Harvard Case study: Airbnb, Inc by Frank T.

Ania Gina Parjan

Student ID S216724
UNIVERSITY OF SUFFOLF
BA (HONS) Business Studies with Foundation Year
Table of Contents

1. INTRODUCTION............................................................................................................................2
2. MAIN BODY...............................................................................................................................2
2.1. CRITICALLY EVALUATE THE ROLE OF ARTIFICIAL INTELLIGENCE ON OVERALL BUSINESS STRATEGY.......................2
2.2. CRITICALLY EVALUATE THE IMPACT OF ARTIFICIAL INTELLIGENCE ON OVERALL BUSINESS STRATEGY...................3
2.3. CRITICALLY EVALUATE THE CREATION OF VALUE WITHIN A GLOBAL ENVIRONMENT........................................4
3. CONCLUSION...............................................................................................................................6
4. REFERENCES................................................................................................................................7

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 1. Introduction.

With three air mattresses rented out to young designers visiting the city for a conference in
late September 2007, Airbnb began in San Francisco with two roommates, pricey rent, and
three air mattresses. These would include a place to sleep, a place to work, food, and the
internet. Since 2007, Airbnb has changed from its first air mattress-based bed and breakfast
strategy. Booking fees collected from both hosts and visitors are how Airbnb generates its
revenue. Currently, the organisation counts almost 4 million hosts who have hosted more
than 800 million visitors in roughly 100,000 places worldwide. Airbnb reported revenue of
more than $3.3 billion when it went public in an IPO in December 2020. Its market value has
surpassed $95 billion currently. During the COVID-19 outbreak, Airbnb has encountered
travel inconveniences like most of the hospitality sector. Revenue for 2020 decreased 29.6%
from the previous year. This paper will cover the function and effects of AI on general
company strategy before assessing Airbnb's ability to create value in a global setting.

2. Main Body

2.1. Analyse the role of artificial intelligence on the overall company plan.

An example of how artificial intelligence is employed is provided below:

Airbnb makes use of AI algorithms to analyse patterns, user behaviour, and other pertinent
data to identify suspicious activity like bogus registrations, fraudulent bookings, or
suspicious payment transactions to identify and stop fraudulent activities on its platform. To
create their search and recommendation system as well as to maintain a secure and reliable
environment for both hosts and guests. AI assists in determining the preferences of
consumers when they look for lodging by learning about things like location, cost, facilities,
and more, (Jhaver, 2018).

The processing and analysis of host-uploaded photographs for their listings is made possible
by AI techniques used by Airbnb. With the help of these algorithms, photographs may be
automatically categorised and tagged, guaranteeing that recordings contain precise and

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aesthetically pleasing aspects. Additionally, Airbnb employs NLP algorithms to examine and
evaluate customer feedback and reviews, (Islam, 2022). By analysing this data, Algorithm AI
can evaluate listing quality, pinpoint areas that need to be revised and enhance the hosting
experience, (Malik, 2023).

The processing and analysis of host-uploaded photographs for their listings is made possible
by AI techniques used by Airbnb. With the help of these algorithms, photographs may be
automatically categorised and tagged, guaranteeing that recordings contain precise and
aesthetically pleasing aspects. Based on details like prior reservations, user evaluations, and
preferences, it analyses a lot of data to offer tailored recommendations, (Kirkos, 2022).

AI algorithms can modify prices in real-time by looking at a variety of variables, including

demand, seasonality, local events, and previous data. On Airbnb, dynamic pricing tactics are
applied with the aid of artificial intelligence. Consequently, guests can find options that
meet their budget while hosts can adjust listing rates to maximise reservations and revenue.

AI chatbots and virtual assistants are employed by Airbnb to offer automated customer
service and support. These artificial intelligence (AI) systems can do a variety of jobs,
including responding to frequently asked queries, assisting with reservations,
troubleshooting issues, and making recommendations. As a result, the whole user
experience is enhanced through their quick and effective help, (Cheng, 2022).

Image Recognition Technology checks for any unlawful or deceptive information.

Artificial intelligence is crucial to streamlining the Airbnb booking process, enhancing user
experience, optimising prices, eliminating fraud, enhancing the cleanliness of the search,
and improving search quality, (Jeong, 2021).

2.2. Analyse the effect of AI on your company's overall business plan.

Artificial intelligence

The potential of AI also involves changing how people think and work, which is not just a
technological development, acknowledges Brian and Airbnb. He says it requires new kinds
of thinking to succeed in an AI world. These include collaboration, critical thinking, design,
visual display of information, and independent thinking. Airbnb has already made great
strides in leveraging artificial intelligence, on demand and seasonality and automatically
adjusting rates based and using its smart pricing feature to tag photos and its neural
network for image classification, (Zhu, 2020).

Airbnb employs machine learning technology, the Translation Engine, to translate reviews,
descriptions, and listing messages between guests and hosts who speak different languages.
This AI function can be fully active at both ends without requiring the manual activation of
any components, (Allam, 2016).

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 Their current strategy is built on criteria that examine several data points to find harmful
conduct, like anomalous login activity, geographic locations, or device kinds used by
suspected fraudsters.

