Airbnb Inc.

1. Introduction
Airbnb was born in 2007 when two Hosts welcomed three guests to their San Francisco home
and has since grown to 4 million Hosts who have welcomed more than 1 billion guest arrivals in
almost every country across the globe. Every day, Hosts offer one-of-a-kind stays and unique
Experiences that make it possible for guests to experience the world in a more authentic,
connected way (source: https://news.airbnb.com/about-us/).

The case is set in early 2019; and the protagonist of the case is Brian Chesky, co-founder and
CEO of Airbnb, Inc.—an online platform that offers global hospitality services. In early 2019, just
over 10 years after the two roommates (Brian Chesky and Joe Gebbia) had sent the fateful e-
mail inviting complete strangers to share their apartment and stay with them (see Figure 1),

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Airbnb was valued at $31 billion. This makes Airbnb the world third most valuable private
company, just after Uber ($72 billion) and Didi Chuxing, China’s equivalent of Uber ($56 billion).
Airbnb’s $31 billion valuation is even close to that of Marriott, the world’s largest hotel chain,
valued at $37 billion (in early 2019).

Chesky worried about Airbnb’s prospects. Growth was slowing as regulators in the United States
and abroad outlawed certain instances of short-term rentals, subjecting violators to steep fines.
In Paris, Airbnb’s largest market with over 65,000 homes listed, the city council demanded that
Airbnb take down over 1,000 listings lacking official registrations in a bid to reign in the home-
rental business. In early 2019, the city of New York filed a lawsuit claiming that Airbnb had been
used illegally in an organized $20 million short-term rental scheme.2 Many local governments,
including those of Paris, Berlin, and New York, claimed that Airbnb has driven up rental prices
and had other negative impacts on neighborhoods. In addition, Airbnb’s newly introduced
Experiences required a new level of quality control that the startup had yet to master, especially
at a larger scale. In 2019, Airbnb had 5 million listings in over 81,000 cities in 190 countries,
ranging from spare rooms to castle villas, or even entire islands. Airbnb offered more
accommodations than the three biggest hotel chains combined: Marriott, Hilton, and
InterContinental.
1. “Paris Threatens Airbnb, Peers with Court over Unregistered Listings.” Reuters. December 11, 2017. https://uk.reuters.
com/article/uk-france-airbnb/paris-threatens-airbnb-peers-with-court-over-unregistered-listings-idUKKBN1E51RT?il=0.

2. Barbanel, Josh. “New York Suit Says Airbnb Used in $20 Million Illegal Hotel Scheme.” The Wall Street Journal, Dow Jones &
Company, January 14, 2019. https://www.wsj.com/articles/new-york-suit-says-airbnb-used-in-20-million-illegal-hotel- scheme-
11547500722?ns=prod/accounts-wsj.

2. Airbnb History (source: https://en.wikipedia.org/wiki/Airbnb)

Airbnb, Inc. (pronounced /ˈɛərbiːɛnbiː/ AIR-bee-ehn-bee and stylized as airbnb) is an American
company that operates an online marketplace for lodging, primarily homestays for vacation
rentals, and tourism activities. Based in San Francisco, California, the platform is accessible via
website and mobile app. Airbnb does not own any of the listed properties; instead, it profits by
receiving commission from each booking. The company was founded in 2008 by Brian Chesky,
Nathan Blecharczyk and Joe Gebbia. Airbnb is a shortened version of its original name,
AirBedandBreakfast.com. The company has been criticized for possibly driving up home rents
and creating nuisances for those living near leased properties. The company is regulated by
many jurisdictions, including the European Union and cities such as San Francisco and New York
City. It is viewed as a competitive threat by the hotel industry.

Figure 1: Airbnb Timeline, 2007–2019

Month and
Year Event type Details
date

Brian Chesky and Joe Gebbia create the initial concept

for AirBed & Breakfast during the Industrial Design
Conference held by Industrial Designers Society of
America.[1] The original site offers short-term living
2007 October Idea creation quarters, breakfast and a unique business
networking opportunity for attendees who were unable
to book a hotel in the saturated market. Chesky and
Gebbia themselves use Airbnb to help meet the rent for
their loft in San Francisco.

2
 Month and
Year Event type Details
date

Harvard University graduate and technical

2008 February Team architect Nathan Blecharczyk joins as the third co-
founder of AirBed & Breakfast.

2008 August 11 Product The Airbedandbreakfast.com website launches.

In order to raise enough seed money to sustain their

business, Airbnb sells cereal boxes for Barack
Obama and John McCain. They sell 800 boxes at $40
August–
2008 Funding each, netting $30,000 in funding for the
November
company. Their most successful single sale event is
the Democratic National Convention in November
2008.

Airbnb is accepted into Y Combinator's Winter 2009

batch and receives $20,000 in funding. Y Combinator
co-founder Paul Graham says that even though he is not
2009 January Funding
a fan of Airbnb's idea, he is impressed by their creative
methods for bootstrapping their funding situation by
selling cereal.

The website name is shortened from

Airbedandbreakfast.com to Airbnb.com, and the site's
content has expanded from air beds and shared spaces
2009 March Product to a variety of properties including entire homes and
apartments, private rooms, castles, boats, manors, tree
houses, tipis, igloos, private islands and other
properties.

