AIRBNB CASE STUDY ASSIGNMENT

Current situation & existing issues:

AIRBNB is a housing concept started in 2008 by Brian Chesky and his friend which is based on a person-
to-person room sharing business model and is an extremely successful and growing concept. Its
business model is based on sharing economy concept where a technological platform is used to
connect the host of a property to the consumer. The concept eventually changed the way people
made living preferences and this had a large impact on other competitors like big hotel chains and
BNBs. Like for any other business, the Covid-19 Pandemic has been a major setback for the company
which in turn had to come up with many reactive business strategies. Other general challenges of the
company include businesses complaining about Airbnb not subject to the same regulations and taxes,
racial discriminations by host, legal and financial problems of hosts, etc. The future sustainability of
the company with many big chains adopting competitive ideas is a matter of debate. Although Airbnb
has been successful in revenue growth and high profits & valuation, taking into consideration the huge
market competition, it still has a long way to go.

Deep-analysis:

Comparison of different business models:

AIRBNB Hotels (big chains) BNBs

Business  Sharing economy  Ownership concept  Owner
model concept  Differentiated by operated
 Peer reviewed services or business model
digital environment amenities.  Popular near
 Source of revenue:  Source of revenue: rural areas.
Hosting fee (3-5%) Fixed booking fee  Cozy and quiet
and Service fee (15- of the property + atmosphere
20%) Service fee.
Strategy  Mix of Focused low  Broad  Low cost or
cost & focused differentiation focused low
differentiation strategy. cost strategy.
strategy.
 Technological
platform to
connect host to
customer.

Based on the above comparison of different business models, the renting of a property idea of Airbnb
is more appealing to the current consumers. Consumers feel they get a sense of privacy, freedom and
space when they rent the whole property. This is opposite to what happens in a hotel room or a cozy
BNB. The use of Airbnb is beneficial to consumers in the following ways:

 Value for money – Airbnb prices are competitive and even lesser than most of the prices of
other service providers.
 Easy to book properties using the app – Navigation of properties in any region is easy using
the map functionality. Also the background check is quick and hosts are encouraged to
approve the bookings as soon as possible.
  Amenities – Hosts are encouraged to provide a range of amenities like AC/heater, clean
kitchen, utensils, food items, drinks, towels, mattresses, bedsheets, etc.
 Space & privacy – Consumers get their very own private space when they book an Airbnb.
 Rating system – A very efficient rating system is available where the consumer can give
feedback about his/her stay at the property, thus providing a community governance.

Covid-19 pandemic was one of the most disastrous setbacks for businesses all over the world.
Lockdowns led to people staying in their own private spaces. In order to drive the operational and
maintenance costs, Airbnb had to take a series of reactive decisions. Some of them are as follows:

1. Raised $2 billion in private equity funding and debt to support operations during the
pandemic.
2. Cancellation policy adjusted during the Lockdown period. Refunds provided to consumers.
3. Safety and cleaning guidelines for the host to maintain the properties and keep the hosts
sound & safe.
4. Airbnb established a $17 million fund to help support hosts that had acquired long-term status
with Airbnb.

It seems that the approach taken by Airbnb is more resistant than that taken by other big hotel groups.
Many big hotel groups refused to give refunds to their customers during the Covid time. Airbnb
retained trust among their consumers by doing the reverse. Airbnb established cleaning guidelines
even when they did not own any properties. This is something that shows that they know what is
important to them. Not all things should be about money or revenue. Lastly, it is important for any
company to be reactive in their strategies in difficult times. Airbnb showed its reactive nature by
raising huge funds for their operational continuity and supporting hosts rather than concentrating on
the much awaited IPO process.

Solution

There are many factors that may determine the success or failure of Airbnb in the coming future.
Following are the factors and the recommendations for Airbnb from my side to improve its
competitiveness in the accommodation market:

 App development – Developers of Airbnb app must ensure to maintain an UI that gives easy
accessibility to the consumers.
 Managing risks of bad incidents – Continuous updating rules is very important for fine
customer experience. Hosts must be encouraged to have good communication skills.
 Innovation of new value prepositions – This element is important for every business to expand
its customer base. Airbnb can look into providing value prepositions in its costs.
 Marketing & Sales – Since the app depends on connecting hosts and guests, it must ensure to
keep growing the network of such people through new marketing strategies.
 Maintenance of properties – Although Airbnb does not own any properties, it is highly
important for them to ensure that hosts maintain their spaces so that the consumers would
prefer the brand again and again.
 Instant AIRBNB properties – Some small properties must be reserved for instant booking like
within 1 or 2 days of day of travel for urgent/frequent travelers.
 AIRBNB pickup service – Finding the property in a new city alone can be difficult. Services like
airport pickup can be provided by the host or drivers for some extra service fee.