Last Tuesday, Airbnb announced that they had remitted $5,300,000 in lodging taxes to the state of Maine since April 2017. As someone that loves analyzing numbers, I have been struggling with how to interpret this figure. One practice business owners commonly perform is a market analysis. According to Investopia, a company’s market share is its sales measured as a percentage of an industry’s total revenues. You can determine a company’s market share by dividing its total sales or revenues by the industry’s total sales over a fiscal period. With the number released from Airbnb, you can determine the market share of Airbnb in Maine. I went forward doing the math and determined that Airbnb has 6.7% of the market share in Maine. Knowing your market share is important in business because you can determine fair share and determine if there is room for growth. There is a great saying, if you can measure it, you can improve it. But, understanding the Airbnb market share is a little more complicated. It is difficult to understand if this is good news or bad news for innkeepers, if there is potential for growth or if it really means nothing at all.
To put this number into context we need to look at how much the State of Maine collected in total between April 2017 and February 2018. Thanks to the Portland Press Herald, this was calculated at $79 million. Of that $79 million $5.3 is from Airbnb. As I try to break this down into good news and bad news, I first have to explain what Airbnb is in this equation. Airbnb, in the eyes of the State of Maine for taxable reasons, is considered one entity. There are individual Bed and Breakfasts, Inns, Hotels, Motels and then there are the Airbnb properties combined into one entity. When you think of Airbnb as a single business with a lodging tax expense of $5,300,000 (9%) in the State of Maine, it is overwhelming. To pay $5.3 million sales tax that means your taxable lodging revenue is $58,888,888. That type of revenue for a single lodging entity is awesome and the fact that the Portland Press Herald stated that Airbnb in Maine had a 62% increase the year before, is phenomenal. When you look at Airbnb as a $58 million lodging competitor with 62% growth, you can be overwhelmed and discouraged as a player in the market. This is definitely part of the bad news. But if you look at this closer, you will see that Airbnb is not a traditional tax generating lodging entities. Because Airbnb is a website and not a physical location with obvious room units with room night numbers, we cannot determine fair share for Airbnb. For a proper analysis of the whole picture, more data is needed. But that leads me to my next point on the confusion this tax number gives us, that is that Airbnb is not the lodging competitor, the 4,500 Maine properties listed on Airbnb are. To do a proper market analysis for a property would be to pinpoint individual businesses, not a group. Airbnb’s market share is actually the percentage of the total from the Online Travel Industry sector. Airbnb’s competitors are HomeAway, VRBO, FlipKey and Booking.com.
Therefore, we move to the good news for Innkeepers and Hoteliers. Understanding that Airbnb is not your competitor, but a marketing tool that can generate $58,888,888 is important. Airbnb has proven that they can sell lodging space in Maine. In addition to this proof of performance, the other good news is that everyone else in the equation has proven to be good sales agents also. The other 93.8 % of sales in Maine are from independent lodging companies and small lodgings in Maine. So, if you are tempted to feel defeated knowing that Airbnb reported $5.3 million in sales tax revenue, don’t be because the lions share is with the other 93%. Knowing these numbers and watching them rise or fall can be a game changer for a business. Watching these numbers fluctuate can indicate market preferences. Those that purchase lodging accommodations on Airbnb are looking for a very specific experience. Understanding that experience and replicating it could help generate growth for competitors. The more information a lodging property has about guest trends and preferences, the better.
In conclusion, the Airbnb Maine tax number is overwhelming, but it can also be empowering for Maine lodgings. Understand that Airbnb is a platform to advertise and not your direct competitor. You might decide to use this platform to sell your rooms, or you might use the information from the market split to innovate your lodging. Don’t let Airbnb’s presence in the marketplace discourage you. Understand their place and their function and use that knowledge to make your business better.