Airbnb: Case Study

Why is the Corporate Sector Shifting to Airbnb (rather than 5-star hotels)?

INTRODUCTION

In just a decade, Airbnb has become one of the most talked about companies in the world, and is today considered a threat by the biggest hotels chains in the world. It’s a great achievement considering the fact that the company started as an online portal which brought together hosts (who wanted to rent out their property) and people who were looking for affordable short-term accommodation.

The success of an organisation is dependent on several factors, but the most important thing is to know the pulse of the market and offer products that will appeal to a wider audience.

Airbnb has come a long way from being the preferred destination for those looking for budget accommodation to being considered an alternative for 5-star hotels.

And that is the focus of this research.

Airbnb operates an online marketplace and hospitality service for people who wish to lease or rent their property for short-term lodging.

In this dissertation, I intend to understand how a company that was once looked down upon by the rich is seen as an alternative to five-star accommodation by the corporate sector.

The most important question is how Airbnb changed the perspective of the high-end traveller, and the main argument proposed is that there Airbnb is taking steps to cater to that particular segment by providing high-end (and consistent) accommodation which will appeal to those who prefer to stay on 5-star hotels.

Rationale for interest:

My interest in pursuing this research project is because of the following reasons:

• Pursuing a MBA in hotel management
• I am an avid traveller
• Want to be entrepreneur

This research would help me understand more about the industry and also understand the impact of technology in disrupting the status-quo of the industry.

Research Questions

Against this background and discussion of the problem above, this dissertation intends to answer the following central question: ‘How did Airbnb change the perspective of the high-end traveller’.

This can be broken down to include the following sub-questions:

• What strategies should Airbnb employ to increase the percentage of travellers from the corporate sector?
• Will Airbnb invest in 5-star properties to attract more people from this category?

 

Potential Contribution

My research has two potential contributions.

1. Understand the needs of the high end traveller (and those from the corporate sector) when it comes to looking for accommodation
2. Use of technology that Airbnb leveraged to become big (without investing in real estate), which will help other Start-up companies in this industry

 

More About the Project

The central focus of my research project is to investigate “why the corporate sector shifting to Airbnb rather than opting for 5-star hotels” and how Airbnb has managed to get into that sector, considering the fact that they used to cater to the needs of the budget traveller.

Keeping these goals in mind, this chapter talks about:

1. The beginnings of Airbnb
2. How it leveraged technology to scale
3. Its foray into other related markets

About Airbnb?

What is Airbnb?
Airbnb is an online company that operates in the hospitality industry, it allows people to lease or rent their properties on a short term short-term. The company has come a long way and today people use it to list holiday cottages, apartments, hostel rooms/beds to tourists.

Its business model is to connect people who want to rent out their private properties with those who are looking for short-term accommodation.

The best part about the American company is that it does not own any Real Estate, neither does it conduct any tours.

Difference between Hotels & Airbnb:

• With Airbnb, you can choose to stay with locals, and experience the place like a local.
• There are lot of cheaper options listed on Airbnb
• No room Service: As Airbnb guests, you cannot expect room service (as in a hotel), but you will get a clean room when you arrive.
• Airbnb does not have any say on the price of the lodging offered by the hosts

 

Price is one factor when people look for accommodation on Arbnb (though it’s not necessarily the cheapest). However, another factor is that a lot of travellers want to live like a local and explore the place, and that is where many find the options listed in Airbnb quite attractive.

How the Company Started
Here’s a little bit on how the company started.

There were several tech conferences scheduled in the Bay Area in 2007, which put pressure on rents in San Francisco. One of the landlords in the city leased a small apartment to designers Joe Gebbia and Brian Chesky, who met while studying at the Rhode Island School of Design. They could not afford San Francisco rents, yet they knew they had to remain in the city, the epicentre of new tech designs and a growing number of tech-oriented venture capital firms.

To make ends meet, they decided to turn their loft into a lodging space, but, as Gebbia explains, “We didn’t want to post on Craigslist because we felt it was too impersonal. Our entrepreneur instinct said ‘build your own site.’ So we did. It looks as if the role of that San Francisco landlord in reshaping the hospitality landscape will someday become the stuff of legends.

In the beginning, when the founders were seeking funds to expand their business, a lot of people thought it was a crazy idea, but today its valuation is in business and has severely impacted the businesses of several low-middle tier hotels.

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Airbnb SWOT Analysis

Strengths

• Well-established brand, strong brand image, good social media presence
• Offers a platform that allows suppliers (people with spare rooms, houses) to offer alternative to Hotels
• The Ratings and reviews feature of its platform makes it easy to trust the customers and the suppliers.
• Offers additional services in order to accommodation, such as guided tours, hobby classes, and meetups for travellers.

Weaknesses

• The big hotel chains are now offering budget options as well.
• Most properties listed on Airbnb are

Opportunities

• Its easier for Airbnb to expand its product mix by offering related services – travel guides, car rentals, etc.

Threats

• In several countries, Airbnb business seem to violate local housing laws and regulations.
• There are other companies who can imitate their business model

Useful Videos

Useful Links

Get to know Airbnb

Airbnb Case Study by Joseph B. Lassiter and Evan Richardson (on HBR)