CONTENTS
Background..3
Environment Scan4
Internal Operation Environment7
Strategies & Justification8
Organizational Change: Reflections..10
Conclusion.11
Airbnb: A Strategic Analysis
BACKGROUND
The hospitality business is changing. In contrast to a conventional model of corporate-controlled business model offering a broad range of hospitality services to consumers largely defined within limited geographical spreads, peer-to-peer hospitality enterprises are disrupting hospitality business into an innovative model. The peer-to-peer model cuts across different hospitality services but, for current purposes, main focus remains on accommodation services. Of all short-stay, peer-to-peer companies, Airbnb is probably most prominent and, for that matter, most controversial. Founded based on limited property offerings in specific areas in U.S. home market, Airbnb has expanded into a dominant marketplace not only for short-stay vacations but also large family, group and business hub at a global scale. The business model Airbnb represents is, if anything, an evolving one defined by different external and internal variables. Indeed, if Airbnb has come to meet any needs for customers, factors influencing how world's biggest peer-to-peer accommodation marketplace has come into being should be explored for better understanding of current evolving model and, not least, for more accurate prediction of future patterns. Further, by more in-depth analysis of Airbnb's business model best-in-industry practices can be identified for more optimum, consumer-oriented services. This report aims, hence, to offer an in-depth strategic overview of Airbnb as a disruptive hospitality industry business for better understanding of current practices and more accurate predictions of future patterns, particularly during periods of change.
The choice of Airbnb is justified by deep changes in hospitality industry. Indeed, hospitality, long defined by service-orientation, has been defined, paradoxically, not by corporations offering hospitality services but rather by customers showing corporations which services are needed. Put differently, instead of "packaging" hospitality services by companies, customers, enabled by ubiquitous ICT platforms and applications are sharing needed or desired services. Thus, Airbnb, as a peer-to-peer platform, represents an ideal example of a customer community sharing accommodation "insights" with little interventions from company's management or personnel. (This latter aspect of community engagement is explored in further depth under "Internal Operation Environment".)
The report is made up of five sections in addition to introduction: (1) Environment Scan, (2) Internal Operation Environment, (3) Strategies & Justification, (4) Reflections on Change and (5) Conclusion. The Environment Scan section offers a broad overview of Airbnb's external operating environment including a discussion of Opportunities and Threats. The Internal Operation Environment section offers a broad overview of Airbnb's internal operating environment including a discussion of Strengths and Weaknesses. The Strategies & Justification section discusses competitiveness, marketing and communication and growth strategies Airbnb should emphasize on including justifications of congruency to mission and goals. The Reflections on Change section addresses projected change in current practices and future implications. The Conclusion section wraps up report findings and offers further insights.
ENVIRONMENT SCAN
Airbnb is shaping and being shaped by an evolving hospitality business ecosystem. By managing property rentals between peers, Airbnb disrupts conventional, corporate-designed hospitality business model. Notably, Airbnb's model does – in contrast to standard, short-stay rental offerings – not involve corporate ownership of offered properties which are, in fact, owned by peers, customers or, in Airbnb's parlance, "providers". From a strategic financial management perspective, Airbnb enjoys an Opportunity of freeing up cash flows (usually consumed by conventional hospitality companies to invest and/or maintain properties) to invest in more sophisticated platforms and strategic partnerships in old or new markets.
Further, Airbnb enjoys a second strategic Opportunity. By being a web-based platform offering a value-added accommodation service / experience, Airbnb is at forefront of knowledge economy, one defined less by conventional economies of scale (for more profits) and more by substantial upfront costs (albeit recoverable at much higher ROI) invested in R&D. This aspect does not only constitute a strategic Opportunity but also, more significantly, an engine for multiplier-effect gains. More specifically, if in a more conventional hospitality model companies are expected to achieve financial and non-financial returns based on quantifiable initial investments, outcomes Airbnb is projected to achieve in return for investment in peer-to-peer platforms and applications far surpass initial investments and hence unlimited opportunities in a fashion much similar to companies based on knowledge and experience models.
On a more negative note, Airbnb faces a set of Threats and challenges in a historically competitive industry made more so by blurring lines between corporate and customer functions.
In addition to more established players, Airbnb faces a second competition Threat from startups modeled along company's business models but addressing needs of narrower, niche markets. These include, for example, companies such as Kid & Coe, Preferred Residences, Tzell and Villas.com (an offshoot of Booking.com) aimed at family and children and luxury customer segments respectively (Rosenbloom, 2015).
