Case Study on

“Airbnb”
Presented by : Group 1D
Group Members: Akash Reyon Tirkey 2019PGP000
Kajal Sharma 2019PGP000
Khushboo Maroo 2019PGP027
Navneeth VKV 2019PGP000
Pargunan P 2019PGP000
Sarthak Sethi 2019PGP000
 About Airbnb (1/2)

• Airbnb is an online marketplace that connects people who want to rent out their homes with people
who are looking for accommodations in that locale.
• The company's name comes from “AirBed&Breakfast”.
• Founded in San Francisco on October 2007, by roommates and former schoolmates Brian Chesky and
Joe Gebbia who could not afford the rent for their loft apartment.
• Chesky and Gebbia came up with the idea of putting an air mattress in their living room and turning it
into a bed and breakfast essentially just "to make a few bucks“
• In February 2008, Nathan Blecharczyk, Chesky's former roommate, joined as the Chief Technology
Officer and the third co-founder of the new venture
• They put together a website that offered short-term living quarters, breakfast, and a unique business
networking opportunity for those who were unable to book a hotel in the saturated market
 About Airbnb (2/2)
• In March 2009, the name of the company was shortened to Airbnb.com
• By 2011, the company started penetrating the European market too and was well received, slowly
they expanded to Asia and Australia opening their offices in Sydney and Singapore in the upcoming
days
• In November 2012, Airbnb launched "Neighbourhoods", a travel guide of 23 cities that provides in-
depth information via collaborative filtering to help travellers choose a neighbourhood in which to
stay
• In March 2017, Airbnb raised $1 billion in funding, bringing total funding raised to more than $3 billion
and valuing the company at $31 billion
• In February 2018, the company announced Airbnb Plus, a collection of homes that have been vetted
for quality of services, comfort and design, as well as Beyond by Airbnb, which offers luxury vacation
rentals.
• It currently covers more than 81,000 cities and 191 countries worldwide.
• By October 2019, two million people were staying with Airbnb each night.
 Airbnb Business Model (1/2)
Interested guests could search for room in a given area and examine possible options;
and filter them using various filters like price range, neighbourhood, facilities etc. After
choosing a preffered room, a guest submitted a reservation request to the
corresponding host.

The host then had the opportunity to accept or decline the guest's request , Before
accepting the request host could see the profile of the guest (including prior
reservations), A host was asked to respond to a request within 24 hours, if not the
request would expire.
A hosts placement in search results was also affected by the proportion of requests
that the host had accepted . This provided incentive to respond to requests in timely
manner

Before accepting a request, the guest and host could exchange messages through
Airbnb but weren't allowed any communication outside of the system until a
reservation had been made. To make sure of this Airbnb developed and algorithm to
block messages that contained phone numbers or e-mail addresses.
If a host accepted request, Airbnb authorized the payment and provided the host with
the guest's contact details. If a host declined the guest was notified.
 Airbnb Business Model (1/2)

• Value Proposition- Airbnb is a community based, two-sided online platform which facilitates the
process of booking private living spaces for travellers. Through facilitating access to distinctive spaces
and local culture, the company aims to make travellers “feel at home”, by building connections with
local hosts, gaining access to distinctive spaces and culture of their destination.
• Value Formation- Airbnb operates as a transaction facilitator between the hosts and travellers who
are looking for comfortable accommodation at a cheap price. By providing the hosts with multiple
benefits, as well as rating and review system, it builds trust within the community of users and lowers
transaction costs.
• Revenue Model- Airbnb receives commissions from two sources upon every booking, namely from
the hosts and the guests. Airbnb charges the guest 6-12% of the booking fee and charges the host 3%
for every successful transaction.
Guests paid Airbnb via credit card at the time of reservation, Airbnb held the guest’s payment until the
reservation began and within 24 hours of guest’s arrival, a host received payment from Airbnb by cheque,
direct deposit or PayPal
 Problems and criticisms faced by Airbnb
 In June 2011, a surge of criticism called into Question Airbnb’s entire business model
 The Big Incident - A corporate events planner, “EJ” had rented her apartment to a guest booking via Airbnb.
They never met, but followed the Airbnb protocol and had exchanged messages through the system. The guests
seemed friendly, and even during the stay messaged EJ complimenting the property..
When EJ returned, she found her house ransacked and her belongings stolen, with damage totaling tens of
thousands of dollars.
 EJ blogged about the incident. The blog mentioned some of the irreparable damage like hole in closet, stolen
documents and ancestral jewelry, external media backups etc., which she described as her entire life
 The story spread quickly and gained attention. It was covered by major newspapers and journals
 Situation was made worse due to Airbnb’s late response
 More such incidents of theft and vandalism started coming to attention
 Although Airbnb was able to raise more fund, users were distraught by the earlier incidents and some critics
questioned whether concerns about trust about trust could undermine Airbnb’s business model.
 Airbnb’s online review system was not sufficient to protect users and preserve confidence and the managers
had to regain the trust of market participants, especially the hosts
 Possible solutions available for Airbnb (1/2)

