Airbnb is an American company that offers online marketplace and hospitality services for locals and visitors to lease or rent the lodgings; including hotel rooms, apartments, and holiday cottages, among others. The business does not operate any form of real estate or tourism but acts as a broker. It links the customers to the appropriate services in the respective sectors, thus receiving a certain percentage as payment from the clients (Ardian and Syairudin 2018, p.154). The operation of Airbnb is a manifestation of what the disruption can do in the travel industry.
Porter’sfive forces is a tool that is used for analyzing the nature of the competition in the market. It drives the organizations to draw the attractiveness from an array of similar businesses. According to Ikeda (2013, p.436), he noted that factors that are close to the industry (microenvironment) have high impacts on the performance of the company. Regular reassessment of the market allows the management to determine what to offer, different from the companies that operate in the same area. Airbnb functionsin different regions, which exposesit to the various legal implications from different nations.
Threats of entering the new markets have dominated the current form of doing business. Since the company operates online, adaptation to some of the countries such as developing states is a challenge. The costs associated with compliance are high, which limits its capability to expand. Additionally, an adopting to the varied cultures is difficult to achieve, due to lack of physical presence (Hong and Lee 2018, p.85). The services are provided through internet, which eliminate human interactions. Some tastes and preferences can only be identified by interacting with customers directly. This is one of the areas that Airbnb is losing, regarding understanding the consumers’ habits.
Threats of the substitutesneed much consideration for the Airbnb to excel in the sophisticated hospitality sector. Although the company has continually enjoyed the monopoly of services, others such as eBay, Orbitz, and local hotels are slowly adopting new technology in attending their clients. This is a potential threat to the sustenance of the company if an internal disruption in the way of operation is not efficiently conducted. However, there is no substitute for what Airbnb offers. Additionally, the bargaining power of suppliers is limited. Once the companies are listed in the portal, they lose the absolute authority in controlling the prices and the number of visitors they receive. This has a negative side in the sense that the owners of the facilities could decide to look for an alternative such as linking to the customers directly (Lee and Kim 2017, p.43).
Moreover, the bargaining power of buyers is curtailed. Requesting for the assistance of Airbnb in locating a place to stay is dependent on what is available. They might present the guest with the option that does not match the desired quality. According to Phua (2018, p.4), the role of online businesses is perceived as manipulative because they tweak the psychology of the customers to portray the high-quality services, which might not be necessarily true. The assertion aligns with the intermediaries like Airbnb, who uses all available marketing DNAs, to signal appropriateness of a particular facility. The statistics show that Airbnb has facilitated more than 260 million check-ins, and has listings of over four million in more than 191 countries (Reinhold and Dolnicar 2017, p.89).
Airbnb is competing with large companies such as Google, Orbitz, and other local hotels. It has been able to leverage on comprehensive data, and it’s not limited to the increased variable costs. Based on their knowledge of the market, it’s easy to track preferences and habits of the customers, thus recommend ways to improve the services (Jaremen and Nawrocka 2017, p.290). Again, they invent new suggestions to impress the guests, as opposed to the local hotels that offer homogenous experiences.
What makes Airbnb standout is not the cost reduction due to use of modern technologies, butthe integration of C2C (customer to customer)services (Hong and Lee 2018, p.85). Traditionally, the travel industry was dominated by B2C (business to customer), where communication was only limited to the supplier of services and recipient. The new transition has enabled the customers to exchange the views regarding a particular hotel, apartment, or their general opinions regarding the company. The strategy has won Airbnb much trust and loyalty among the new and past customers. Ikeda (2013, p.436) affirms that the company charges the listing companies 3% and an additional 6% for the guests who subscribe to reside there. The strategy earned the business total revenue of $1billion in the year 2017.
External Analysis
Airbnb is a unique service provider, which has distinguished itself by providing the accommodation needs of the customers, without meeting them physically. The operations of the business have been affected by the external environment forces that either increase or lower the return. Political factors play a significant role in a multinational company, such as Airbnb. The company has run into legal issues, due to the differing state housing policies. In some nations, the owner of the apartment is supposed to reside in the same compound, where the short time guests stay. Airbnb has faced hefty fines in Barcelona and New York, for failing to comply with the tourism laws (Abdar et al. 2017, p.87). Lack of understanding of the drivingrequirements might predispose the business to unnecessary fees.
The business has created what is termed as a shared economy. It’s a trend that is growing, where the resources are distributed among the corporations and the individuals. By providing cheaper rentals to the guests, the company has attracted more tourists and creating jobs to the host countries. According to Phua (2018, p.4), Airbnb has exponentially grown, connecting more than nine million people. Subsequently, the income generated through hospitality has significantly contributed to the GDP of various nations. For example, in the year 2017, New York received more than $600 million from the hospitality sector and created an estimate of 4000 jobs (Carton 2017, p.178).
Airbnb relies on a social connection to register high number of customers. Through the use of modern social Media, it has been able to expand through the word of mouth. It provides a platform where the guests can share their experiences. Furthermore, the hosts can discuss the activities of tenants, and identify the areas that would need improvements. Far and above, the company has slowly invested in modern technology (Ardian and Syairudin 2018, p.170). Room bookingis made through an app or website. The automation is also used to connect to the host. In case the owner of the facility fails to respond, Airbnb takes the initiative to message the customer. The entire process is seamless and gives the guest little complication while filling the details and receiving a response.
