In late March 2020, as Airbnb was reeling from the impact of the first COVID-19 wave, it mentioned for the first time that it was working on a travel insurance product for its guests. After 2 years, while the company was testing the waters and working on redesigning its AirCover offer for its hosts, Airbnb has announced that travel insurance should be available in Spring 2022.
We’ll see why the COVID-19 crisis has forced Airbnb to offer travel insurance. Caught between host cancellation policies that Airbnb now swears it will enforce and an extenuating circumstances policy that excludes most COVID-19 related travel restrictions, Airbnb guests may need a solution. We’ll see why Airbnb had to draw this conclusion after the revolt of Airbnb hosts in March 2020, why we think Airbnb’s travel insurance will not be free for guests (after, Vrbo and Hopper make good money selling similar products), and why the Generali Group could be the “reputable insurance carrier” mentioned.
We’ll finish with Airbnb’s brand new Guest COVID Support Program, because it illustrates the situation where Airbnb is, between host cancellation policies it cannot break at will anymore and its own policies which officially make it harder for guests to use COVID-19 as a reason to cancel a reservation and get a refund.
Airbnb Guest Travel Insurance: Why and How
On January 20, 2022, Airbnb announced its new guest insurance product in partnership with a reputable insurance carrier. We plan to launch this new product in Spring 2022.
The Airbnb Guest Travel Insurance has been in the works for almost two years!
- On March 30, 2020, during an emergency live stream held with Airbnb hosts in the thick of the COVID crises, Brian Chesky announced that the company was working on travel insurance ,
- In 2021, Airbnb discreetly launched its Travel Insurance page and started recommending guests purchased a travel insurance product at the end of its booking process. Airbnb here was merely redirecting travelers to third-party websites, such as the travel insurance aggregator InsureMyTrip in the US and insurance company Europ Assistance (part of the Generali Group) in Europe,
- In August 2021, during a quarterly earnings call, Airbnb mentioned working on opportunities such as “guest travel insurance”,
- On January 2, Brian Chesky confirmed in a tweet that the company was working on guest travel insurance.
Will Airbnb’s travel insurance product for guests be free? Most likely not.
Airbnb offers AirCover for free to its hosts. AirCover is mainly made up of “guarantees”, not insurance products (except for the liability part). If it really were insurance, then Airbnb would have to pay an insurance premium to an insurance company, on behalf of its hosts. It would be very, very costly.
If Airbnb were to offer free travel insurance, it would also have to pay an insurance premium to a professional insurer. Given the volume of Airbnb bookings, it would represent a lot of money and would dent Airbnb’s profitability.
First, Airbnb would not need to cover all its guests, as some already have their travel insurance. Also, unless a reservation is non-refundable, a guest may have a chance to get their money back by canceling their booking or asking their host for some flexibility. Hosts may not like to hear it, but, in a way, flexible cancellation policies are a form of travel insurance for guests.
Second, Airbnb seems to see travel insurance as a money-maker. After all, Vrbo has been flogging insurance products to guests and owners for years, probably making a lot of money from its insurance provider Generali.
- In August 2021, during a quarterly earnings call, a financial analyst asked Airbnb leaders whether the take rate, currently at 15% on average, would increase in the future. The answers were quite interesting.
- First, Airbnb mentioned, “ opportunities (such as) guest travel insurance”. So, the take rate could increase from commissions on travel insurance that Airbnb would sell to guests.
Another reason why it could be a paid product for guests is Hopper’s success at selling its “cancel any time” and “price freeze” guarantees. It shows that consumers are ok to pay for an added service. Airbnb’s shareholders may be happy to hear that the company is trying to increase its margins, as Hopper is doing. With the launch of Hopper Homes, the competition between the two companies is increasing.
What could Airbnb’s Travel Insurance product look like?
Airbnb wrote that it was working on a “new guest insurance product in partnership with a reputable insurance carrier”. It could be the Generali Group and its Generali Global Assistance unit, because:
- Airbnb is already partnering with Generali to sell insurance through an affiliate program in Europe (under the Europ Assistance brand)
- Generali is one of the few global players who could help Airbnb roll out this insurance product, country after country (unlike a “guarantee”, an insurance product has to comply with strict regulations that differ from one country or even state to another.)
- Vrbo is already selling travel insurance products in the US created by Generali (formerly CSA Travel Protection)
Here’s what Vrbo’s insurance products look like, as created by Generali:
Why Airbnb needs its $20 million Guest COVID Support Program until the guest travel insurance product is available
Launching a guest travel insurance product was probably not a priority for Airbnb before the COVID-19 pandemic. It was probably seen as something to offer at some point, to create ancillary revenues for the company.