1
Present more sophisticated consumer reviews
• There was no incentive for renters and guests to share detailed reviews
• Implementing a reward system for frequent reviewers
• Categorizing reviewers with better contributions as “Elite” reviewers

Collect other Information about hosts and renters

2 •
•
•
Devising schemes to encourage users to complete their profiles
Making some fields in the profile mandatory
Providing hosts with pictures, names and other basic information
about potential guests
Make it Easier to reject renters

3 •
•
•
Redesign current rejection penalization policies
Assess rejections qualitatively rather than quantitatively
Implement a robust feedback system to feedback when hosts
reject a guest and process them

4
Vary prices based on ratings
• Moving away from the single price policy offered to hosts
• Provide options to vary price based on guest profile
Possible solutions available for AirBnb (2/2)

5 Provide insurance for hosts

•

•
Protecting hosts against potential damages by guests though
insurance schemes
This will alleviate fears of loss incurred on hosting rogue

6
customers

Add discounts
• Offering lucrative discounts to frequent users, this will spur
demand and encourage repeat visits
• Discounts can also be offered to guests who had a bad prior
experience while using the services

7 Prescreen hosts and guests

• Adding a screening process before users start engaging in the
platform
• Cross verifying a basic details like name, address and phone
number with public sources
• Deploying dedicated company personnel to interview users
and validate their profiles
 The response from Airbnb (1/2)
Actions focusing on Issue Prevention

Profile Completion
Allowing hosts to receive requests only
Address verification
from guests who have completed their
Verifying the addresses of all hostsby profiles
requiring each host to enter a code
written on mail sent to registered
address

Public profile linking

Allowing users to link Airbnb accounts
Eliminating Rejection penalization policy with Facebook, LinkedIn and Twitter
Allowing hosts to reject guests without profiles
penalizing them
 The response from Airbnb (2/2)
Actions focusing on Damage Control

Expanding Support teams Insurance

The customer support teams in A $50000 guarantee was provided
Airbnb was expanded increasing to hosts safeguarding them
the availability of the services. against guest damages.

Customer Hotline
24hr email and telephonic
customer support services were
established.
More Suggestions..
 Use of AI & ML for Ranking
Data points from the website can be used and analysed to create a pattern for the behaviour of the user
and then rank the user on that basis

• Will help in differentiating between users who are actually looking for places to stay
and users who are window browsing
• Will automatically understand the choices and preferences of the customers and help
in suggesting the best available properties.
• For hosts, this will help in identifying the type of customer they would want to rent
their property to
• Using the browsing pattern, the previous bookings, incident reports, cancellations and
other data points, a ranking structure will be designed to rank both the hosts and
customers.
• The better the ranking, more visibility will be shown for the property including
benefits like discounts
 REWARD POINTS
Reward points will be given to users who give reviews and complete their profile. These reward points can be
redeemed on the next bookings through Airbnb

PROFILE:

• Users will be encouraged to complete their profiles by giving them reward points

• Users will be asked to link their profiles to social networking accounts

• Proper identification and address verification through govt. issued IDs

• Phone number verification through OTPs

• Enabling video and voice calls through which hosts can have a interaction with the
guests
 REVIEWS:

• Reviews will be taken from certified Hosts as well as certified Guests

• Reward points will be awarded to the people for providing reviews

• Reviews will be in form of questions and ratings(1-5) to save customer time

• Any host or Guest giving rating less than 3 will be asked additional questions such as
security risk etc.

• Blocking the user if the reviews mention any suspicious activities related to security
 ALERT OPTION ON APP

An ALERT 24 hours The support Pressing a Fast Increasing

button will be Hotline will team will be button on response in the number
available on be available alerted and the case any of people in
the mobile for ensuring measures can application is damage to the customer
application for safety be taken easier than the property care
all registered ASAP making call or furniture
users and emailing is observed
Thank You!