Business Case Analysis: _____ (Airbnb)

What key factors may determine the success of Airb

Question 4 Analyzed by Anisha - name –Anisha- surname

In most industries, companies have considerable freedom in choosing the how’s of

strategy. Thus, some companies strive to achieve lower costs than rivals, while others
aim for product superiority or more personalized customer service or enhanced quality
dimensions that rivals cannot match. Airbnb founders had the right concept at the right
time which swayed away the world of accommodation as we know of today. The idea of
injecting Trust into the vacation rental model, and encouraging folks to share space they
already owned fell on very receptive ears. Homeowners, empty nesters and young adults
alike have found a way that helps pay mortgage, rent and college bills. A creative
distinctive strategy such as this is a key factor for developing a competitive advantage
over its rivals.
The idea of keeping a guest in the house is not new. We can even think of it as a
traditional idea of renting a flat to a guest. What is new is the corporate concept of
staying in a lavish hotel chain like Marriot. Airbnb has done a phenomenal job to
provide a platform for travelers and the common people like us to find these places and
provide a payment platform for the safe and secure transaction. This unique and
innovative idea helped travelers in getting comfortable and affordable stays that wouldn’t
have been possible otherwise.
Airbnb works as a middle-man between hosts and guests. So, via this company gains
profit from both the parties. This business plan is highly innovative and smart as the
company charges 10% commission from hosts upon every booking and 3% of the
booking amount as transaction charges from people who have booked the rental upon
every confirmed booking. But this amount is nothing in comparison of the chains like
bed and breakfasts or motels. This is a smart move which helped making this business
idea a huge success today. People are more comfortable in booking through an online
platform at reasonable rates than spending it on expensive corporate hotel chains. The
traditional ways of rentals are made more attractive for the travelers and it is a benefit
for all the parties involved in the booking.
Another key factor in their success is their ability to innovate and make it appealing and
fun. The company succeeded in differentiating itself from the establishment like bed-
and -breakfast by using lots of creativity in it’ s structure for people who are looking for
fun or a local experience rather than luxury or formal setting. Airbnb differs from even
the traditional rentals in it’ s approach to be more open to the public review. Customers
feel more connected to this idea of staying in a place which gives them a feel like staying
as a local among the local community and they feel safer as they already have an idea of
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the location, structure of the rooms, things provided in them, customer reviews and
ratings of all the individual hotels present in the chain. So, the idea of mixing the
comfort with the local community helps them decide on their decision of choosing this
chain over the other available accommodations.
The most important factor of the success of Airbnb is the free market concept. It’ s
prices are much lower than many other options available in the market. And the best
part is that company has no physical real estate to balance. It works on the concept of
demand and supply. Companies like Uber also took this concept in today’s world of
social network and gained a huge profit. In the beginning it looks hard as there is no
physical entity and all it depends on is the demand of the bookings done by travelers or
commuters. But once it sets foot in the market and grows through social media. It
doesn’t look back and just grows it’ s roots in the market.
As we can see how social media impacts our lives, it can even impact the lives of these
kind of business plans. So, it is one of the important factors in Airbnb’s growth. It
creates a secure community like environment for the customers with ratings and reviews.
People love sharing their thoughts on social media and adore the process in which they
think that they are a part of everything. They feel connected and free to write anything
they want and this helps in transforming a rental review having huge profits as people
get attracted to the places with high ratings and excellent reviews. Airbnb used a right
strategy at the right time which made it one of the most popular chains of
accommodation in today’s world.
One more factor which helps Airbnb being trusted by the people is it’ s rules and
regulations. The hosts can be scared of letting a stranger enter their property as there can
be risks of theft or damage to the property but the policy of showing the Valid ID
proofs while entering the hotel is a smart decision by the company. Even if the customer
enters the app or online platform, they have to link the account with their social
networking sites. This helps hosts trusting the person and in case of any thefts or
damage they can be tracked easily. It is called the Host Protection Program. Even the
travelers are protected under some of it’ s rules and regulations. Airbnb take care of it’ s
travelers’ safety and satisfaction by giving them a 24/7 customer care helpline. There is
also an easy refund policy provided by the company. This makes a customer have a full
faith on the company which is very important to have for a business to have a reliable
future. All these factors make sure to highlight the company in positive light and ensure
it’ s success in the market.

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ND
QUESTION N.1

Textbook, articles and additional sources

Textbook
N. Topic Chapter Page
1. What do we 1 4
mean by strategy
2. Strategy and the 1 5
Questfor
Competitive
Advantage

Additional sources (company disclosures, web pages, video etc)

N. Title Author Link
1. Why is User in https://www.quora.com/Why-is-Airbnb-so-popular
Airbnb so the quora
popular site
2. What key Not https://www.coursehero.com/file/24640161/C45-Airbnb-
factors specified casedocx/
may
determine
the success
of Airbnb

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 Business Case Analysis: _____ (Airbnb)
What is your comment about Airbnb’s performance after 2016 and before
COVID-19? What is your outlook for Airbnb’s future performance and its
prospects for maintaining its market position after the COVID-19?