Airbnb raises $585,000 from Sequoia Capital and

$30,000 from Youniversity Ventures partners Jawed
2009 March Funding
Karim, Keith Rabois, and Kevin Hartz in a seed round
valuing the company at $2.4 million.

In response to increasing overcrowding at his residence,

that is doubling up as an Airbnb office, co-founder and
2010 June 21 Team
CEO Brian Chesky decides to move out of his
apartment and live using Airbnb for a few months.

Airbnb receives $7.2 million in Series A funding

from Greylock Partners and Sequoia Capital, and
2010 November Funding
announces that out of 700,000 nights booked, 80% had
occurred in the past six months.

Usage Airbnb announces its 1 millionth booking since the

2011 February
milestone website launch in August 2008.

Venture capitalist Fred Wilson publishes a blog post

saying that his firm's decision not to invest in Airbnb
was a mistake. The next day, Y Combinator co-
2011 March 16–17 Funding
founder Paul Graham publishes (with permission)
correspondence between himself and Fred Wilson
about the possibility of Wilson investing in Airbnb.

Actor and partner at A-Grade Investments, Ashton

2011 May 25 Endorsements Kutcher, announces a significant investment in the
company and his role as a strategic brand advisor for

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 Month and
Year Event type Details
date
the company.

Acquisitions
by Airbnb, Airbnb acquires Accoleo, a small German clone of its
2011 May 31
international service, thereby expanding to Germany.
expansion

Airbnb raises $112 million in additional funding. The

investment round is led by Andreessen Horowitz and
2011 July 24 Funding
other investors include DST Global Solutions
and General Catalyst Partners.

An email allegedly written by Chamath

Palihapitiya to Airbnb CEO Brian Chesky, that was
critical of the manner in which Airbnb was structuring
its funding round, is leaked to Kara
Swisher of AllThingsD. A follow-up reveals that new
Funding,
2011 October aspects of the deal are in development that might
controversy
alleviate some of the concerns expressed by
Palihapitiya, and he is reconsidering his decision not to
invest in the funding round. He also expressed regret
about the email being leaked, and he said that he was
not responsible for the leak.

International Airbnb opens up its second international office

2011 October
expansion in London in the United Kingdom.

Usage
2012 January Airbnb announces its 5 millionth booking.
milestone

Airbnb opens six international offices, in the

cities Paris, Milan, Barcelona, Copenhagen, Moscow,
International and São Paulo. These are in addition to existing offices
2012 (early year)
expansion in San Francisco, London, Hamburg, and Berlin where
Airbnb maintains its international presence for
the EMEA markets within a German incubator space.

Usage
2012 June Airbnb announces its 10 millionth booking.
milestone

Acquisitions Shortly before the 2012 Summer Olympics Airbnb

by Airbnb, acquires London-based rival CrashPadder,
2012 July 25
international subsequently adding six thousand international listings
expansion to its existing inventory.

Airbnb co-founder and CEO Chesky announces his

focus on Australia, the second largest Airbnb market
behind the United States, as well
International
2012 November 2 as Thailand and Indonesia. To support this effort,
expansion
Airbnb opens its 11th office in Sydney. The Australian
consumer accounts for one-tenth of the Airbnb user
base.

Airbnb announces its strategy to move more

International aggressively into the Asian market with the launch of
2012 November 12
expansion their newest headquarters in Singapore. The company's
goal is to acquire an additional 2 million properties

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 Month and
Year Event type Details
date
within the continent.

Airbnb acquires NabeWise, a city guide that aggregates

curated information for specified locations, in
Acquisitions
2012 November 13 November 2012. This acquisition shifts the company
by Airbnb
focus toward offering hyperlocal recommendations to
travelers.

Airbnb announces the acquisition of

Localmind. Localmind is a location-based question and
Acquisitions answer platform that allows users to post questions
2012 December 13
by Airbnb about specific locations online. These questions are
then answered in real-time by experts on the specified
territories.

International Airbnb announces that European headquarters would be

2013 September
expansion located in Dublin, Ireland.

Airbnb announces plans to partner with home cleaning

services whereby the home cleaning service is available
at a discount to those who are about to host people via
2014 January 31 Partnerships Airbnb, in order to incentivize hosts to prepare homes
well for guests and also give guests a more
standardized experience. Prospective partners
include Homejoy and Handybook.

Airbnb announces plans to open a new "operational

headquarters" for North America in Portland, Oregon,
2014 March 14 Company
in summer 2014, but indicated that its main North
American headquarters would remain in San Francisco.

It is announced in April that Airbnb is getting an

April (unofficial
investment by TPG Capital at a valuation of
rumors), August
approximately $10 billion. The amount of funding is
2014 1 Funding
variously reported as $450 million and $500
(announcement
million. On August 1, the round is revealed to be a
in SEC filing)
$475 million round.

Airbnb reveals design revisions to their site and mobile

app, and introduced a new logo.] Some consider the
2014 July 16 Product new icon to be visually similar to genitalia, but a
consumer survey by Survata shows only a minority of
respondents thought this was the case.

