Introduction
Two friends, Joe Gebbia and Brian Chesky, started Airbnb when they sought to raise their rent in San Francisco. They started an experiment in 2008 and named it Airbnb, which would later disrupt the hotel business (Dolnicar, 2021). Ten years later, the business had accrued immense growth by expanding to over 190 countries and a valuation of $31 billion. The main mission of Airbnb is to develop a world where everyone can exist anywhere and have an end-to-end travel platform that can handle every aspect of a person’s trip.
Competitive Advantages
The first one is that it allows group travel because they offer entire homes for guests to stay. While hotels allow a limited number of individuals to book a room, Airbnb provides homes that can host an entire group and even parties. The second competitive advantage is that Airbnb provides out-of-way locations in places that have tourist attractions. Major hotels shy away from investing in rural areas that have tourist attractions because their returns are not guaranteed. In such situations, Airbnb provides a listing of rooms and homes that people can be able to hire in those locations. The third competitive advantage is that Airbnb provides an opportunity for travelers who want an extended stay. While hotels may be uncomfortable for long stays of around two weeks because they have few kitchens, laundry, and other amenities, Airbnb provides an excellent solution because there are no shared amenities.
An Analysis of the External Environment and Internal Resources
Five Forces Model
The threat of new entrants
Airbnb’s threat of new entrants is moderate because the company has gained a significant competitive advantage. While it may be easy for a competitor to enter the market, Airbnb has already established itself in over 190 countries, benefiting from being the first movers (Hati et al., 2021). In addition, a competitor who may wish to join the market will require significant capital to create a seamless website for conducting the business.
Threat of substitutes
The threat of substitutes for Airbnb is relatively strong in the market. While Airbnb has taken a specific positioning as a slightly luxury travel company, it has a good distinction in the consumer’s mind because it provides a home-like experience (Hati et al., 2021). In addition, due to its popularity, most luxurious homes worldwide have already been listed on the platform.
Bargaining Power of Customers
The bargaining power of customers for Airbnb is low because of the high demand for homes and an inadequate supply from hosts. There are more travelers in the world than the listed properties, and thus the demand for homes is always high (Hati et al., 2021). As people are interested in having a homely experience in their travel and others want to stay in exotic homes, they cannot afford to buy, reducing the bargaining power of customers.
Bargaining power of suppliers
Airbnb has a high bargaining power against its suppliers in the market. While many people have bought vacation homes that are not occupied, few companies offer the services given by Airbnb, which reduces their bargaining power (Adamiak, 2019). In addition, Airbnb handles all the services, including renting and transactions, so the owner and customer get hassle-free services.
Competitive Rivalry
The competitive rivalry for Airbnb is relatively low in the market because there are few players, and each of them has identified a market niche hence no overlapping of consumer targets. Turnkey, gives their consumer key codes instead of a key, which makes it more flexible. However, with all the competition, Airbnb has dominated the market.
PESTEL Analysis
Political Factors
Airbnb has faced various political factors as the company sought not to follow some of the state rules. In some states, for a person to rent a house, they must live in the same apartment. In others, they are required to pay tourist charges for providing holiday homes (Huang et al., 2020). The company has faced lawsuits in various states such as New Orleans, New York, and Barcelona, which implies that the company has to follow housing guidelines.
Economic factors
Airbnb follows the shared economy model whereby individuals and corporations share their resources. In majors such as New York, Airbnb accumulated economic activity with a value of $600 million (Henama & Apleni, 2020). Additionally, the company offers jobs to hosts with vacant lying investments or homes by providing them with willing customers to rent their homes.
Social Factors
Airbnb has brought a new social experience where people can rent and live in places not close to their homes. In addition, visitors can rate their homes, while hosts can rate their visitors, creating a social world (Henama & Apleni, 2020). Airbnb’s main method of advertising its services is through word of mouth. This shows that Airbnb has revolutionized the social experience and traveler and increased social interaction worldwide.
Technological Factors
Airbnb is a technology-oriented company that relies on technology to offer its services. Visitors book the room through online platforms such as the company website or app. In addition, the booking relies on the feedback of visitors and hosts (Henama & Apleni, 2020). If a host is poorly rated, they will likely have difficulties finding customers.
Legal Factors
Airbnb has faced various legal issues concerning housing regulations. Thus, they must address how their hosts have to follow various regulations such as taxation, tourism, and housing regulations. Airbnb has faced various legal charges concerning taxation in various states in Spain and the US. Hence Airbnb is seeking to be regulated like hotels to enable them to work without restrictions in all countries.
SWOT Analysis
Strengths
Airbnb has various strengths over hotels and competitors, including affordability, pleasant experience, access to all people, and uniqueness. Most Airbnbs are relatively cheap compared to hotels and accessible to many people (Henama & Apleni, 2020). In addition, they offer exemplary group and family experiences that are not in the hotels. Airbnbs offer a home-like experience that is unique from what other competitors offer.
Weaknesses
One of the common weaknesses of Airbnb is that it leads to a high level of dissatisfaction. When visitors ruin the properties of the host, Airbnb is responsible for ensuring that they compensate the owner. In addition, Airbnb depends on reviews from both the host and customer (Adamiak, 2019). When one of the hosts does not follow the stated rules, they spoil the company’s reputation.
Opportunities
Due to the growing urbanization, Airbnb has helped to support urban area lodging, which was afraid of enlisting their businesses because of legal regulations. This is because Airbnb has taken the responsibility of covering legal issues, which has given investments confidence to list their lodgings (Adamiak, 2019). Airbnb supports easy correspondence by having an online platform where people have to sign in and out when they check into their homes.
