Worldwide: In 24 hours’ time, the eyes of the world will be on Japan for the delayed 2020 Olympic Games, as well as its global partners and sponsors, including Airbnb.
On the eve of one of the most polarised Games in modern times, there is as much at stake for the home-sharing platform as there is for the event organisers themselves.
Two years ago, when Airbnb was named as an official Worldwide Olympic and Paralympic Partner until 2028, the announcement was made to widespread fanfare. IOC [International Olympic Committee] president Thomas Bach claimed the partnership would “bring the Olympics into the digital age”, helping travellers visiting the Games to see more of the host countries and mix with local communities.
Having won the 2020 Games hosting rights in 2013, Tokyo could never have imagined that its flagship event would have to be postponed due to circumstances beyond its control, a global pandemic.
The events were meant to mark a new dawn of prosperity for Japan after years of economic decline and environmental disasters, preceded by the cancellation of the 1940 Tokyo Olympics and the Niigata earthquake before the 1964 Olympics, leading finance minister Taro Aso to call the Games “cursed”.
Since then, the build up to the latest sporting extravaganza has been beset by problems. Domestic and international spectators are banned from entering venues in the Japanese capital as part of a Covid state of emergency enforceable until 22 August.
The Games, running between July and September, are taking place against the backdrop of soaring cases and mounting public opposition against the events. One poll in the leading Asahi Shimbun newspaper suggested that more than 80 per cent of the Japanese population wanted the Games to either be cancelled or postponed.
Politicians too have been caught in the crossfire: Prime Minister Yoshihide Suga’s approval rating has plummeted to 37 per cent.
To compound matters, prominent Japanese car brand and worldwide mobility partner, Toyota, is pulling all Olympic-themed marketing because of a lack of public support, and Olympic opening ceremony director Kentaro Kobayashi has been fired after footage emerged of him allegedly making jokes about the Holocaust in the 1990s.
Airbnb risks being condemned by association to the Games too.
But what will be Airbnb’s defining legacy once the flame goes out in 2021? Can it truly capture the exposure it wants without the presence of in-person spectators?
What is at stake for Airbnb at the Games?
Olympic and Paralympic sponsorships are traditionally extremely lucrative. As many as four billion people experience Games in the stadia, at home or through social media, as viewers are subconsciously inundated with sponsor adverts, logos and other media.
However, Airbnb’s status as official housing partner for the Games is due to be even more profitable. Most top-tier sponsors will pay up to $300 million for a four-year package [one summer and winter Games]; whereas Airbnb is reportedly paying the IOC $500 million for its eight-year sponsorship.
While the goalposts have changed since it was revealed that Airbnb’s Japanese host community would generate direct revenue by providing accommodation during the Games, Bach’s goal to make the Olympics and Paralympics “more feasible and sustainable” remains the same.
But the unprecedented demand for tickets pre-pandemic is long gone.
Liam Fox, an analyst at GlobalData, told MarketWatch: “It was expected that this would bring in $800 million revenue for the Tokyo 2020 OCOG [Organising Committees for the Olympic Games], making it the OCOG’s third most important source of revenue and it would also help fund 12 per cent of the overall budget.”
The timing of Airbnb’s sponsorship announcement was also set to coincide with the company’s IPO [initial public offering] and it would have been a prime opportunity to showcase the benefits of the partnership and increase its host presence in destination host cities.
Airbnb will therefore be keen for the Games to go ahead smoothly and hope TV ratings will not suffer too heavily. For most sponsors, the branding opportunity to link up with a global sporting event like the Olympics is too good to turn down, and marketing campaigns can achieve huge exposure.
Japan’s relationship with minpaku
Japan’s relationship with short-term rentals, or minpaku, has been far from straight forward.
The country’s tourist accommodation market includes everything from minpaku to hotels, ryokans [traditional inns] and minshuku [Japanese-style bed & breakfasts], with many grey areas in between. Many of the lodging businesses are small and family-operated, leaving them behind others in marketing, pricing and technology advancements.