Airbnb announces that its home cleaning trial will be in

three cities, and lists Handybook as its sole
2014 July 21 Partnerships
partner. Homejoy, which had earlier been listed as a
partner, is dropped.

Airbnb announces a partnership with Concur, an

expense reporting service for businesses, to make it
2014 July 28 Partnerships
easier for business travelers to report Airbnb stays as
business expenses.

Airbnb announces that it will start collecting and

2014 September 17 Financial/legal remitting a 14% tax for short-term rentals in San
Francisco starting October 1.

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 Month and
Year Event type Details
date

Airbnb announces arrangements for an employee stock

2014 October 23 Funding sale. Valuations for the sale are rumored at around $13
billion.

San Francisco Mayor Ed Lee signs a law making short-

term rentals legal in San Francisco, thereby legalizing
2014 October 27 Financial/legal
Airbnb. The law gets the moniker of "Airbnb law"
because Airbnb is the most affected company.]

Vacation rental company HomeAway sues San

2014 November 3 Financial/legal
Francisco for the Airbnb Law.

Airbnb expands its liability insurance program for hosts

and landlords. Whereas the initial liability insurance
program was limited to property damage due to the
guest, the new program $1 million worth of protection
2014 November 20 Product
in the case a guest is accidentally injured anywhere in a
host's building or on their property during their stay.
Rentals starting January 15, 2015 will automatically be
covered under the new program

Airbnb announces that it will start collecting taxes

2015 January 30 Financial/legal in Amsterdam, San Jose, Chicago, and Washington,
D.C.

Airbnb announces a partnership with Deutsche

Telekom, the parent company of T-Mobile, to have its
2015 February 25 Partnerships app pre-installed on mobile phones in 13 countries.
Those who register for the service via DT will get 30
euros of vouchers to stay in Airbnb rooms.]

Product,
2015 April 29 Airbnb launches an official iPad app.
accessibility

Airbnb adds a pricing recommendation tool, called

2015 June 4 Product Price Tips, offering suggestions on appropriate prices
for people renting our apartments.

Airbnb closes $1.5 billion in additional funding,

bringing its funding total to $2.3 billion. The valuation
for the round is $25.5 billion.[67] Both the amount raised
2015 June 28 Funding and the valuation are higher than those originally
projected when rumors of the round originally
circulated in late February/early March (when the
numbers were $1 billion and $20 billion respectively).

August 25
Airbnb announces that it will start collecting a tourist
(announcement),
2015 Legal tax on Airbnb rentals in Paris starting October 1. The
October 1 (start
tax amount will be 0.83 euros per night.
date)

Airbnb releases an app for the Apple Watch, whose

2015 September 3 Product main focus is to facilitate communication between
guests and hosts.

Acquisitions Airbnb announces its acquisition of Vamo, a company

2015 September 11
by Airbnb based in Seattle whose product is a multi-city trip

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 Month and
Year Event type Details
date
planning app. The app would be shut down as part of
the acquisition; the purpose of the acquisition is to use
the team's expertise to help with the aspects of the user
experience related to travel beyond just booking an
Airbnb.

San Francisco voters vote No on Proposition F, a

measure to restrict Airbnb rentals in the city. In the run-
up to the vote, Airbnb spent over $8 million in
advertising to the public against the measure, whereas
groups supporting Proposition F spent less than a
2015 November 4 Financial/legal million dollars. As part of its advertising campaign,
Airbnb put out ads highlighting the role that the $12
million in taxes paid by it has played in funding city
operations, but the ads are perceived by many as
tasteless, so the company withdraws them and
apologizes.

Product, Airbnb announces a new "Business Travel Ready"

2015 November 12
partnerships badge and host tools.

Airbnb sues the city of San Francisco over a new law

2016 June Legal that would require Airbnb to verify that their hosts are
registered with the city.

Airbnb is reported to be raising $850 million at a $30

2016 July Funding
billion valuation

The city of Barcelona cracks down on homes that are

illegally rented out to tourists, including houses listed
2016 August on Airbnb. In addition, Barcelona's town hall
announces that it would fine Airbnb and HomeAway (a
similar service).

2016 September Acquisition Airbnb acquires the travel startup Trip4real.[82]

Airbnb launches their "Friendly Buildings Program",

which lets landlords and homeowners
associations collaborate with Airbnb to create hosting
2016 September Product
rules, update leases and agreements to allow home-
sharing, and to share portions of their tenants'
reservation income.

Two Airbnb rivals, Wimdu and 9flats, consolidate in

2016 October Competition
a merger.

Airbnb sues New York City over a new legislation that

would make it illegal for Airbnb to display housing
units that cannot be rented legally, and would also
2016 October Legal allow fines of up to $7,500 on hosts who rent out
housing illegally. In its suit, Airbnb argues that the
liability for rental listings belongs to the hosts who post
them.

Airbnb launches the "experiences" feature in the Airbnb

2016 November Product app. This feature allows hosts to offer tours and events
in addition to places to stay.

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 Month and
Year Event type Details
date

Airbnb settles the lawsuit it filed against New York

2016 December 2 Legal City. Airbnb agrees to drop the suit as long as the city
fines only the hosts and not Airbnb.]

Brian Chesky, CEO of Airbnb, tweets that the company

will give free housing to refugees and any others not
2017 January 28 allowed into the United States as a result of President
Trump's executive order to temporarily ban refugees
from the United States.