Threats
One of the threats is that it could be a medium for transferring contagious viruses because it offers a temporary stay for individuals. In addition, it faces the threat of any other pandemic, which may restrict people from traveling activities (Hati et al., 2021). Thirdly, it faces stiff competition from other companies that have copied the model.
Value Chain Analysis of Airbnb
Airbnb inbound logistics involve the company’s peer-to-peer listings based on the online platforms where users can upload photos of their properties. In its operations, Airbnb conducts a wide range of activities such as cleaning the rooms, providing amenities, and holding the keys to properties (Hati et al., 2021). Airbnb outbound logistics involves the accommodation, adventures, and experiences guests provide. Airbnb marketing services include a wide range of activities such as having affordable costs, celebrity endorsements, brand partnerships, and social reviews.
Analysis of Financial Data of Airbnb
Airbnb has a net worth of $58 billion and an enterprise value of $51 billion. The company’s share has increased from 5.72% to $636 million, which implies the company can raise more funds for its operations. In 2011, Airbnb earned net revenue of $6.621 billion with profits of $801 million with earnings per share of $1.41, which implies that it has good dividends for its shareholders (Hati et al., 2021). Checking its balance sheet, Airbnb has $9.34 billion in cash and a debt of $2.41, implying that it has a new position of $6.3 billion.
Statement of Problems and Purpose of Analysis
The main problem facing Airbnb is its future in communities that offer its services. While some people may hate the influx of tourists, Airbnb may be unsafe for communities as people can use them as hideouts, and sometimes they may go against community policies by throwing parties. This problem may challenge the company because it may face community resistance, affecting its well-being.
Strategic Alternatives
The main resolution to this challenge is finding a way to regulate the visitors of Airbnb to ensure that they abide by the community rules. Airbnb should classify their communities according to age, social, religious, and moral factors. Thus, when people are looking for a house to throw a party, they may be given a place that allows loud noise at night (Hati et al., 2021). The main benefit is that people will be given houses in the neighborhood that match their traveling events. A disadvantage of the model is that it will reduce the flexibility of Airbnb.
The second option is that Airbnb can regulate the type of activities conducted on its premises. This can include banning the hosting of parties in their homes and any illegal activities. The main advantage of this method is that it will make their services environment-friendly and reduce the mischievous activities conducted in their houses (Dolnicar, 2021). However, the disadvantage is that it may change the need for unique experiences on Airbnb, reducing its demand.
The third alternative is to engage in consumer social responsibility services. This will ensure that the company will support projects in local communities to earn their support. One advantage of this method is that it will improve the business profile of Airbnb. On the contrary, since the company is global, it may have to spend many resources on community work and social responsibilities, reducing its profitability.
The recommend strategic alternative is the segmentation of the neighborhoods. This method is most effective because it will have the least impact on the business model and will not change the image of the company. In addition, it will ensure that it does not change the aims of the consumer, but it will give them an alternative place to do it. This is the most feasible solution for this study.
Implementation Plan
To implement the first plan of segmenting their neighbohood, Airbnb should hire personnel to evaluate places where they have homes listed to know the type of environment and people who live in that region. This data should then be uploaded to a central system which can be used to segment the neighbors into silent, moderate, and noisy neighborhoods (Dolnicar, 2021). This data can then be used to grade all the houses in the system so that when users rent a home, they can see its level. This will reduce the conflict between the communities and Airbnbs. The challenge they may experience with the implementation is that it is costly to segment communities in over 190 countries and the data may be biased, giving false information.
Evaluation and Control
The effectiveness of this method shall be rated according to the number of complaints raised in different communities regarding the services of Airbnb. If the number of community complaints reduces, this will indicate that the method is effective. This will imply that the company can use its resources to expand the project and get more segmentation. This long-term solution for Airbnb should consider implemented to solve the conflict between visitors and the local community.
Conclusion
Airbnb is a multibillion business with a very nice market niche that plays a competitive advantage. However, for the company to prosper, it has to reduce the conflict between visitors and the local community caused by loud noise, parties, and mischievous activities in the homes. There are various solutions to this problem; however, the most feasible one is segmenting the neighborhoods and rating them according to the age and type of people living there. This will ensure that when visitors book rooms, they can choose effective ones fit for their purpose.
Summary
This study highlights the history, internal and external environment of Airbnb through the PESTEL analysis, SWOT analysis, Value Chain, and Five Forces model. In addition, it focuses on one problem the company faces, which is the conflict between the visitors and local communities. The study further highlights several options that can be used, and the most feasible one is the segmentation of its neighborhood according to the people who live there. This will ensure that the visitors know the people’s culture and expected behavior when they visit.
References
Adamiak, C. (2019). Current state and development of Airbnb accommodation offer in 167 countries. Current Issues in Tourism, 13(2), 1–19.
Dolnicar, E. S. (2021). The evolution of Airbnb’s business model. Uq.pressbooks.pub; The University of Queensland.
Hati, S. R. H., Balqiah, T. E., Hananto, A., & Yuliati, E. (2021). A decade of systematic literature review on airbnb: the sharing economy from a multiple stakeholder perspective. Heliyon, 7(10), e08222.
Henama, U. S., & Apleni, L. (2020). Airbnb as a tourism supply chain champion for small businesses. Strategies for Promoting Sustainable Hospitality and Tourism Services, 43(3), 22–38.
Huang, D., Coghlan, A., & Jin, X. (2020). Understanding the drivers of Airbnb discontinuance. Annals of Tourism Research, 80, 102798.