Artificial intelligence (AI)

Machine learning algorithms are used to improve search and discovery, to determine prices
for hosts, to avoid fraud, and to display the most relevant results to match guest
preferences and host expectations, (Fadlullah, 2020).

A wide range of payment methods are accepted without making cash, customized country
and currency options and machine learning algorithms provided by a secure financial
system.

To optimize user experience standardized digital platform with a simplified and simple
booking procedure.

To promote transparency and avoid manipulation evaluation and qualitative evaluation

system.

To protect the account and identity of users. for both hosts and guests, a multimodal
verification system, (Mahyoub, 2023).

2.1. Critically evaluate the creation of value within a global environment.

Value creation

To add value for hosts, guests, and other parties, Airbnb depends on several crucial
processes, assets, and partner contributions.

The peer-to-peer accommodation platform's success depends on five activities: expanding

and developing networks; matching guests and hosts through search optimisation;
understanding and tracking the needs of the hosts as well as the behaviour of the guests;
establishing trust and lowering risk; and cost management. The routine actions that allow
Airbnb to fulfil the above-described value proposition are known as key activities.

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 Managing expenses.

Key Essential actions

Tracking and comprehending visitor and host actions.
Network development and maintenance for hosts and

activities
guests.
Enhancing the search to better match hosts and visitors.
Enhancing trust by reducing risk.

Market that is customised.

Key Partnerships based on trust.

Reviews with profiles attached database.
Resources for learning.

resource
Service recovery personnel.

Growing and cultivating guest and host networks

Indirect network effects and density economies are what these are referred to as.

Airbnb becomes more appealing to new hosts and guests as it gains more hosts and visitors.
Several factors help Airbnb recruit new hosts. Depending on how many transactions it can
allow, a platform model's appeal will vary. This explains why there is a self-reinforcing loop
in which a small number of powerful networks control most digital markets. It follows that
Airbnb employs growth managers who are focused on growth. Airbnb's creators conducted
door-to-door sales and planned events to recruit new hosts. The financial advantages of
renting out someone's holiday property to pay for their trip are promoted in Facebook
adverts for New York and San Francisco. Since Airbnb has never imposed a listing fee, unlike
most other peer-to-peer trade platforms, hosts know they have nothing to lose by joining
peer-to-peer accommodation networks on Airbnb. To expand its local host network in
Germany and the UK, Airbnb has purchased rivals and clones. They have dispatched tiny
teams’ door-to-door to ask hosts to sign up in person as buying digital hosts has proven to
be expensive in other foreign markets. With the help of targeted adverts on Google
searches, Airbnb maintains its SEO, (Reinhold, 2018).

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3. Conclusion.

In conclusion, in modern business strategies, the integration of AI offers a huge potential to

improve customer experiences, stimulate innovation and optimize the operations of the
organization. By properly utilising AI technologies and taking ethical issues into account,
businesses may position themselves for success in a world that is becoming more digital,
and data driven. By using AI as a strategic tool, businesses may stay ahead of the curve and
open new prospects for expansion and sustainability. The components of the business
model effectively show the interdependence of design choices made for the Airbnb
platform: service design to expand the network and block users on either side of the
platform, safety and risk mitigation, practical and affordable procedures, and cost-effective
processes.

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4. References

Allam, S., 2016. The Impact of Artificial Intelligence on Innovation-An Exploratory Analysis. Sudhir
Allam," The Impact of Artificial Intelligence on Innovation-An Exploratory Analysis", International
Journal of Creative Research Thoughts (IJCRT), ISSN, pp.2320-2882.

Cheng, Y. and Jiang, H., 2022. Customer–brand relationship in the era of artificial intelligence:
understanding the role of chatbot marketing efforts. Journal of Product & Brand Management, 31(2),
pp.252-264.

Fadlullah, Z.M. and Pathan, A.S.K. eds., 2020. Combating Security Challenges in the Age of Big
Data: Powered by State-of-the-Art Artificial Intelligence Techniques. Cham, Switzerland: Springer
International Publishing.

Islam, M.D., Li, B., Islam, K.S., Ahasan, R., Mia, M.R. and Haque, M.E., 2022. Airbnb rental price
modeling based on Latent Dirichlet Allocation and MESF-XGBoost composite model. Machine
Learning With Applications, 7, p.100208.

Jeong, H.Y., 2021. Multi criteria based personalized recommendation service using analytical
hierarchy process for airbnb. The Journal of Supercomputing, 77(11), pp.13224-13242.

Kirkos, E., 2022. Airbnb listings’ performance: Determinants and predictive models. European Journal
of Tourism Research, 30, pp.3012-3012.

Reinhold, S. and Dolnicar, S., 2018. How Airbnb creates value. Peer-to-Peer Accommodation
Networks; Dolnicar, S., Ed, pp.39-53.

Zhu, A., Li, R. and Xie, Z., 2020, September. Machine learning prediction of new york airbnb prices.
In 2020 Third International Conference on Artificial Intelligence for Industries (AI4I) (pp. 1-5). IEEE.