Airbnb acquires Luxury Retreats, an Airbnb-like

service for high-end homes and premium vacation
2017 February 16 Acquisition homes. The deal is reported to be $200–$300 million.
As of the time of the deal, it is Airbnb's largest
acquisition.

2017 February Acquisition Airbnb acquires Tilt, a social payment startup.

Airbnb acquires AdBasis, advertising technology

2017 November 13 Acquisition platform built for A/B testing and Multivariate ad
testing.

Airbnb acquires Accomable, a startup focused on

2017 November 16 Acquisition
travel accessibility.

Airbnb began allowing users to split payments with up

2017 November 28 Product
to 16 other travelers.[95][96][97][98]

Following a cash infusion from Brookfield Property

Partners, Airbnb announces their "Niido" line of
apartment buildings designed for tenants to rent out
2017 December Product their units for up to 180 days per year on Airbnb, in
conjunction with their landlords. Two Niido properties
opened the following year in Nashville,
Tennessee and Kissimmee, Florida.

Brian Chesky revealed the company's intention to

2018 February Product
launch an airline.

Airbnb announced Airbnb Plus, a collection of homes

that have been vetted for quality of services, comfort
2018 February Product
and design, as well as Beyond by Airbnb, which will
offer luxury vacation rentals.

Airbnb acquires Gaest, an Aarhus, Denmark-based

2019 January Acquisition startup, which provides a platform for posting and
booking venues for meetings and other events.]

Airbnb acquires HotelTonight, a website for booking

2019 March Acquisition
last-minute hotel rooms, for over $400 million.

Airbnb announces their "Natiivo" line of condo hotels,

which feature amenities such as 24-hour concierge,
2019 June Product valet parking, co-working spaces, and other amenities.
The first two Natiivo locations are planned for Austin,
Texas and Miami, Florida.

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 Gebbia convinces Chesky to move to San Francisco
Email from Gebbia to Chesky with proposed “designers bed and breakfast”

Airbedandbreakfast.com debuts at South by Southwest with only two bookings

Airbed & Breakfast website is launched for the Democratic National Convention and a
round of funding is raised through the sale of “Obama-O’s” and “Cap’n McCains”
Airbnb is accepted into Y Combinator

Airbed & Breakfast rebrands to Airbnb

Airbnb receives funding from Sequoia Capital

Airbnb launches Instant Book feature

Airbnb introduces $1M Host Guarantee

Airbnb initiates Open Homes program in response to Hurricane Sandy

Airbnb rebrands with Belo (symbol of belonging) image

Mother in Madrid reaches out to Airbnb when son contacts her about sexual assault

Guest in Argentina is attacked by host’s Rottweiler

Airbnb announces that it is expanding into China

Guest accuses host of sexual assault after Airbnb failed to conduct a background check
Chesky tweets about possible Airbnb offerings and “Split Payments” are born
Launch of Airbnb Experiences

Airbnb responds to refugee ban with #weaccept campaign

Airbnb launches Aibiying in China
$300M acquisition of Luxury Retreats for Airbnb
Airbnb makes announcement about refusing to host white supremacists in
Charlottesville, VA
Airbnb partners with Resy to allow guests to book reservations at local restaurants
Airbnb announces research and prototypes in mobile technology involving VR and AR

Airbnb announces a $5M investment into expanding Experiences in the US

Airbnb Plus and Airbnb Concerts are launched
Announcement that CFO Laurence Tosi will leave Airbnb
Announcement of guest loyalty program “Superguest”
Airbnb celebrates 10 years

Source: Rothaermer , including from https://press.airbnb.com/fast-facts/.

In 2017, CFO Laurence Tosi led the acquisition of Luxury Retreats for Airbnb, a high-end rental
site for $300 million. Following disagreements between Chesky and Tosi over Airbnb’s growth
tra- jectory, however, Airbnb announced in February 2018 that the CFO would leave Airbnb. The
two senior executives clashed about the question of when and the preparation of Airbnb to go

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public (IPO). Chesky favored a longer time to IPO. The CFO departure remained not the only
high-profile executive leaving Airbnb. As of the fall of 2018, the position of Chief Marketing
Officer also remained vacant. Since March 2018, Greg Greely, former head of Amazon Prime’s
member- ship unit, has led Airbnb Home, Airbnb’s core business. Airbnb Home has since
announced options for hotels, luxury properties through Airbnb Plus, and a guest loyalty
program called Superguest.

