Business Model Report

Mini-Project: AirBnB

Class Code: L42     

Members: Ho Mun Yee Hilda (Student Number: 10169328)

               Loke Qi Hui [Elayne] (Student Number: 10170853)  

               Vanessa Lim Yurong (Student Number: 10164774)

Email: myhho001@mymail.sim.edu.sg

          qhloke001@mymail.sim.edu.sg

  vylim001@mymail.sim.edu.sg

Background Information On AirBnB

• It is a online marketplace and hospitality service, allowing people to rent short-term lodging
• AirBnB acts as a broker and does not own any lodging
• Founded in 2007, based in San Francisco, California
• It has over 3,000,000 lodging listings in 191 countries

Whether an apartment for a night, a castle for a week, or a villa for a month, Airbnb connects people to unique travel experiences, at any price point, in more than 65,000 cities and 191 countries. And with world-class customer service and a growing community of users, Airbnb is the easiest way for people to monetise their extra space and showcase it to an audience of millions.

• Business Objectives: Help create a world where you can belong anywhere

Business Model

A summary of how a company will generate a profit identifying its core product or service value proposition, target customers in different markets, position in the competitive online marketplace or value chain and its projections for revenue and cost. A company may have more than one e-business model for different target customers and products.

Key Elements:

Value proposition

• Low cost, reliability, user-friendly, easy to compare different information which allows for better decision-making by users, efficiency and ease in booking on the website, density of information

Revenue models

(a) Commission (C2C)

Airbnb receives commissions from two sources upon every booking, namely from the hosts and guests. For every booking Airbnb charges the guest 6-12% of the booking fee.

(b) Transaction fee

Airbnb charges the host 3% for every successful transaction.

Market opportunity

> Report released by Ted Rogers School of Management at Ryerson University explains that 61% of tourists chose Airbnb as a substitute over budget - mid range hotel.

> Airbnb currently has more than 3 million homes listed worldwide, connecting more than 200 million guests to unique travel experiences, at any price point, in more than 65,000 cities and 191 countries

Competitive environment

1. Major competitors: Other than hotels, similar websites such as tripping, flipkey and HomeAway are major competitors of Airbnb
2. To stay competitive, Airbnb collaborated with WeWork recently to attract young professionals to book a rental instead of a hotel room

Competitive advantage

1. Able to offer the same services at a lower price as compared to hotels. As Airbnb only facilitates the exchange of services between the hosts and the guests, they are able to cut costs on maintenance of the lodging while offering the same services. Hence, they are able to have a competitive advantage

  2.  Closer connection to target audience/market. 

Understand customers better. Personal connection due to hosts.

Marketing strategy

>Building communities

Airbnb has built their community by creating trust between users. They encourage regular communication, detailed profiles and strong reviews. Thus with the authenticity of the experience, Airbnb is made a successful community.

>Use of influencers

Airbnb invites journalists, bloggers, YouTubers, podcasters and Instagram stars to your events. This helps to attract more page hits, new users, and social impressions which creates an awareness of the brand.

>Spreading of information through their news website, https://www.airbnbcitizen.com/ .

>Brand partnerships

Some successful Airbnb partnerships include KLM airline, Waterstones bookshop and even the French government.

>Increase revenue by recommending nearby restaurants, tourists sites, etc

Management team

Airbnb focuses alot on community thus hosts are considered part of the management as well. This gives them more authority hence they are motivated to provide quality services to their customers. As such despite them being the consumer, they are considered part of the management hierarchy which makes the Airbnb business model an unique one.

Impacts of AirBnb

Economically

• Contribute to economic growth (New York, America: Generated $623 million in spending)
• Generate more jobs which increase employment rate (Paris, France: Supported 1,100 jobs)

Businesses

• Affects the hotel industries due to more competitors
• Might be disruptive to the neighbourhood

Individual

• Allow individuals to have a diverse variety of information to choose from
• Able to have a more immersive experience in the country, increasing travelling satisfaction

Disruption

• The entrance of AirBnB and other similar companies have disrupted the market for short-term lodging all around the world. While it has brought about many benefits as seen above, it has also greatly disrupted the market in many ways Ø The drastic fall in profits in hotels as they are no longer able to price-gouge due to the low prices that AirBnB offer

• As hotels enjoy record success, many hotel leaders and executives have grown concerned that Airbnb and the popularity of home sharing will limit their ability to earn even more money by price gouging in the future. While some analysts disagree on whether Airbnb has already limited the hotel industry’s ability to price-gouge, it is clear that hotel executives are concerned about losing the chance to raise prices to stratospheric heights.

• Airbnb vs. Hotel Prices in Houston during 4 Major Events, 7 Major Cities on New Year’s Eve
  In a dynamic economy, supply and demand forces will impact the price of a hotel room or an Airbnb listing. Some fluctuation is natural and appropriate. But for too long, hotels have had nearly unchecked power to raise rates and price gouge consumers at will. While more research into this matter is necessary, it is clear that Airbnb has given consumers more affordable accommodation options and left hotel industry officials deeply concerned about their ability to price gouge consumers in the years ahead.Airbnb and home sharing already offer an affordable option to consumers looking for a place to stay during big events and over popular weekends and holidays.

Solution in Japan: Limit total stays to 180 nights a year

Reference: 

https://www.airbnbcitizen.com/airbnb-fighting-hotel-price-gouging-saving-millions-consumers/

https://www.bloomberg.com/news/articles/2017-06-09/airbnb-gets-green-light-in-japan-with-home-sharing-law-s-passage

http://www.airbnb.com