It was not until 2013 when the minpaku boom surfaced, coinciding with the rise in Airbnb listings driving up inbound tourism from the rest of Asia. Rentals benefitted where hotels could not capitalise: they were more family-friendly and affordable to young and overseas demographics, they could use existing buildings and infrastructure, and there was an explosion of tertiary businesses serving the market, such as tour guides, ticketing concierges and attractions.
But in recent years, the backlash against minpaku and Airbnb has escalated over concerns that popular tourist destinations are being saturated by non-Japanese travellers, usual lifestyles and neighbourhoods are being disrupted, and the majority of press reports focus on ‘unprofessional hosting’.
The introduction of stricter regulations in 2018, requiring minpakus to operate for up to 180 days a year, has heightened the barrier of entry for the market and gone some way to professionalising the marketplace, but many people believe Airbnb should be responsible for educating the domestic market about safe and legal hosting.
How will the Games affect Japan’s short-term rental industry?
Sceptics of the Airbnb partnership saw it as a measure of cutting costs associated with hosting two major sporting events in the space of two years, but to Thomas Bach, the Games would provide guaranteed accommodation for visitors, families of athletes, and officials, reducing the need for host cities to invest significantly in new hotels.
For Tracey Northcott, a property manager and CEO of Tokyo Family Stays and Tracey Northcott Consulting, it made perfect sense for Airbnb to host the 2020 Games too. Even without the pandemic, there would have been a shortfall of 30,000 rooms to fulfil demand during the competitions, and discussions even took place to bring in cruise ships as floating hotels.
The majority of operators’ businesses, like Northcott’s, were “decimated” by the pandemic, triggered by border restrictions, the postponements of the Games, and cancellations of other in-demand occasions, such as the Tokyo Marathon and Hanami [Cherry Blossom Season].
Northcott said: “99 per cent of our guests were inbound tourists. The borders were closed to all non-Japanese [even those with a working visa] and of course not tourist visas have been issued.
“We had a number of listings that we were specifically keeping for the Olympics and when it was clear that they were to be postponed [or even cancelled], we made some hard decisions and closed these down. We now have about a third of our inventory that we had in January 2020.
“We had planned for the Olympics year for about five years. We were strategic in our choice of properties to be close to venues and suit our target customer of families. We were successful throughout 2019 in our marketing and were fully booked with mostly athletes’ families.
With officials, support staff and journalists all in lockdown bubbles and unable to mix with the general population, hosts are left counting the cost of empty Airbnb listings during the Games.
Northcott believes that Airbnb could have done more in terms of community outreach and support hosts, both when the new regulations went through in 2018 and at the start of the pandemic when it cancelled bookings that could no longer be fulfilled. The company’s reliance on international inbound tourism, as opposed to strengthening local communities based around domestic travel is leading to a drop in smaller hosts and listings, albeit a rise in ryokan licences for single dwellings [bookable all year].
“There is not the demand – this is not the fault of Airbnb or the hosts. This is just collateral damage of a global pandemic, which is a human and economic tragedy.
What does the data tell us?
While this is only pacing data, the figures provided by AirDNA make for sobering reading. Average daily rates [ADR] provided the one positive note for the weeks of the Games [23 July – 8 August], compared to 2019.
For the sake of comparison, booked nights were up by more than 600 per cent and ADR by 135 per cent in August 2016 from August 2015 when the last Olympics and Paralympics were held in Rio de Janeiro, Brazil, serving as a reminder of the loss of crucial anticipated revenue for hosts.
Pre-pandemic, the Japanese Tourism Organisation [JNTO] revised its original target of 20 million inbound visitors to Japan in 2020 to 40 million, highlighting the demand generated by the Olympics and the Rugby World Cup two years prior. Now, most foreign travel to Japan is not permitted unless for exceptional circumstances and Tokyo is under its latest state of emergency.
What benefits may come from Airbnb’s IOC / IPC sponsorship?
In the absence of fans, Airbnb is projecting a positive outlook and getting creative in finding solutions to maintain its brand exposure during the Olympics and Paralympics.
The company has created a specially curated programme featuring more than 200 Olympian and Paralympian Online Experiences through its platform, allowing athletes to share their passion and experience with guests and receive $500 in promotional credit in celebration of their accomplishments.
The Airbnb Athlete Travel Grant, which launched in April, follows the same lines and is designed to provide around $8 million in direct support for Olympians’ and Paralympians’ travel accommodation and training over the next eight years.