3. Airbnb’s Business Model

To grow, traditional competitors in the hospitality industry, such as Marriott or Hilton,
would need to add additional rooms to their existing stock. To add new hotel room
inventory to their chains, they would need to find suitable real estate, develop, and
build a new hotel, furnish all the rooms, and hire and train staff to run the new hotel.
This often takes years, not to mention the multimillion-dollar upfront investments
required and the risks involved. In contrast, Airbnb faces no such constraints because
it does not own any real estate, nor does it manage any hotels (Figure 2). Just like
Marriott or Hilton, however, it uses sophisticated pricing and booking systems to allow
guests to find a large variety of rooms pretty much anywhere in the world to suit their
needs. As a digital platform, Airbnb allows ordinary people to offer rooms directly to
any consumer looking for accommodations online. In addition to helping hosts with
professional photos of their properties and thus marketing, Airbnb also assists hosts
in pricing their properties for varying levels of demand and time of year. Airbnb makes
money by taking a cut on every rental transaction through its platform. Given that
Airbnb faces no real inventory constraints as a digital platform, it can grow much faster
than a traditional business, such as Marriott. Airbnb’s inventory is only limited by its
ability to sign up new users with spare rooms for rent. This unlimited potential is
combined with no to low costs for adding inventory to the existing online offerings.

In letting people list their spare rooms on Airbnb as hosts, Chesky and Gebbia created
Airbnb as a two-sided platform. With hosts providing properties on one side and guests
providing demand on another, Airbnb makes money by taking a portion of rental fees
as guests book the host proper- ties (about three percent). Also, Airbnb eliminated the
pains of person-to-person transactions by facilitating the reservation and payment
entirely online. Airbnb follows an asset-light approach because it does not own any
(rental) properties or real estate, unlike the large physical holdings held by traditional
hotel chains. To expand capacity, Airbnb is not restricted by the need to build more
properties, whereas a hotel must increase its number of beds to meet increased
demand. Instead, Airbnb only needs to ensure that its site remains online and available
to satisfy the growing number of guests and hosts. Airbnb’s number one source of
future hosts are its current guests.
Initially, staying in an Airbnb property meant experiencing a new destination in
someone’s home, authentically in the way a local would. By offering properties at a
cheaper rate per night compared to hotels, both guests and hosts benefited: price-
conscious guests found affordable accommodations, while hosts benefited by the extra
income earned through renting a spare bedroom. Guests exchanged their generic hotel
rooms in tourist areas or suburbia for interactions with local hosts and the opportunity
to stay in local spaces and neighbourhoods. Soon, properties expanded from spare
bedrooms to offerings of entire houses, villas, treehouses, and islands complete with
cooking staff. Through the platform, hosts and guests were able to communicate, while
both parties were further empowered by the ability to leave reviews. Guests received
reviews from hosts that could impact future stays in Airbnb properties; hosts could view

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the reviews of a potential guest to vet the guest’s behaviour. Likewise, guests rated and
commented on the properties of hosts, allowing potential guests to gauge if they liked
the host in addition to the space they might rent.

Figure 2. Airbnb Guest Arrivals, 2009–2017

4. Airnb Hosts
Airbnb allows hosts to list their rooms, whole apartments, or their entire property on the Airbnb
platform; from simple bedrooms to manors, and even entire islands. Airbnb provides hosts with
a one-million-dollar guarantee for any damages (akin to a temporary homeowner’s insurance).
The platform rewards and highlights high-performing hosts who consistently earn a 5-star rating
from guests as Superhosts, a designation that a mere 7 percent of hosts achieve. Airbnb provides
an online marketplace where hosts can list accommodations and guests can browse and book
listings. Airbnb aggregates these host listings thereby prompting more users to become guests
as they are attracted to the selection and availability of listings. In turn, more hosts list
accommodations on Airbnb to gain access to the increasing numbers of guests booking listings.

Despite the availability of several other apartment and home online rental platforms such as
VRBO, Wimdu, Wunderflats, TempoFLAT, booking.com and so forth, Airbnb hosts are quite
loyal. Of the 5 million homes listed on Airbnb, some 3.5 million (or 70 percent of all hosts) list
exclusively on Airbnb, contributing a deep, as well as unique, inventory.

Host Facts

43% of Airbnb hosting income is used to pay for regular household expenses

6% of hosts used their Airbnb income to start a new business

88% of hosts incorporate green practices into hosting

Source: https://www.airbnbcitizen.com/data/#/en.

5. Airnb Guests
Through verification of licenses, Airbnb screens guests before they can register on the platform.
Following a booking request, hosts can accept or reject a guest based on reviews or ratings. This
has prompted cases of guests accusing hosts of racial discrimination. For properties listed as
“Instabook,” the host relinquishes this review-based screening process. While Airbnb hosts offer
guests more choices by offering different cancellation plans, fees, ame- nities, and check-
in/check-out requirements, a new rewards system is also catering to guests. In 2018, Airbnb
introduced the Superguest loyalty program, akin to hotel loyalty programs. Superguest rewards
Airbnb guests with free nights or discounts for frequent stays. Although this program is still in
development and will not be launched until it is differentiated enough, the idea is to include
benefits across the Airbnb community including homes, transportation, experiences, and other
ser- vices. The Superguest program is just one of many ways that Airbnb continually innovates
to meet the needs of its consumers and invests in increasing customer loyalty. To develop

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Superguest, Airbnb’s website is asking guests to leave suggestions for desired features. Other
improvements include categorizing listings into collections catered to different traveling needs,
for example family, honeymoon, or work. Through the Airbnb Plus offering, guests can expect a
certain level of high quality in their stays because listed homes are subjected to an in-person
100+ point quality inspec- tion by Airbnb.

