Airbnb Case Study

Introduction

Airbnb is a platform where tourists get to stay at the property that is registered on the site by the local resident or hosts. Hence, Airbnb acts as a community established on sharing. In simple words, it can be inferred that Airbnb is an online or digital platform that associates or links individuals who want to rent out their houses to an individual who is seeking accommodations in that specific region or locale.  The organization was initiated by two friends when they experienced several challenges in paying the huge rent and had a spare living kind of a room. At present, Airbnb operates in over 190 nations and has an international presence in over 34000 plus cities across different nations of the world. The organization has transformed into a giant business currently with 150 million-plus customers and 1.9 million plus registrations that the individuals could book at any given point in time. This case study presents the current internal and external environmental situations of Airbnb and suggests ways of sustaining the current position in the global hospitality market.

Discussion

The business model of Airbnb

Airbnb is mainly based on an aggregator business model. Aggregator Business Model can be defined as a network model in which the organization gathers the information about a particular good or service provider, make the providers their associates or partners, and accordingly selling its services under the same brand name. Since the aggregator is mainly a brand hence, it has to offer services that have quality and price which is uniform in nature. This is, however, done by signing up a contract with the key associates or partners. As a consequence, it can be understood it as an asset light model where the organization earns a commission for the services it provides without owning any specific inventory as a whole. In addition to the tourists and hosts, the Airbnb’s business model also incorporates a massive network of freelance photographers in all significant or most recognized cities of the world. The organization visits a property and get high definition photographs of the property. This helps in attracting several customers easily (primarily the younger generation around the world).

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SWOT analysis

Strengths:

Airbnb possesses an unmatched brand recognition and strength in the hospitality and vacation rental industry. The type of brand recognition maintained by the organization also assists in developing an exceptional competitive edge over other players within the travel industry. Airbnb also offers and acts as an inexpensive alternative to giant hotel chains operating as a major strength for the organization. Airbnb hosts require only cover a few ancillary costs associated with its business operations. As a consequence, customers save a huge money as no resort fee or amped up hotel taxes.

Weaknesses:

Airbnb encounters developing legal issues and rergulati9njs as the law catches up in this digital platform. Insufficient and ambiguous regulations homestays assisted Airbnb in expanding its business efficiently. However, legal requirements associated with this business for commercial gain have created severe issues for the locale hosts and travellers simultaneously. No standards of quality control, lack of cleanliness and comfort acts as a tough issue for the organization in the long run. Due to the crowd sourced nature of the organizational business model, Airbnb lacks a collaborative marketing strategy. It is hugely based on destinations where hosts are more or clustered, and it also tries to appeal to both hosts as well as travellers.

Opportunities:

The prime appeal of Airbnb is in making the accommodation part of the customer experience, not only a necessity due to the traveller requires a place to sleep. Captivating to the distinctness of an individual’s stay will be analytical to maintain the allure of Airbnb beyond the traditional cost savings methods. The current business model concentrates mainly on accommodations. Hence, Airbnb could stretch its offerings in order to incorporate other efficient alternatives such as air travel, car rental, tickets for different attractions or activities, and others as well. This would assist Airbnb in creating a complete destination package, which could act as the next step in Airbnb’s evolution and growth.

Threats: 

Local as well as state governments continue to shift the goal posts and focus on what is needed for a private property owner for renting out their house or living space. The dynamic nature of legal needs can make it challenging for the hosts to place a room for rent on Airbnb, and capable hosts require to do appropriate planning while they plan on hosting or renting their space to Airbnb. In addition to this, Airbnb is highly susceptible to different lawsuits from hosts who use this digital platform. Few hosts have charged Airbnb because as it did not reimburse cancellation fees, and shire governments have to try to collect tourism taxes from organizations such as Airbnb acting as a classic hotel.

PESTLE Analysis

Political and Legal factors:

Airbnb is an eccentric business. Individuals offer to lease their houses, penthouses, or rooms to strangers in need of the same. However, the organization has encountered several legal issues as some of the locations available to rent does not follow the state housing regulations and laws. In addition to this, Airbnb has also encountered fines and court proceedings in different nations such as New York and Barcelona as the organization failed in following rules for local tourism. Hence, it is crucial for Airbnb to make sure that the organization follows the housing laws of each state in order to stay compliant in the long run.

Economic factor:

Airbnb has evolved and is a significant competitor of giant hotels chains and motels. Airbnb offers inexpensive options for renting. Other than this, the organization has also evolved aggressively within a short span of time. Currently, the organization (Airbnb) serves over nine million people around the globe. In addition to this, Airbnb has profited states by causing millions in expanding and full time like jobs around different nations as well.

Social factors:

Airbnb is classified as a social operation or business. Hosts offer their houses to travellers or guests in exchange for money. Travellers can document their experience digitally or through online channels. Airbnb evolves and advertises through word of mouth advertisement. However, the current social trends have been very rapid in nature and have resulted or guided a new direction for the society in which Airbnb operates. This guidance has positively assisted the business model of the organization (Airbnb) and has been used by the organization for effective utilization of the available resources in the most efficient or possible way.

Technological factors:

Airbnb relies hugely on advanced technologies in order to address the current needs and preferences of the business situations and markets. The travellers could easily book rooms on the web based application or through the official website of the organization. The website also allows travellers in writing proper reviews in case customers encounter any disturbance or challenges while using the services of the organization. This, in turn, assists Airbnb in improving themselves on the basis of gained feedback from the new and existing customers.

Environmental factors:

Airbnb brags that the organization lowers energy usage within nations such as America and Europe as compared to other hotels. This incorporates reducing greenhouse gases, reduced consumption of water, avoidance of waste, and escalated environmental awareness. However, Airbnb is a relatively sustainable business as the properties registered under the name of the brand consumes less energy and are environment friendly at the same time. Airbnb considers energy consumption as a crucial part of environment conservation. This makes Airbnb one of the most effective businesses in the hotel industry.

Recommendation

The hotel industry is highly dynamic in nature. Therefore, it is recommended that Airbnb focuses on changing its pricing strategy and follow a demand pricing model. Implementing this model will help Airbnb in generating more income and profit for the organization based on the current demands in the business markets. It is also recommended that Airbnb operates in every nation and embraces diversity. It is also crucial that Airbnb offers local, original and authentic, sustainable as well as diverse offerings to attract new customers and retain the existing ones. Embracing these elements will also allow hosts in improving the rate of occupancy for several reasons. Implementing tools for instant booking is also recommended to Airbnb. This would help in attracting more customers through the organization’s search algorithms. Doing this will also help in boosting the ranking of registrations through instantly bookable attributes.   

Conclusion

Therefore, from the above discussion, it can be concluded that Airbnb could stretch its offerings in order to incorporate other efficient alternatives such as air travel, car rental, tickets for different attractions or activities, and others as well. This would help in diversifying the business around the globe and increase the current or existing share in the global hotel industry. Airbnb is highly susceptible to different lawsuits from hosts who use this digital marketing platform. Expanding its product line and product offerings would also allow Airbnb in addressing the new demands of the customer in different nations as well.

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