Question 8 Analyzed by Anisha - name –Anisha- surname

Airbnb revolutionized the concept of accommodation for the travelers. Airbnb posted
its first profit in the second half of 2016 and expects to maintain it through 2017,
according to a report from Bloomberg, citing sources close to the company. Revenue at
Airbnb increased more than 80% during 2016, according to Bloomberg's sources. That
comes despite a regulatory clampdown on the service in major cities, including San
Francisco and New York. This shows how strong are the foundations withheld by the
company. It attracted this generation of the hassle free and budget friendly backpackers.
Airbnb became a huge success in the market. Through today’s technology and the old
concept of home stays this gave away a unique and affordable idea to today’s generation.
They feel more connected with the locals while staying in these accommodations. If we
check their business update, we can find in their own words that. “In 2018, we saw
strong growth throughout our company: our core homes business enjoyed robust
growth, Airbnb Experiences are now available in more than 1,000 cities, and we
continued to optimize our platform to support the expansion and development of new
business units. At the same time, Airbnb put in place senior leaders who are focused on
investing in growth and long-term profitability”. With this insight we can have idea of
how fantastic their journey from the scratch is.

But right now, the COVID-19 is a huge concern for the world which not only shakes
the entire mortality rate of the world but can also disbalance the social and economic
structure of the world. Many companies are already on huge losses. But as we know, the
concern of the world isn’t connected to monetary profits but the health and mortality of
the world. This is declared as a pandemic by the WHO which already engulfed almost all
of the world. As declared in New York Times “The toll that the virus is taking on the
$688 billion online travel industry is shared by airlines and big hotel chains. One of the
hardest hits may be Airbnb, where millions of hosts have listed their properties for short
stays since the company was founded in 2008. (Airbnb takes a cut of their fee.) Last
week, Brian Chesky, Airbnb’s chief executive, sent an email to employees outlining the
company’s response to the virus. In the message, he said Airbnb would grant some
refunds to customers and establish a $10 million fund to support Chinese rental
operators while tourism to the country, where the outbreak started, has halted. Airbnb
was born during a global crisis,” Mr. Chesky wrote, referring to the 2008 financial
crisis and without mentioning the company’s I.P.O. plans. “It didn’t stop us then, and it
won’t stop us now.” According to this report we can see that like others Airbnb is hit

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hard by the pandemic as people are cancelling their stays in these horror times and
holidays are out of question under lockdowns. So, hosts have no other option but to
find other options to earn their living. So according to the reports Airbnb wants to keep
the customer trust even in these times. So, the allowed customers to cancel their stays
with a full refund. But this policy is applicable for few countries which have high cases
like China and Italy. People from other countries faces an issue as they do not fall under
this policy. So, Airbnb should not restrict their policies for few countries as in these
crucial times by giving away such a policy to customers they have earned their trusts.
This is very important for the future when this pandemic will come to an end. As right
now customers are trusting hotel chains having a reputed name to give them an
environment which is free from virus than some hosts in some local area. When panic
starts people run after high name brands because they think that they are more trustable
in these situations.

I believe that the steps Airbnb has taken will help restore its profits back after COVID-
19. People already trust the brand and will start booking immediately after the pandemic
ends. The yearn and need for travelling never ends. Right now, the costs of the rooms
are low but as soon as this ends everything will be back on track. They should keep great
offers in the starting when people will start booking so that more and more people book
their stays in this chain. This will attract more travelers who are quarantined right now in
their homes. The need to get out of the houses will help the company bring its profits
back. The areas which are the epicenters like China and Italy will take time to regain the
market. So, they should keep the prices low in the beginning. Airbnb should also ensure
that they are going to give people a safe and clean space as people are hesitant in the
starting due to panic and fear. On the other hand, I agree with Bloomberg’s claim that
this pandemic is going to affect the travelling business in even next year. But this should
not be a reason to stop trying. At the end I think that the industries will come out of it as
people will start rebuilding the trust as we can compare it with previous pandemics
which shows that people move forward once the worse phase ends. In the recent survey
it is found that people trust government much more in comparison with the past
pandemics. So Airbnb will regain it’s name and success in the end.

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 QUESTION N.2

Textbook, articles and additional sources

Textbook
N. Topic Chapter Page

….
…

Additional sources (company disclosures, web pages, video etc)

N. Title Author Link
1. Airbnb made Jennifer https://www.marketwatch.com/story/airbnb-made-its-first-profit-in-
2016-report-2017-01-26
its first profit Booton

in 2016: report

2. Airbnb2019 Airbnb https://news.airbnb.com/airbnb-2019-business-update/

Business

Update

3. The New York https://www.nytimes.com/2020/03/10/technology/airbnb-hosts-

Times coronavirus.html