Legal factors also are well addressed on the company’s website. To mitigate conflicts with tourism and housing jurisdictions, the hosts are mandated to comply with all rules listed on the portal. The providers agree to terms and regulation, including but not limited to the taxation and tourism regulations. Airbnb is increasingly taking into consideration the environmental factors. Research conducted by Phua (2018, p.3) indicated that the company had reduced energy usage in America and Europe, compared to the local hotels. It has contributed to lowering of greenhouse gases, a decrease in consumption of water and heightened environmental awareness.
SWOT Analysis of Airbnb
| Strengths The company utilisesrobust advertising tools, such as current social Medias to reach out to the customers. It has placed its brand on the high end, by linking customers to the service providers in the hospitality industry.Airbnb provides insurance to the guests. The surety eliminates the doubts of their security in new places. This has encouraged the influx of tourists from different geographic regions.The company’s website is user-friendly. It enables the users to choose where they want to stay, and also discuss directly with the agent.Airbnb has an established brand which has dominated the market. The uniqueness is contributed by quick, responsive services and a high portfolio of lodgings in different regions. | Weaknesses The image of the company is at stake because if the host decides to do anything wrong, the brand is negatively affected. It is difficult to controla high number of different companies from a common platform.The rapid expansion of Airbnb might violate tourism laws in the countries of operation. This could resultin fines.Similar businesses are emerging, which poses a threat to the dominance of the Airbnb. It would lower the customer base.The cost of maintaining the security of data is high. This could be the next big issue since the company deals with a myriad of customers. |
| Opportunities Airbnb should explore other areas of investments, other than concentrating on rentals. The customers’ tastes are changing as the time goes. There is need to expand geographic territories, and cover rural areas, which are less cateredfor.The company can participate in corporate social responsibility, through offering rentals during the time of crisis.Collaborating with tourism industry would significantly move the business ahead. | Threats New competitors are entering the industry, which threatens the growth of Airbnb. Some companies with C2C platforms such as Amazon, eBay among others are possible entrants which could lower the profitability.Illegal listing of the suppliers might taint the brand image of the company. Airbnb does not control the management of suppliers. The misbehaviorof any, impact the performance of negatively.Changing tourism laws in different countries might hinder growth of the company in some countries, especially the developed states. |
Application Blue Ocean Strategy
Carton (2017, p.178) opines that competition is not the only solution to remain ahead of the rivals in the market. In his argument, businesses need to go beyond the usual comparison with others and tap the new opportunities in other countries. Blue ocean strategy is a unique method that advocates for venturing into untapped ripe markets that portray potential for growth. Airbnb has continually expanded in different locations, and mostly in developed nations. This is because it does not require physical presence, but allows the hosts to place their services in the portal. There is a vast potential market that is untapped in developing states such as India, China and others. They have high population,and tourism activities are improving significantly. The locations are also becoming points of international attractions, hence the need to make foreigners aware of the available sceneries.
The blue ocean strategy functions contrary to what an array of businesses adopt. Instead of focusing on competitors and current customers, the market should direct the interest on potential customers (Hong and Lee 2018, p.83). One way to adopt this strategy in Airbnb is to offer the services that are beyond rentals. The current customers need more improved services. For example, instead of just connecting the guests to the places of accommodation, they could offer tourism consultancy. Furthermore, reduction of the prices while maintaining the quality standards would assist in covering more markets and increase the revenue.
References
Abdar, M., Lai, K., and Yen, N. Y. (2017). Crowd Preference Mining and Analysis Based on Regional Characteristics on Airbnb. 2017 3rd IEEE International Conference on Cybernetics (CYBCONF), 78-90.
Ardian, S., and Syairudin, B. (2018). Development strategy of the culinarybusiness is employing the Blue Ocean Strategy (BOS). IPTEK Journal of Proceedings Series, 0(3), 153-178.
Carton, G. (2017). A Blue Ocean Strategy for “Blue Ocean Strategy”: on Performativity of Strategic Management. Academy of Management Proceedings, 2017(1), 176-198.
Hong, S., and Lee, S. (2018). Adaptive governance, status quo bias, and political competition: Why the sharing economy is welcome in some cities but not in others. Government Information Quarterly.56-89.
Hajibaba, H., and Dolnicar, S. (2017). Airbnb and its Competitors. Peer-to-Peer Accommodation Networks.78-120.
Ikeda, M. (2013).Towards a sustainable world through positive feedback loops between critical issues. Designing our Future, 433-438.
Jaremen, D., and Nawrocka, E. (2017).Airbnb Competitiveness in the Hospitality Market Sector. PraceNaukoweUniwersytetuEkonomicznego we Wrocławiu, (473), 286-296.
Lee, S., and Kim, D. (2017).The brand personality of Airbnb: application of user involvement and gender differences. Journal of Travel & Tourism Marketing, 35(1), 32-45.
Phua, V. C. (2018). Perceiving Airbnb as sharing economy: the issue of trust in using Airbnb. Current Issues in Tourism, 1-5.
Reinhold, S. C.,and Dolnicar, S. (2017). How Airbnb Creates Value. Peer-to-Peer Accommodation Networks, 78-90.
