AIRBNB CASE STUDY

The Airbnb company doesn’t own any rooms themselves but instead offers a

technological platform for listing and renting locals homeowner who have spare rooms to earn

extra income by enable owners signed up through the platform and offer the service or resources

towards the travelers. They offer cheaper accommodation and unique accommodation. They also

offer extensive variety of accommodation options with direct host contact. Travelers can

bookroom through local host with a lower price, and Airbnb received a percentage of what the

host received for the room. They provide a rating and review system for hosts and guests by used

of technology to which they are familiar.

It profits formula is revenue generation dependent on renting rooms and overall

occupancy. Its transaction fee charged to users who offer and rent accommodations through app.

The cost structure associated with operating brick and mortar physical location, food and

beverages, marketing, and developing and updating software and technology, as well as

marketing and wages for engineers, professional management and staff. And it possibly wages if

large enough to necessitate staff. Low operating costs compare to trad ion brick-and-mortar

because the company doesn’t own properties. Local host doesn’t subject to regulation and

taxation like tradition brick-and-mortar. They are varying and different locales in which to stay,

both local and international reach. The profit margin is not contingent upon the fixed costs

associated with operating hotels/bed & breakfasts. Instead, profitability associated with

percentage of revenue generated by all participating users offering accommodations. And this is

the highest profit margin as well. Its independent of costs associated with operating hotels/bed &
breakfasts. Instead, profitability associated with percentage of revenue generated by all

participating users offering accommodations.

Large Hotels/Motels customer value proposition is called extensive number of value-

added services. They use well-known brand name or familiar brands, or international brands to

which customers are accustomed and potentially feel affinity and loyalty (global reach with

loyalty programs). They invest heavily in additional amenities such as pools, gyms, spas, etc.

with a significant operating cost to compete for all segments of travelers. They also provide

accommodating guest in single or multiple rooms. They offer spectacular views and on-site

parking. Their profit formula is revenue generation dependent on renting rooms and overall

occupancy. The cost structure extensive, composed of wages and purchase and upkeep of

multiple physical assets/locations. Other costs would include food and beverage, marketing,

taxes, licenses. Global costs further complicate structure, including operating across multiple

legal and physical jurisdictions. The profit margin of large hotels/motels is low. Its dependent on

generating sufficient revenues across multiple locations to cover fixed and variable costs

globally. Profitable locations may be used to offset losses and unprofitable locations.

Bed & Breakfast’ customer value proposition provides one location, offering unique,

local accommodation, affordable accommodation, intimate accommodation, with proprietor

sometimes serving multiple roles, including ambassador to area. If in rural area, they provide

may be only accommodation. It is very small, usually where owner-operators offered a couple of

rooms within their own home to accommodate guest. The place feels like cozy, home-like

ambience associate with more rural, slow pace, more personalized, quieter atmosphere offering

bed & breakfast with great allure and ambience for the guests’ experience, possibly with

historical background.
 The profit formula is revenue generation dependent on renting rooms and overall

occupancy. The cost structure associated with operating brick and mortar physical location, food

and beverages, marketing. They give possibly wages if large enough to necessitate staff. The

profit margin of Bed & Breakfast is medium. Its dependent on generating revenues sufficient to

cover fixed and variable costs. Lack of profitability several jeopardizes business as owned by

sole proprietor.

The strength of large hotels/motel is the variety of value-added services, safe and

supervised large number of rooms. They give a perception of safe, comfortable and/or reliable

accommodations. Their weakness is that high prices can scare people hard to be flexible with

properties. If consumer has bad experience with one location, all locations may be viewed as

terrible. The strength of bed & breakfast is personalized atmosphere cheaper than large hotels.

As we said of top, they provide one location, offering unique, local accommodation. And If in

rural area, they provide may be only accommodation. Their weakness is limited number of

rooms, high workload for little staff. The cost structure, which is highly sensitive to fluctuations,

as a sole proprietor has very little room for shifts in revenue and costs. The strength of Airbnb is

string brand image, no ownership, and competitive prices. They offer both low-cost

accommodations, as well as unique experiences. They also offer no costs associated with

operating hotels, thus greatly reduced cost structure. Their weakness is regulations, imitators, and

inconsistency among hosts. Guest can have perception of at times unsafe experiences. Legal

exposure as cities and towns determines if renting rooms through Airbnb is legal, and the

potential for it to be illegal. Legal exposure through individual users not following laws, such as

anti-discrimination. Their business model is relatively easy to copy, as demonstrated by Uber

and Lyft in the ride-sharing space.

 When staying in a hotel turns out to be way too expensive and living in a hostel with

other 100 people in a room doesn’t sound pleasant, the third option-Airbnb comes. The fact that

a traveler can look at many options and find accommodations which suits him better either it is a

bohemian or modern apartment is fascinating. Consumers have started to value direct and easy

contact even more in the last years. This is when Airbnb stepped in and offered something that

people have been waiting for. Customer’s value is changing over time due to the rapid

development of technology. Airbnb provide an online platform where people can rent properties

without having standard amenities of a hotel. Airbnb not only leveraging technology but also the

current change of how consumers interacted with business and how the consumers had

deemphasized ownership. Consumer seems to refer sharing or renting instead of ownership

interest.

According to Rimer, there are three main factors of attributes to the success of Airbnb:

the accommodation, the economic benefits and the idealistic motives. Airbnb offer flexible

prices and peer-to-peer lodging services refers to as the “sharing economy” concept. People can

rent properties for short or long-term stay offering by the local hosts. Airbnb also assist the

growth of local economy by create income for localhosts and the community. Airbnb charge the

hosts 3% service commission fee to cover the expenses and handling fee after each complete

booking. Guest are required to pay about 11%non-refundable service commission for every

booking they make. Airbnb guests would like to have authentic experiences that make them feel

like travelers and not tourist bases on a value of sharing unique experiences of meeting and

staying in each other’s home, introduce guests into the local community. Beside the authenticity,

another two important factors for the guests are location and price (Rimer, 2017).
 Key factors that determine the success for Airbnb are their business model that based on

trust, authenticity and transparency towards guests and local hosts. Airbnb was able to win trust

with its reviews and feedback systems, gain loyalty with rewards, and increase the user base with

referential programs. Also, the sharing economy is one of the keys. They don’t own any actual

property and can therefore be flexible. They provide variety of accommodation options at

competitive prices. Airbnb is digital and this is the best place where to reach more users.

My suggestion would be to work with hosts more to make sure there are no

accommodations options with too many negative reviews as it might be spoiling the brand’s

image, also securing the travelers and imposing stricter rules for conduct. The safety and security

of hosts and guests - this is difficult issues and can’t be easily resolve from both sides. Guests

might experience some issues like theft, destruction of property or even kidnapping, and they’ll

pick the hotels in the future for safety purpose. Hosts, on the other hand, might expose

themselves to legal and financial problem from accommodating guests, for instance, rooms and

home being damage by huge parties. Airbnb should offer more information of its hosts within the

city to the guests before their travelling so they’ll more options to choose from. For the hosts,

Airbnb should work with insurance company to form more comprehensive plan that would shift

the risk away from the hosts.