Why enforcing host cancellation policies leads to the need for the Guest COVID Support Program
We’ll see below why Airbnb’s new firm stance on host cancellation policies is making it look not super consumer-friendly, especially during the Omicron variant wave. Let’s go back to March 2020, when Airbnb hosts revolted against Airbnb.
- March 2020: Airbnb decides unilaterally to allow guests to get refunded for their stay, regardless of their host’s cancelation policy. Airbnb took the money out of the hosts’ accounts and sent it back to the guests. A lot of Airbnb hosts complained that Airbnb was using their revenues as free travel insurance money for the guests.
- It caused a major outcry among hosts, a lot of them feeling betrayed by Airbnb. A few months later, Airbnb CEO Brian Chesky would apologize for taking such rash decisions without consulting hosts first.
- In Sping 2020, it modified its extenuating circumstances policy to exclude most COVID-related issues. For instance, travel restrictions and border closures could not count anymore. Host cancelation policies were enforced. Basically, only guests who had actually caught COVID-19 could use Airbnb is set to launch guest insurance and a $20 million Guest COVID Support Program.
- Things run more or less smoothly until the Omicron wave hit Europe, the US, and Australia. Then, Airbnb was stuck into a dilemma: It had promised to hosts that it would enforce their policies from now. Going back on this promise would mean destroying a part of the goodwill that the company had rebuilt, bit by bit, with its hosts.
- Yet, the highly contagious COVID-19 forced some governments to impose new travel restrictions. Airbnb guests started complaining about hosts not being willing to cancel and refund their stay.
So, Airbnb finds itself in a situation where the guest side, not the host side, was complaining about the company’s attitude. How can Airbnb look consumer-friendly, while keeping most of its promises to hosts?
If you read Airbnb’s announcement, you can feel that the company painstakingly wants to show that it is consumer-friendly, and more so than its competitors (hello, Vrbo, Booking, and Expedia).
“In this context, we announced the global activation of our Extenuating Circumstances policy in March 2020 enabling guests who booked before the pandemic to get refunds, making Airbnb the first short-term rental platform to implement such a consumer-friendly approach to COVID cancellations. And Airbnb continues to allow guests who contract COVID to cancel for a full refund even if it’s outside of the Host’s cancellation policy. This is something none of our peer short-term rental companies have done.”
So, what could Airbnb do at this point? If you are an Airbnb connoisseur, you will say: “Launch a program with a PR-friendly name!”. And here’s how the “Guest COVID Support Program” was born.
Who is the Guest COVID Support Program for?
The Guest COVID Support Program provides relief to guests no longer able to proceed with their previously booked reservations due to unexpected travel disruptions caused by government mandates — such as border closures or mandatory extended quarantine requirements.
How does the Guest COVID Support Program work?
For guests in these situations who are unable to obtain full refunds under their Hosts’ cancellation policies, Airbnb will provide relief in the form of a travel coupon for 50 percent of the cost of the unrefunded portion of the reservation. We are funding this program with $20 million initially to help defray these financial impacts to our guests and ensure guests know that we are listening to their concerns.
Canceled bookings that are eligible
Canceled bookings must satisfy all of the following criteria:
- A stay reservation with a check-in date on or after December 1, 2021;
- Canceled by the guest (a) on or after December 1, 2021, (b) before check-in and within 45 days of check-in, and (c) on or before the end date of the Program; and
- Canceled due to a qualifying government-mandated travel restriction arising after the time of booking.
Types of government-mandated travel restrictions covered
Only the following COVID-related travel restrictions are covered:
- A border closure, shelter-in-place, or lockdown order that prohibits either:
- All non-essential in-bound travel to the guest’s destination location, or
- All non-essential out-bound travel from the guest’s location of origin;
- A new or extended requirement that all travelers from the location of origin must quarantine or self-isolate upon arrival at the destination location.
Now, Airbnb is naming clearly naming the Omicron variant. The company is probably taking a measured risk, as the Omicron wave may die off in a few weeks. If you look at the fine print, you can read that:
The Program will end when all Program funds have been allocated, or on April 30, 2022, whichever comes first.
So, the program will have solved a temporary issue, without making hosts and guests angry.
Now, note that guests get an Airbnb travel coupon, not a cash refund.
Conclusion
Airbnb has been working on its guest travel insurance product for over two years and announced that it will be launching the product in Spring 2022. The COVID-19 pandemic has forced Airbnb to expedite the launch of this product. The company will probably offer it to guests for free. Additionally, we believe that the Generali Group could be the “reputable insurance carrier” mentioned in their announcement.
