Airbnb is an online platform for renting and listing local homes connecting travelers and hosts. It supports establishing a sharing economy by enabling property owners to find clients to rent their private flats. The company has grown to become the largest community-based and accommodation, provider. Today, the platform has more than 1,500,000 listings in at least 190 countries and 34,000 cities (Chen & Chang, 2018). It has made it possible for customers to make an online payment at their convenient place and time. This paper intends to use Osterwalders Business Model Canvas to explain the business model used by Airbnb Company, discuss the role does innovation, and how it can be improved.
Role of Innovation in the Business Model
The company has embraced modern internet technology to improve its daily activities and meet the rising demand in the market. It has applied disruptive innovation to alter the market preferences to favor its activities while giving a disadvantage to its competitors. One of the innovations that have enabled the company to attain massive growth is the development of an effective website allowing the host to list their cottages, apartments, and homes. The website offers room for the host to communicate with travelers and learn more about the provided services (Gibbs et al., 2018). It has enhanced immediately the competitiveness of the company since most of its competitors are unable to match its innovation. Modern internet technologies help Airbnb satisfy customer needs, achieve cost-saving and improve the local experience. Innovations on the cloud-based platform have enabled property owners to collect payments efficiently.
Value Proposition and Customer
The company makes it easy for travelers to learn about the available accommodation services in a given region and identify the ones satisfying their needs. Since the company offers services in many countries, travelers can find private spaces in many places they wish to travel (Chen & Chang, 2018). Moreover, the company keeps a record of the personal profiles, including reviewing system and rating information, helping travelers understand the provided services and details about the host.
Value Formation and Core Activities
The company serves as a transaction facilitator by connected hosts and travelers interested in finding quality and comfortable accommodation at their expected prices. It has gained trust and confidence from travelers offering effective review and rating systems (Gibbs et al., 2018). Many service providers enjoy the companys host protection insurance since it eliminates the involved risks. User reviews and profiles have earned the company gain great reputation in the market and enabling it to attract many customers.
Revenue Model
The company earns a commission from both travelers and hosts for every booking made. The host must pay 3% of the booking cost for a successful transaction, while customers pay between 6 and 12% of the charged fee. Since the company makes many transactions in a day, it is earning massive returns and likely to grow further in the future (Chen & Chang, 2018). By charging a low cost to the host, the company encourages many accommodation owners to use its platform when sourcing for clients.
Key Partners
The company distinguishes key partners who are crucial to its success and the platform. The accommodation owners are some of the key partners to the business, including the super hosts. They are considered the company suppliers who offer the services desired by the travelers. Hosts provide the value proposition that satisfies the demand or the needs of guests (Gibbs et al., 2018). They bring their services and property to offer variety and mass supply of choice that is necessary for the customer value proposition.
Tourism partners and communities form other key partners to the business since they direct their clients to the platform for easy access to accommodation. Travel companies usually partner with communities around and tourism bodies to give visitors the best experience and enhance demand. Airbnb is determined to partner with under-represented groups and communities to improve their positions (Nathan, 2020). The company understands that interacting positively with every group can play a great role in its growth.
Technology firms are other companies that Airbnb is partnering with to enhance its relevance in the market and innovation. This is enabling the company to keep on improving its services and become more competitive in its operation. These firms are supporting Airbnb through enhancing innovation and technological advancement. Some of these partners include additional/preferred software partners such as technological providers (Gibbs et al., 2018). They provide inventory, travel inventory tasks, and support the management of bookings, among other services. Partnering with these firms enables the company to use technology to understand the best pricing strategy and check the availability of accommodation spaces. Moreover, the company works together with payment and map platforms, identification, and cloud storage (Nathan, 2020). Other key partners include associates, travel partners, investors, venture capitalists, and commercial partners.
Key Activities
Airbnb is involved in three key activities, namely improving the existing value propositions as well as establishing new ones, operational consistency and excellence, and continued host expansion. The company is determined to maintain its gradual growth using the innovation adoption trajectory. Most of the companys activities can be grouped into transaction/post transaction costs, reductions of search, and promoting network effects while lowering negative implications (Nathan, 2020). All the company activities are focused on improving its services to customers and subsequent returns on investment.
Developing new and improving the existing value propositions has enabled the company to remain competitive in the market. It has engaged in many activities to achieve its dreams, such as adding new offering tiers with Luxe and Airbnb Plus. The eruption of the COVID-19 saw the company develop a product that aligned with the emerging demand. It grew and introduced an online experience for an incredible 14 days, and the feedback is positive (Gibbs et al., 2018). Moreover, the company is working with owners and property developers to include multi-home complexes in their system to extend its business to another level. Airbnb is determined to embrace innovation to improve its capabilities and offer better services in the future.
Customer Segment
The company applies innovative strategies to segment both sides: the host and guests. It uses micro and market segmentation based on the purpose such as business growth, development of a new product, and marketing. Airbnb may consider segmenting its guests depending on behavioral, geo-demographic, interest, and motivation. Behavioral segmentation considers the rental type, including the private room, shared space, and entire apartment/home (Gibbs et al., 2018). Trip type considers factors such as backpacking, visiting friends, and leisure travel. The behavioral segment may also cover accompanying guests such as kids, spouses, and parents. The interest of the guests and their activities helps the company determine the nature of services and spaces that customers would like to rent out.
Finding Customers
Customers enable the company to earn revenue and remain in business by either paying the accommodation service or providing spaces. The company uses innovative strategies to find both travelers and hosts, including word of mouth, social media, affiliate models, promotional offers, and digital marketing. It is determined to use emerging technology to reach out to as many customers as possible. Airbnb uses diverse social media platforms such as Facebook and Twitter to attract customers and offer as much information as possible (Gibbs et al., 2018). Marketing its services through social media has enabled the company to maintain and develop steady growth. The company uses innovative strategies to improve its image, reputation, and popularity around the globe to remain the most preferred by travelers.
Improving Innovation
Airbnb should make more effort to improve its innovation to offer better services and meet the rising demand. This should focus on eliminating issues affecting customers or hindering them from using the platform. The company should consider developing keyless access to the paid spaces to eliminate the hassle of handing over the keys to the travelers when they arrive and collecting when leaving. This implies that the company should invest in scanning technology or the use of codes to enable the guest convenient access. Moreover, the company should invest in the improvement of customer stickiness and business traveler acquisition.
In conclusion, innovation has enabled the business to maintain a steady flow of customers and achieve consistent growth. Its effective systems create room for owners to list their spaces and gain returns from renting their spaces and travelers to find a comfortable, affordable, and convenient space away from home. Its effective strategies in the marketing process and provision of quality services have seen the company grow to become the largest community-based platform. To achieve its objectives, the company has adopted innovative business models that encourage customers to keep on coming. Understanding the market and applying an effective business model has enabled the company to invest in more than 190 countries. It is determined to boost its daily transactions and attract more customers to remain ahead of its competitors. Creating convenience for both the travelers and host has won the company customers trust and confidence.
References
Chen, C. C., & Chang, Y. C. (2018). What drives purchase intention on Airbnb? Perspectives of consumer reviews, information quality, and media richness. Telematics and Informatics, 35(5), 1512-1523. Web.
Gibbs, C., Guttentag, D., Gretzel, U., Morton, J., & