AIRBNB BUSINESS MODEL

AIRBNB: Business Model Development and Future Challenges

The CASE
• In 2007, the founders of Airbnb were looking to solve a problem and ended up transforming their idea
into a $10 billion company

• What started as a quick website to advertise an overnight stay on their apartment airbeds eventually grew
into an online accommodation booking business that spanned the world

• Airbnb used its business model to carve out an extremely important space in an already crowded industry

• However, along with success came challenges in terms of the scalability of its business model

• In 2014, Airbnb was also facing legal challenges by state attorneys general that could make its business
model suspect. The founders had to decide whether to defend their business model in a court of law and
in the court of public opinion, or change it
Problems

• How to leverage Social Media better?

• Scaling model?

• Industry Landscape - Competitors

• Legal Issues
Competitors
• Over 500 imitator sites  future threats
• Some sites are backed by investors in EU market  then sell back to
original founders (Ebay, Groupon)
Copycats • Look and felt like Airn BnB, even copy listing from AirBnB
• Using deceptive marketing practice
• Expanding using substantial upfront capital

• Heavily funded sites

Competition • Owned by TrpAdvisor and focus on vacation rental
• Aimed at families and individuals
Vacation rental • Use fund to acquire other websites
• Strong-arm the competition then sell out

• Existing large sites: Hotels.com Travelocity

• Focus o and dominate hotel booking
One-Stop • Use capital to take over smaller sites to cater different segment and
Vacation Services price advantage (give awards if found cheaper price)
Competition and response to competition through
Stakeholder Management

• Competition from the peers (same and • Address customer and host concern
different geography) (24/7 support, liability guarantee,
feedbacks)
• Vacation rentals (HomeAway, VRBO, • Fostered engagement between
Flipkey, etc.) stakeholders (encouraging interactions
• Hotel aggregator sites (Hotels.com and between host and guest and Vayble)
Travelocity) • Fast, easy booking (website
improvement)
• Expose imitator sites: To gain customer
loyalty and feel like they part of Airbnb

Face competition with stakeholder’s involvement to get competitive advantage

Recent Legal Issues

• Unlike hotels and lodges, there is no defined set of laws for renting residential properties for less than 30 days

• This was hurting hotel business and government was loosing tax share on the business taken away by Airbnb

• This lead State of New York to issue a Subpoena

• This subpoena was made public and was received with strong voice of displeasure (similar to what Uber does)
Future Plans
• Infinite future opportunities in terms of allowing people to put-up
anything for rent –
• Boats
• Experiences
• Tailor made tours

• Missteps –
• Unofficially targeting competitor's source of Listing