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Case Study: Platform vs Pipeline Business Models: Are Airbnb and Marriott
Right to Move into Each Other's Turf?

Chapter · January 2022

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 Platform versus Pipeline Business
CASE

15 Models: Are Airbnb and Marriot

Right to Move into Each Other’s
Turf?
Jochen Wirtz

The general view is that platforms are somehow in a winner-takes-it-all market and therefore
justify enormous valuations, especially when compared with their pipeline counterparts. However,
to continue its fast growth, Airbnb diverted from its pure peer-to-peer (P2P) strategy and has been
adding owned room capacity. At the same time, Marriott added P2P platform-sourced rooms to
its marketing and distribution channels. The question the senior management of both companies
needs to address is what it takes for them to be successful in each other’s turfs.

It has become fashionable to show tables of market

valuations of supposed legacy companies (referred to here
as pipeline businesses), such as Marriott International,
and compare them to their peer-to-peer (P2P) platform
business model counterparts such as Airbnb. Indeed,
these asset-light platform businesses often approach
or even exceed the market capitalization of their “old
economy” counterparts although they often have no
physical assets to speak of. Over the past 10 years, P2P
platforms have enjoyed explosive growth. Consumers
globally have become familiar with the sharing economy
and many consumers are happy to use them, including to
stay in peer-provided accommodation by Airbnb.

AIRBNB’S MOVE INTO PIPELINE

© 2021 by Jochen Wirtz.
Note: This case is based on the following publications: Martin
P. Fritze, Martin Benkenstein, Russell Belk, Joann Peck, Jochen
Wirtz, and Bart Claus (2021), “Commentaries on the Sharing
Economy: Advancing New Perspectives,” Journal of Service
Management Research, Vol. 5, No. 1, pp. 3–19; Makarand Mody,
Jochen Wirtz, Kevin K. F. So, Helen Chun, and Stephanie Liu (2020),
“Two-Directional Convergence of Platform and Pipeline Business
Models,” Journal of Service Management, Vol. 31, No. 4, pp. 693–
721; Jochen Wirtz, Kevin Kam Fung So, Makarand Mody, Stephanie
Liu, and Helen Chun (2019), “Platforms in the Peer-to-Peer Sharing
Economy,” Journal of Service Management, Vol. 30, No. 4,
pp. 452–483.
BUSINESSES
To sustain its rapid growth, Airbnb acquired the last-
minute hotel-booking platform HotelTonight, which
enabled it to offer HotelTonight’s independent and
boutique hotel offerings directly on its Airbnb platform.
Instead of having to work individually and directly with
boutique hotels and bed and breakfast owners to list
their properties, Airbnb could, through the acquisition
of HotelTonight, lower the cost of integrating a large
amount of hotel inventory onto the Airbnb platform.
This was achieved through technology integration at the
back end between HotelTonight and Airbnb. Offering