Needless to emphasize, Airbnb faces a third, major Threat of regulation. Notably, Airbnb faces hefty fines by local authorities, particularly in major cities, including for example Los Angeles (Reyes, 2015) and San Francisco (Branson-Potts & Lien, 2015). In managing conflicting stakeholder interests, Los Angeles regulatory authorities are more likely to pose serious challenge to Airbnb given company's unclear property management practices, particularly for properties whose ownership is not immediately clear (Reyes), a situation San Francisco authorities have pushed even further by offering up Proposition F (a regulation meant to make rules governing rental homes stricter) for vote (Branson-Potts & Lien).
INTERNAL OPERATION ENVIRONMENT
Internally, Airbnb has a unique corporate structure. Typical of peer-to-peer business model, Airbnb "delegates" main business function in a conventional hospitality model to customers or providers. By "delegates" is meant Airbnb promotes further interactions between peers / customers / providers by offering a platform only to make community participants handle marketing and branding functions, for example, by sharing reviews, offering recommendations and simply offering helping via different forums. Thus, in lieu of a conventional hospitality website, Airbnb creates a platform culture between participating peers (Sundararajan, 2014). This aspect, a Strength, is developed and enhanced by Airbnb in different ways. Notably, Airbnb has made as a constant habit of organizing Airbnb Open, an annual host convention aimed, ultimately, to engage providers more aggressively (Sundararajan). Moreover, Airbnb makes an ideal use of her online platform for more community engagement by, first of all, defining company as a "community marketplace" ("About Us," n.d.), personalizing company's brand ("Make Your Symbol, Share Your Story," n.d.), offering step-by-step travel ("How to Travel," n.d.) and hosting ("How to Host," n.d.) tips and differentiating travel experience for business travelers ("Travel for work, feel at home," n.d.).
Paradoxically, Airbnb's community engagement strategy could be a major liability, or a Weakness, should community broader stakeholder interests are not considered for. Specifically, by limiting community engagement to connecting peers using multi-channel communication platforms without proper follow up or, for that matter, adequate background checks, Airbnb risks losing control of community activities, a risk most manifest in recent protests against company's unregulated hosting policies. True, Airbnb has introduced offline activities to further engage providers such as Airbnb Open. However, responsibility and accountability to customers and broader stakeholders at large requires more active steps in ensuring community's safety and genuine belonging, particularly in international markets.
STRATEGIES & JUSTIFICATION
Airbnb is uniquely positioned to enhance her market positioning by developing key strategy areas in competitiveness, marketing and communication and growth areas.
For competitiveness, Airbnb has developed value added services meant to differentiate company's services compared to competitors. For example, by partnering with France's Aquarium de Paris on a competition allowing people to sleep in a bedroom surrounded by sharks (Gibbs, 2016), Airbnb is offering unparalleled accommodation experiences. In an industry defined most primarily by experience and in a business ecosystem increasingly shaped by peer interaction, Airbnb is apt to lead ahead by identifying similar, value-added experiences for more customer satisfaction. Notwithstanding company's intervention to shape customer's experience, an apparent inconsistency to company's promotion of peer-to-peer interaction, similar initiatives are apt to enhance, not interfere with, peer interaction as peers share experiences across company's marketing and communication channels.
For marketing and communication, Airbnb has developed corporate platform into what amounts to an integrated e-commerce, community marketplace and content provider platform (Fayer, 2013). Currently, Airbnb employs a set of marketing and communication tools to better engage community members including, most notably, Neighborhood Guides, Airbnb TV, aggressive use of social media for promotion and Airbnb Connections (Fayer). This marketing and communication strategy is well aligned to company's mission and goals of creating a community marketplace and community engagement respectively. However, Airbnb still needs to expand on her marketing and communication messages in order to embrace more diverse customer segments, particularly family and senior customer segments, segments captured more effectively by HomeAway. This can be implemented by organizing more offline events, developing more customized applications and communication messages, offering more personalized services and perks (e.g. family-friendly playrooms for younger families and more accommodating facilities for older ones) for specified customer segments.
For growth, Airbnb has secured a premium market share by developing, gradually, a refined referral program (Patel, 2015). By offering credit for peers referring new peers, Airbnb has managed to expand her market share only by selling more of her services. This is, in fact, an effective growth strategy but which, to remain sustainable, should be complemented by more aggressive and "interventionist" initiatives as noted above. Specifically, Airbnb should, in addition to offering credits, provide incentives to peers by expanding on partnerships aimed at enhancing peer experience. This can be implemented by offering rental spaces in locations most connected to peer day-to-day experiences. For example, by offering rental spaces for homecoming or reunion purposes, Airbnb can develop a business model designed, literally, around lasting life experiences instead of and/or in addition to short experiences during vacations or business. Needless to say, initiatives as such require extensive marketing and branding efforts across different communication channels.
REFLECTIONS ON CHANGE
The above mentioned strategies should not only enhance Airbnb's market positioning externally but also increase organizational effectiveness. As noted, implementing each strategy requires adopting specific actions in order for efforts to bear fruition. For current purposes, implementing mentioned actions should enhance organizational effectiveness by streamlining business processes into more integrated ones. This can be explained in further detail for each strategy area.
In competitiveness area, Airbnb managers can perform more effectively by externalizing business operations. That is, instead of managing internal business functions, as in conventional business models, Airbnb managers can expand on managerial roles by developing more strategic roles beyond Airbnb's organizational context and into broader ones in collaboration with strategic partners, as in Airbnb- Aquarium de Paris partnership. This expansion of conventional business processes has been shown to enhance organizational performance by incorporating new processes which only expands organizational knowledge repertoire and hence capabilities and agility.
In marketing and communication, developing new marketing initiatives and communication messages for broader customer segments should, if anything, contribute to organizational effectiveness by expanding on brand meaning. That is, by embracing new customer segments – a process involving different marketing and communication strategies – Airbnb brand meaning is further expanded and, accordingly, should mean more for broader peer base. From an organizational perspective, expanding brand meaning expands existing skills and capabilities in order to perform functions different from "conventional" ones and hence effectiveness.
In growth area, by reinventing life experiences for peers, Airbnb managers are put under more pressure in order to streamline business functions for more innovative purposes. By shaping peer experiences in much personalized ways compared to broad personalizations usually offered to customer segments en masse, Airbnb managers can learn how to put organizational resources into most optimum use for most personalized experiences and hence effectiveness of enterprise resource planning and use.
CONCLUSION
Airbnb represents a disruptive hospitality business model. By offering peer-to-peer accommodation services, Airbnb differentiates her brand from conventional hospitality companies. Typically, Airbnb has promising strengths of minimal cost peer-to-peer marketing and branding efforts as well as sustainable ROIs in medium and long range. Internally, Airbnb adopts a community engagement strategy which delegates main business functions as marketing to peers and hence community direct involvement in company's business activities. On flipside, Airbnb is vulnerable to losing control over community activities should she fail to manage community activities properly.
Three strategy areas stand out as most important in current practice: (1) competitiveness, (2) marketing and communication and (3) growth. By launching innovative initiatives enabled by unique business partnerships, Airbnb enhance her market positioning by differentiating her services from competitors. By refining her marketing efforts and communication messages, Airbnb expands on her current customer base. By incentivizing peers to participate in company's platform and reinventing accommodation experience, Airbnb reshapes her business model in more effective ways as to better serve more peer base.
There are, of course, bright as well as dark spots well ahead of Airbnb's journey. On bright side, Airbnb is situated in middle of an accommodation revolution. In changing accommodation as well as ownership patterns, Airbnb is set to define how people choose to experience conventional day-to-day activities in unprecedented ways, all mediated by web-based platforms and applications. Consistent to company's strategic goal of being an integrated hub, Airbnb is projected to set future patterns of not only accommodation but also broader life experiences. On dark side, Airbnb can experience brand dilution not effectively managing expansion into different markets and service portfolios. If anything, Airbnb can degenerate from a promising hub for well optimized and integrated accommodation services into a "clutter" of poorly managed community members and service portfolios. The future of hospitality remains an in-progress project defined most primarily by peers in an economy based increasingly on knowledge and added-value services created not by corporate design but by peers and for peers. The evolution of Airbnb also remains to be seen. If anything, Airbnb has started off as a limited space sharing service between peers in specific urban locations only to expand into a global brand which, as noted, if not well managed during current heated expansion phase could end up being diluted into a brand no customer base can relate to and hence demise. In balance, Airbnb's evolution should adapt to an industry no longer defined by preset corporate rules but by peers whose lifestyle is no longer defined by local standards but by global influences.
REFERENCES
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