1.

General introduction
1.1. How AirBnB operates

1.2. How large chain hotel chain operates

A Chain Hotel is a hotel that is part of a series or of a group of hotels operated by the same company or
owner.

Hotels invested heavily in additional amenities as they competed for all segments of travelers.
Amenities, including on premise spa facilities and fine dining, were often offered by the hotel. Further,
properties offering spectacular views, bolstering a hotel as the vacation destination, may contribute to
significant operating costs.

1.3. What is the bed & breakfast operator?

Bed and breakfasts, however, were much smaller, usually where owner-operators offered a couple of
rooms within their own home to accommodate guests. The environment of the bed and breakfast—one
of a cozy, home-like ambience—was what the guest desired when booking a room. Contrasted with the
hotel or motel, a bed and breakfast offered a more personalized, yet quieter atmosphere. Further, many
bed and breakfast establishments were in rural areas where the investment to establish a larger hotel
may have been cost prohibitive, yet the location itself could be an attraction to tourists.
2. Business models
2.1. What is a business model?
A company’s business model sets forth the logic for how its strategy will create value for customers and
at the same time generate revenues sufficient to cover costs and realize a profit. Thus, it contains two
crucial elements: (1) the customer value proposition—a plan for satisfying customer wants and needs at
a price customers will consider good value, and (2) the profit formula—a plan for a cost structure that
will enable the company to deliver the customer value proposition profitably. These elements are
illustrated by the value-price-cost framework.

2.2. Analyze & compare

Table 1

AirBnB
Customer value  On the one side it enables owners to list their
proposition space and earn rental money.
 On the other side it provides travelers easy
access to renting private homes.
 Personal profiles as well as a rating and
reviewing system provide information about
the host and what is on offer. Vice versa, hosts
can choose on their own who to rent out their
space to.
 Airbnb operates as a transaction facilitator
between hosts and travelers who are looking
for comfortable accommodation at a cheap
price.
 By providing host protection insurance, as well
as a rating and review system, the platform
builds trust within the community of users and
lowers transaction costs
Profit formula  Revenue generation: Airbnb receives
commissions from two sources upon every
booking, namely from the hosts and guests
with an estimated 11 percent fee per room
stay. For every booking Airbnb charges the
guest 6-12% of the booking fee. Moreover
Airbnb charges the host 3% for every successful
transaction.
 Cost structure: Fixed & variable costs such as
Sales & marketing, operating & support,
product developments, G&A, product
development.
The continual decrease in technology costs.
 Profit margin: Profitability depends on
generating revenues from customers’ booking
& sign-up fees to cover costs and provide
attractive profits.