606 Case 15 ▪ Platform versus Pipeline Business Models: Are Airbnb and Marriot Right to Move into Each Other’s Turf?

these hotels and vacation rentals on one platform allowed
Airbnb to enjoy marketing-related synergies associated
with cross-selling. In particular, Airbnb found that guests
who first booked a hotel on Airbnb were highly likely to
return and also book peer-provided rooms in the future.
Furthermore, Airbnb started pipeline-like product
innovation with an emphasis on standardizing products.
For example, it launched Airbnb Plus, which listed
quality-inspected homes that include everyday essentials.
While these homes commanded a price premium over
regular Airbnb listings, they offered the traveler closer to
a hotel-like consistency with a specified minimum level
of comfort, amenities, and design.
Airbnb Luxe was another sub-brand that offered
“extraordinary homes with five-star everything.” These
homes had to adhere to over 300 brand standards,
including design features such as high-vaulted ceilings,
attractive art, and closets with matching hangers, thus
enabling Airbnb to develop branded accommodation
services that are closer in nature to their pipeline
competitors.
Airbnb also experimented with and later aborted an
apartment–hotel hybrid concept offering 200 luxury
suites located at New York’s 75 Rockefeller Plaza, which
would have moved Airbnb closer to its pipeline-like hotel
competitors.
MARRIOTT’S MOVE INTO THE PEER-
TO-PEER PLATFORM BUSINESS
MODEL
The rapid scaling of peer-to-peer (P2P) platforms
posed strategic threats to traditional incumbents. These
pipeline businesses were at risk of being disrupted and
were forced to rethink their business models. Indeed,
nearly every executive in a pipeline business would
have had numerous discussions about whether and
how their business should become a platform. Marriott
International was no exception.
Homes & Villas by Marriott International marked
Marriott’s entry into the P2P home-sharing market.
Homes & Villas connected individuals who want to rent
out their homes (i.e., peer-provided assets) with guests
looking for short-term home rental. Under this model,
an individual homeowner paid a commission to a third-
party property management company (e.g., Turnkey) to
PART 6
manage their listing(s) on the platform. Everything from
pricing and distribution to customer service was handled
by the property management company. That is, unlike an
Airbnb listing, homeowners could not list their properties
directly, which resulted in professionalized P2P home
sharing and enhanced convenience for homeowners.
The property management company was not restricted to
listing exclusively on Homes & Villas, but could also offer
the same property on other platforms. It is noteworthy
that individual homeowners did not pay the property
management companies beyond what they typically
would have paid for listing on other P2P platforms. Thus,
Homes & Villas offered both management companies and
homeowners, the key players in this ecosystem, superior
value while ensuring higher-quality standards compared
to other P2P platforms.
Working with a select group of property management
companies offered Marriott a number of advantages.
First, this strategy added quality control of listings
and service levels. For example, it established strict
quality standards for any property being added (i.e.,
every home had to include high-speed Wi-Fi, premium
linens and amenities, and family-friendly amenities).
This is in contrast to properties that were listed without
quality prerequisites as on Airbnb and other platforms.
Interestingly, the ensured quality of listings allowed
Homes & Villas to leverage on Marriott’s brand equity.
It adopted an endorsed branding approach whereby
the signature “by Marriott International” was added to
Homes & Villas.
Furthermore, working with property management
companies allowed Homes & Villas to achieve higher
average rates as professional property management
companies tended to outperform amateur hosts (i.e.,
individuals) in terms of pricing and occupancy rates.
Providing this added value increased cost also had
revenue benefits through enhanced guest willingness
Case Studies 607
 to pay, supported by the added quality assurance,
professionalized service, and higher occupancy rates.
This led to higher commission revenues.
Finally, unlike the multisided revenue models for most
home-sharing companies, as in Airbnb’s case, Marriott
only charged property managers a platform fee and did
not charge guests. This approach not only made the
platform more attractive to its guests, but the pricing
model was also aligned with what Marriott’s existing
customer base was familiar with and therefore eased
cross-selling.
One of Marriott’s objectives was to keep loyal customers
within the Marriott ecosystem and allowed its loyalty
program members to redeem their points for Homes &
Villas stays. It was attractive to its guests that they could
collect points from their business travel when they stayed
in Marriott’s hotels to then redeem them on personal
travel on the lower-price point Homes & Villas’ listings.
Furthermore, the added platform was asset-light, allowed
rapid scaling, plus could accommodate much higher
asset heterogeneity compared to its existing hotel room
inventory while still ensuring quality. As such, creating
a platform with peer-provided assets with operations
managed by a third party allowed Marriott to achieve
marketing-related, volume-based, and asset-related
synergies.
ARE AIRBNB’S AND MARRIOTT’S
STRATEGIES SOUND?
The general view is that platforms are somehow in
the winner-takes-it-all market and therefore justify
enormous valuations, especially when compared with
their pipeline counterparts. However, are leading
platforms truly protected from competition, do they have
pricing power, and can they generate high contributions
over long periods of time as is implied by their high
valuations? Are they risking their high valuations if they
add controlled capacity and related costs? Vice versa, for
pipeline businesses, what will it take to successfully enter
the turf of their peer-to-peer (P2P) sharing platform
competitors? These are the questions Airbnb’s and
Marriott’s top managements need to address to charter
their growth strategies in the sharing economy.

Study Questions

1. How does Airbnb’s originally pure peer-to-peer (P2P) platform business model differ from Marriott’s
traditional pipeline model in terms of its economics, marketing and distribution, and operations?
2. Why might it make sense for Airbnb to move into owning or controlling room capacity rather than entirely
relying on peer-provided capacity even though it comes with a higher cost base?
3. Does Airbnb have network effects that protect it from competition? How else can Airbnb build customer
loyalty?
4. What are Marriott’s key challenges of adding peer-provided room capacity to their marketing, distribution,
and operations systems?

The full book is available

on Amazon. Click to order:
Suggested citation: Jochen Wirtz (2021), “Platform vs Pipeline Business Models - Are
Airbnb and Marriott Right to Move into Each Other’s Turf?”, in: Services Marketing:
People, Technology, Strategy, 9th edition by Jochen Wirtz and Christopher Lovelock,
New Jersey: World Scientific, pp 606-608.

Note: This case study is part of the teaching materials accompanying Services
Marketing: People, Technology, Strategy, 9th edition. The case can be used by the
author and in courses that use this textbook as their main reference. For other courses
and uses, copyright has to be cleared with Jochen Wirtz, email: jochen@nus.edu.sg.

608 Case 15 ▪ Platform versus Pipeline Business Models: Are Airbnb and Marriot Right to Move into Each Other’s Turf?
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