hosts can select co-hosts from their network or discover new partners through Airbnb's personalised ranking algorithm. The objective is to enhance the hosting experience by allowing property owners to partner with co-hosts who assist in managing their listings.
How does it work?
The primary host maintains ownership and overall control of the listing, while co-hosts take on day-to-day management tasks. Hosts can tailor the co-hosting arrangement to suit their needs, whether they require comprehensive co-hosting services or prefer to delegate only specific tasks. This flexibility also extends to the financial aspect, with co-hosts having the ability to set their own fees. These can be structured as a flat rate, a percentage of each booking, or any mutually agreeable arrangement, promoting transparency and clear expectations.
Airbnb asserts that this initiative should create value for both parties. Property owners can generate income from their spaces without committing full-time. At the same time, experienced hosts can utilise their expertise to earn additional revenue. Guests also stand to benefit from enhanced hosting quality and a broader selection of available listings. However, the realisation of these benefits is not guaranteed. The program introduces new network effects that may disrupt the existing dynamics on the platform. Thus, it is essential to analyse how the Co-Host Network influences the interconnected network effects at play within Airbnb. To conduct this analysis, I will apply the concepts outlined in Chapter 1 of our book.
Identifying network effects
Understanding the dynamics of network effects is crucial for platforms aiming to connect users effectively. A fundamental step in this process is to analyse how future users might influence one another's experiences on the platform. Specifically, it is crucial to address the following question: When an additional user joins the platform or increases their activity level, does this enhance or diminish the platform's value for other users?
To conduct a more nuanced analysis, it is beneficial to categorise other users based on whether they belong to the same group as the new or more active user or to a different group. This distinction allows for examining same-side network effects (how a user impacts others within their group) versus cross-side network effects (how a user influences those in different groups).
Network effects on “pre-Co-Host Airbnb”
First, let us examine the cross-side network effects from hosts to guests. The critical question is: How does adding an extra host influence how guests perceive the platform's value? It is widely accepted that this addition has a positive impact on guests. But how and why does this occur?
The answer lies in the variety of accommodations available. Generally, guests tend to value platforms more highly when they can access a broader selection of options. However, it is essential to note that this value is not uniform across all guests. Some may place a higher premium on variety, particularly those who appreciate diverse accommodation types or travel to locations with limited traditional hotel offerings. Conversely, other guests may prefer a more streamlined selection, especially if they frequently visit the same destination or find excessive choices overwhelming. In extreme cases, an expanded menu of options could even detract from their experience by complicating decision-making.
Next, we turn our attention to the same-side network effects among guests. These effects are predominantly positive; guests generally welcome the presence of additional users within their group. The rationale behind this is straightforward: reliable information about accommodations and hosts can be scarce, and guests often rely on reviews from fellow users to inform their choices. As more guests join the platform, the availability of reviews increases, leading to better-informed decisions. It is noteworthy that platforms like Airbnb actively promote this effect by encouraging users to leave detailed ratings and reviews.
Now, let us consider the cross-side network effects from guests to hosts. It is evident that guests positively influence hosts; each additional guest expands the potential demand for any host’s offerings. Again, while this represents a general trend, we must refine our analysis by considering how these effects vary among users. In particular, the guest’s profile can significantly impact hosts’ experiences. A well-behaved guest is far more beneficial than one who may cause damage or disruption. Rating and review systems play a critical role in this context, as they allow hosts to assess each guest’s reputation based on past behaviour, encouraging returning guests to maintain good conduct.
Finally, we must address the same-side network effects among hosts. This aspect requires a more nuanced understanding. We argue that competition among hosts can lead to negative same-side network effects, particularly among those located nearby. For example, a host in Anchorage, Alaska, may be significantly impacted by adding another accommodation option in their city compared to one in Brussels, Belgium. From the perspective of a host in Anchorage, another local host introduces increased competition and potential market saturation, resulting in negative same-side network effects. Conversely, hosts in distant locations do not experience such competitive pressures.
In sum, network effects on Airbnb are predominantly positive, with current guests benefiting from new hosts and guests, as well as current hosts benefiting from new guests. These positive effects fuel organic growth as the platform’s attractiveness continuously improves as new users join.
The only fly in the ointment is the competition between hosts in specific locations. This negative network effect can slow or even reverse growth. If competition intensifies excessively, it may discourage new hosts from joining and prompt existing ones to depart. A host exodus could trigger a corresponding guest departure, potentially initiating a downward spiral.
This kind of vicious circle is not merely hypothetical. Etsy, for instance, currently faces a similar challenge (see my previous post on this topic). Given this, a critical question emerges: Will Airbnb's Co-Host Network initiative mitigate or inflate this risk? The answer is nuanced and warrants further exploration.
The new ‘Co-Host network effects’
Airbnb’s Co-Host Network introduces a novel form of co-opetition among hosts within the same city, characterized by a blend of additional positive and negative same-side network effects.
Regarding positive network effects, the Co-Host Network also opens new avenues for cooperation. First, the initiative promotes knowledge-sharing, as co-hosts can bring expertise and best practices to multiple properties, potentially raising the overall quality of listings in a city. Second, there is room for resource pooling, as hosts and co-hosts might collaborate on bulk purchases of supplies or services, leading to cost savings and improved efficiency. Third, the network could foster a stronger sense of community among hosts and co-hosts, leading to knowledge exchange and mutual support.
However, despite the potential for increased cooperation, the Co-Host Network may also intensify competition among hosts in several ways. First, by making it easier for property owners to list and manage their spaces, the Co-Host Network could lead to an influx of new listings in a given city. This increased supply might pressure existing hosts to differentiate their offerings. Second, experienced co-hosts may give newer or less-engaged property owners a competitive edge, potentially levelling the playing field against more established hosts. Finally, as more properties enter the market with professional management, there could be downward pressure on prices, affecting the profitability of existing hosts.
Balancing act
In conclusion, Airbnb's Co-Host Network initiative holds significant promise for delivering benefits across the platform’s ecosystem. For hosts, this program offers the opportunity to leverage the expertise of experienced co-hosts, potentially improving the quality of their listings and increasing their revenue without requiring full-time commitment. Co-hosts, in turn, can capitalise on their skills to generate additional income by managing multiple properties. Guests stand to gain from this arrangement through access to a broader selection of well-managed accommodations and potentially enhanced service quality.
However, the success of the Co-Host Network will largely depend on how it navigates the delicate balance between cooperation and competition. While the initiative fosters knowledge-sharing, resource pooling, and community building among hosts, it may also intensify local market competition by facilitating an influx of new, professionally managed listings. The ultimate outcome will likely be a more professionalised and efficient short-term rental market that still rewards innovation and personal touch. As the program evolves, its true value will be determined by how well it can mitigate negative same-side network effects among hosts while amplifying the positive cross-side network effects between hosts and guests.
(During the preparation of this post, the author used GenAI tools to collect ideas and improve the expression. After using this service, the author reviewed and edited the content as needed and takes full responsibility for the publication's content. Royalty-free photos from Pexels.com.)