Guest Facts
79% of guests chose Airbnb because they wanted to live like a local
66% of guests said the environmental benefis of home sharing were important in
their choices of Airbnb
89% of guests said that they chose Airbnb because it was more conveniently
located throughout the city than hotels
43% of guest spending happens in the neighborhoods where guests stay
Source: https://www.airbnbcitizen.com/data/#/en.

6. Expanding Airbnb’s Features and Offerings

 SPLIT PAYMENTS: Airbnb launched split payments in November 2017.27 Over 15.5
million groups took trips using Airbnb the past year ending in November 2017, with an
average stay of 3.5 nights. With split payments, the trip organizer does not need to front
the entire cost of the stay, only their own, and Airbnb allows 72 hours for the other
guests of the group to pay their portions.
 AUGMENTED AND VIRTUAL REALITY: In December 2017, Airbnb announced research
and prototypes in mobile technology involving virtual reality and augmented reality.28
In their concepts, guests can use virtual reality to explore any listing, and use augmented
reality that recognizes surroundings to provide contextual information, such as
translations or thermostat instructions. The idea is to create a virtual “try before you
book” experience.
 AIRBNB EXPERIENCES: Airbnb is also branching out to different segments of the travel
market with Experiences to become an end-to-end travel app for a global travel
community by leveraging their hosts’ local expertise.29 Since Experiences launched in
2017, Airbnb has offered over 4,000 experiences in 50 global locations. Over 1,000 of
these Experiences are in the United States. In addition to allowing Airbnb to change from
a home rental marketplace to an “end-to-end” travel company, Experiences offers
higher margins for Airbnb, 20 percent of earnings compared to the three percent from
Airbnb Homes. At the same time, quality control and the ability to scale quickly remain
thorny issues to make Experiences the success Airbnb needs and desires. Some
instances of high-profile negative occurrences (e.g., “one Airbnb Experience offer
consisted of a person yelling at the guests while they collected trash on the beach”),
highlight the pressing need to ensure stronger quality control. While this is done
currently in person, the question of scaling up using such labour-intensive method
remains unanswered. Yet, Airbnb’s Experiences is growing ten times faster than Homes,
albeit from a much smaller base. Experiences rate on average much higher than Homes,
with more than 90 percent of all Experiences receiving a 5-star rating. In 2018, Airbnb
announced a $5 million investment into expanding Experiences locations to 200 in the
United States, with intentions to develop Experiences in smaller markets domestically.
In addition, Airbnb partnered with Resy to allow guests to book reservations at local
restaurants, and Airbnb Experiences allows travelers to book a wide range of activities

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 that are a part of their travel plans though Airbnb, such as truffle hunting in Tuscany or
learning how to make sushi in Japan.
 AIRBNB PLUS: In 2018, Airbnb launched a new feature called Airbnb Plus, which created
a new, luxury tier of properties differentiated with 100 plus features such as design,
accessibility, and comfort. Over 2,000 of the 5 million properties have been inspected
and certified as Airbnb Plus, with a total of 75,000 Airbnb Plus properties planned by the
end of 2018, according to Chesky. Hosts will pay $149 for inspection to obtain the Airbnb
Plus designation and would, in return, be listed more prominently on Airbnb’s site. As
Airbnb adds to its offerings, it is embracing a segment that was previously distinct by
welcoming hotels and traditional bed-and-breakfasts to post on its platform. Although
some hotels had already used the platform, the new entrant’s leadership is now clearly
aligning these offerings as part of Airbnb’s strategic direction of becoming a full-service
travel company. This is an enticing opportunity for hotels, given the lower commission
charged by Airbnb compared to online travel agencies. With over 200,000 rooms in this
category already listed, Airbnb is curating listings for its “Boutique” offering intended to
showcase hotel and hotel-like offerings outside of the large corporate hotel chains.
 GROWING PAINS: External factors such as regulation are continuing to create major
headwinds for the startup.35 In 2016, the city of New York strengthened legislation first
passed in 2010. It is illegal in New York City to rent out entire apartments in residential
blocks for less than 30 days. It remains legal if the renter is living in the apartment at the
same time, so “true space sharing” is still possible. Fines start at $1,000 for the first
offense, rising to $7,500 for repeat offenders. This creates major problems for Airbnb
because New York City is by far the largest market for the internet venture, with more
than 50,000 accommodations available for rent.36 In 2018, the city of New York went a
step further by suing residential brokerage firms (and some of their individual
employees) that used Airbnb in allegedly illegal apartment rental schemes, earning an
estimated $20 million. Hotel chains and resort owners have challenged Airbnb in courts
and lobbied local governments, some of which passed regulations to limit or prohibit
short-term rentals. Residents in New York, San Francisco, Berlin, Paris, and many other
cities are also pressuring local governments to enact more aggressive rules banning
short-term rentals because they argue that companies such as Airbnb contribute to a
shortage of affordable housing by turning entire apartment complexes into hotels or
transforming quiet family neighbourhoods into all-night, every-night party hot spots.
Airbnb is also accused of contributing to the speed of gentrification in some
metropolitan cities. For proponents of affordable housing, Airbnb has come under
scrutiny for raising rents, particularly in areas already impacted by rising rental prices.
Airbnb argues that their website enables hosts to earn extra income, in turn making
their housing more affordable. Research suggests that a 10 percent increase in Airbnb
listings leads to a 0.39 percent increase in rents and a 0.64 percent increase in home
prices.40 In 2015, three of the largest landlords in the country entered into discussions
with Airbnb to allow their apartment tenants to list their rooms on the platform in return
for revenue sharing. The three apartment operators own 250,000 units. While many
tenants use Airbnb to rent out rooms or entire apartments, most apartment leases
prohibit tenants to sublet without permission or at all.
3. Kusisto, Laura. “Rent Your Place on Airbnb? The Landlord Wants a Cut; Revenue-Sharing Model Would Allow Apart- ment Dwellers
to Market Rooms through Lodging Website.” The Wall Street Journal, December 16, 2015. https://www.wsj. com/articles/big-
landlords-airbnb-discuss-partnerships-1450200473.