Catherine Powell, Airbnb global head of hosting, said: “With spectatorship looking different this year, audiences are searching for new ways to support Olympians and Paralympians during Tokyo 2020. Airbnb is all about creating unique experiences that connect people, and Olympian and Paralympian online experiences allow fans to feel closer to their heroes than ever before.”
Event organisers and Airbnb are also promising the most “inclusive and diverse Games of all time”, aligning the home-sharing platform’s ‘Belong Anywhere’ slogan with the Olympic Latin motto – “citius, altius, forties” – translating to “faster, higher, stronger”.
Olympic and Paralympic Refugee teams will again compete, instilling a message of hope and solidarity with the 80 million-plus displaced people worldwide. Para athletes in particular are being given more visibility and exposure than ever before, both at the Games themselves and via Airbnb’s Experiences programmes.
While Airbnb is investing heavily in new diversity leads, there is also a renewed focus on gender equality at the heart of the organising committees. The governor of Tokyo, the Japanese Olympics Minister and the newly appointed president of the Tokyo 2020 Organising Committee are now all women.
The hope is that this commitment to diversity, equality and inclusion will not be a one-off, but rather a sustainable, defining legacy marker of Airbnb’s venture into sports sponsorships.
What does the future hold for Airbnb’s sponsorship of the Games?
The debate will not disappear when Tokyo packs up after the Paralympic Games later this year, either.
Airbnb is being urged to withdraw its support from the Beijing 2022 Winter Olympic and Paralympic Games by Uighur Muslim rights campaigners in China. The End the Uighur Genocide Movement, fighting on behalf of Uighurs who are alleged to have been persecuted and detained in secret internment camps, is calling on the company and CEO Brian Chesky to revoke their sponsorship of the Games with immediate effect.
Meanwhile, the irony of Airbnb being a sponsor for the 2024 Olympics and Paralympics in Paris, where the city’s own mayor is trying to actively restrict the platform, is inescapable.
Airbnb was the subject of intense scrutiny in the French capital long before Paris mayor Anne Hidalgo vowed to hold a non-binding referendum on the platform’s operations, and its estimated 30,000 listings, in the city, as part of a six-year Covid recovery plan.
Only this month, the company was ordered to pay €8 million [$9.5 million] in fines by a Parisian court after more than 1000 of its listings were found to be flouting registration laws in the French capital.
The nine-year sponsorship agreement up to the 2028 Los Angeles Games involves the IOC and IPC making at least $28 million worth of accommodation available to athletes during the Games. City officials in Paris say this will only lead to rent rises and French hoteliers are suspending their collaboration with the 2024 Games owing to “unfair” competition from Airbnb.
How will we reassess Airbnb’s partnership legacy after these Games?
However smoothly the Games go from a sporting perspective, Airbnb’s legacy from this partnership will be measured away from the venues themselves. There is much more than finance at stake, but also the company’s credibility and reputation as a travel and hospitality behemoth.
For hosts such as Northcott, the idea of a business legacy without fans present is hard to fathom: “I don’t think there will be one. Certainly there is no economic upside to businesses like ours who are Olympic adjacent and who were hoping to take advantage of being in a location were we could supply a much needed resource.
“For Airbnb hosts and corporate, we have a product that nobody is needing or willing to pay for. I wish the athletes well but it is just not going to be the same for them,” she added.
Airbnb on the other hand may regret not capitalising on the opportunity to ingratiate itself with its host community in Japan, many of whom were left disillusioned by the company’s cancellations policy at the start of the pandemic. Those hosts will hope that the pent-up demand for travel will return after the Games but they will also feel a sense of PTSD from missing out on a guaranteed stream of income.
Airbnb, though, will have more opportunities to promote the upsides of its product and the partnership, as well as more obstacles to overcome.
These Games will no doubt have a profound impact on the Olympic and Paralympic movement too, with critics believing that the organisations’ idealistic promises of inspiration and national pride is being used to justify the huge expenditure and onerous demands on host cities.
While it will be a defining moment in Airbnb’s history, the ramifications in the years to come will be felt even more strongly in Tokyo.