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 Airbnb in China: In 2015, Airbnb announced it was expanding in China, making it
potentially the largest market with some 800 million internet users. Airbnb also hopes
to grow its number of users by targeting Chinese tourists, whose outbound bookings
had risen 700 percent during 2014 making them the fast- est growing market of
customers booking stays outside of their home country. Airbnb’s expansion is aided by
Chinese venture capitalists, China Broadband Capital, and Sequoia China. In line with
Airbnb’s projection of China being their largest origin market by 2020, Airbnb
announced $2 million in investment through 2020 for “innovative tourism projects” in
the region. Airbnb, or Aibiying, as they are known in China, has domestic competitors
with more reach and listings.48 Xiaozhu and rival Tujia, encountered that a lack of user
education on renting and staying in spare bedrooms is a cultural barrier to many
Chinese, especially those who have not stayed with a local in a foreign city. Xiaozhu
employs property managers to help new users understand the concept of renting out
rooms in a culture where access to one’s home is restricted to family, making the idea
of random guests uncomfortable for many.

7. The Hotel/Vacation Rental Industry

Based on revenue, the home rental market is one-fifth the size of the hotel market in the
United States but has been growing faster since 2015. In 2017 the rental market was
estimated to be approximately $35 billion. The U.S. hotel industry grew 5 percent in 2016 to
$151 billion and is expected to experience stabilized growth of approximately 4 percent over
the next five years, whereas the online vacation rental market is expected to grow at 7
percent or more.

Concerning competition from traditional hotels, Airbnb’s presence in the travel industry
had impacted operations of traditional offerings. In response, hotel deals reached a record
high in 2015. With Airbnb accounting for 5.4 percent of total room supply in 2016 in an
industry where only five hotel operators have a share of greater than 5 percent, hotel chains
turned to consolidation to grow and increase their negotiating power. In 2018, the size and
influence of these hotel giants was evident though Marriott’s $23 billion, Hilton’s $9.70
billion, Hyatt’s $4.68 billion, Wyndham $1.7 billion, and IHG’s $1.87 billion in revenue. 57
Hotels are increasingly attracting guests by offering experiences.58 Marriott International
invested in PlacePass, a tour and activity booking startup. The experiences offered compete
with Airbnb’s Experiences, offering the opportunity for guests to immerse themselves in
local activities. Hotels are moving away from a uniform experience and instead transforming
to give travelers a taste of local cuisine, artists, and cultural activities. PlacePass is featured
on Marriott’s mobile app. Marriott plans to use analytics on their app on customer activity
to create better recommendations for PlacePass experiences, even when the user is not
staying at a Marriott hotel. Hyatt Hotels Corporation has taken note of Airbnb’s home rental
approach and partnered with Oasis to provide over 2,000 vetted homes across 20 worldwide
destinations, including London, Buenos Aires, New York City, and Cartagena, Colombia.

Airbnb is facing increased direct competition through online booking websites now offering
non- traditional accommodations, such as apartments and vacation rentals. Booking
Holdings, the owner of Priceline, decided to create a special category for “alternative
accommodations” after obtaining the same number of listings as Airbnb. Not different from
acquisition-led hotel industry growth, both Expedia and Priceline have jumped into the
home rental market with acquisitions of their own, thereby expanding their offering of
apartments and vacation rentals. In 2015, Expedia bought HomeAway, a vacation rental site

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with 1.4 million bookable online listings. Those listings are slowly being made available on
Expedia.com and Hotels.com. In the first quarter of 2017, HomeAway saw an increase of 48
percent in online vacation rental bookings, compared to a year earlier, resulting in $2.7
billion in revenue. Priceline’s Booking.com has expanded their vacation rental inventory by
50 percent to 613,000 properties, and 2.5 million listings in 2017.

8. Challenges

 Safety: A range of safety concerns impact the operations and reputation of Airbnb.
Following the death of a family due to gas asphyxiation in a property rented through
Expedia’s HomeAway and VRBO rental services, there is increased public interest in the
safety of rental sites.65 Airbnb reports on safety protections, and while 80 percent of
properties do offer smoke detectors, Airbnb does not set this as a requirement. Hosts
must ultimately inform and decide for themselves. The blurred line of responsibility
between hosts, guests, and the company is also evident in controversies involving sexual
assault. On its website, Airbnb now outlines its precautions to addressing safety
concerns ranging from employing analytics in risk scoring, preparedness workshops for
hosts, secure payments, profiles, secure messaging, and reviews. The platform
promotes a global team on 24/7 standby in 11 different languages to support hosts and
guests.
 REGULATION: Local governments have been concerned about landlords opting to list
on Airbnb instead of having traditional tenants, reducing the available long- term
housing. Airbnb contested with lawmakers in New York City in a lawsuit against New
York state law ending with fines in December of 2016. The law fines Airbnb hosts up to
$7,500 for illegally renting out whole apartments for fewer than 30 days. The New York
Hotel Trades Council, representing hotel workers, opposes Airbnb from changing the
law. Revenue from New York City Airbnb hosts amounted to $1 billion in revenue in
2016. Internationally, Airbnb has faced criticism over housing shortages, negative
externalities (such as noise pollution due to partying in short-term rentals), and
government regulation, especially in China and Europe. In Berlin, Germany, nearly 8,000
apartments returned to the traditional rental market in 2016 due to strict property laws
from the Senate Department for Urban Development and Housing.74 The law had fined
landlords up to $125,000 for illegally renting out their property for short-term stays.
Other European cities such as Amsterdam, Paris, and Barcelona have also pushed back
on illegal short-term rentals.
 DIVERSITY AND CORPORATE SOCIAL RESPONSIBILITY: Some Airbnb guests voiced
concerns on being discriminated against by hosts who refuse to issue a booking due to
race or other characteristics. Airbnb responded by increasing the number of listings for
which customers can instantly book a reservation, rather than requiring the approval of
a host. The company further demonstrated its commitment to inclusion and clearly
outlined expectations, both legal and social, for hosts in different geographic areas
through its “Nondiscrimination Policy: Our Commitment to Inclusion and Respect”
document. The policy states that hosts that fail to comply to Airbnb’s policies risk
suspension from the platform.

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 ASSIGNEMENT
In early 2019, CEO Brian Chesky had several key issues to address:
 Deciding when to take Airbnb public.
 How to ensure future growth in the United States and internationally (esp. China).
 How to deal with regulatory challenges and backlash in major markets such as New York City
and Paris.
1. According to CEO Brian Chesky, what is Airbnb’s mission? What are the strategic
implications of this mission?

2. List Airbnb’s internal and external stakeholders. What is Airbnb’s stakeholder strategy?
Conduct a stakeholder impact analysis. Would this analysis change when Airbnb is a publicly
traded company? Why or why not? Explain.

3. What is Airbnb’s platform strategy? What are some strengths and some weaknesses of
this approach?

4. Who is Airbnb’s competition, and how does Airbnb attempt to differentiate itself from
the competition? Do any of these factors have the potential to lead to a (sustainable)
competitive advantage?

5. Identify the key issues that Brian Chesky faces in the case. What recommendations
would you give Brian Chesky to address each of them? Be specific.

Source: Adapted from Rothaermel (2019).

References:

1. Tsang, Ami, and Paul Mozur. 2015. “Airbnb Seeks to Expand in China with Local Help.”
The New York Times, August 19, 2015.
www.nytimes.com/2015/08/20/technology/airbnb-hopes-to-deep- en-its-penetration-
of-china-with-local-partnerships.html
2. “Airbnb Makes Group Travel Easy with Global Launch of Split Payments.” Airbnb,
November 28, 2017. press.atairbnb.com/airbnb-makes-group-travel-easy-with-global-
launch-of-split-payments/.
3. “Developing the Next Realities for Travel.” Airbnb, December 11, 2017.
press.atairbnb.com/ developing-the-next-realities-for-travel/.
4. Vora, Shivani. “Airbnb Offers Tours with New Yorkers (No Vacation Rental Required).”
The New York Times (Online), September 25, 2017.
www.nytimes.com/2017/09/25/travel/airbnb-tours- hosts-new-yor.html.
5. Bensinger, Greg. “Airbnb Promotes Diversity to Prevent Booking Discrimination by
Hosts.” The Wall Street Journal, September 8, 2016. https://www.wsj.com/articles/
airbnb-promotes-diversity-to-prevent-booking-discrimination-by-hosts-1473343215.
6. “Interview with Brian Chesky, Co-founder and CEO Airbnb.” (34:24 min) Code 2018.
Recode, https://www.youtube.com/watch?v=nc90n-6dQRo&t=673s.
7. “Interview with Brian Chesky, Co-founder and CEO Airbnb.” (34:24 min) Code 2018.
Recode, https://www.youtube.com/watch?v=nc90n-6dQRo&t=673s.
8. Morgan Stanley. “Important Reasons Why People Use Airbnb in the United States and
Europe from 2015 to 2017.” Statista—The Statistics Portal, Statista.

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 www.statista.com/statistics/796866/ reasons-people-use-airbnb/. Accessed 23 Feb
2019.

October 2021

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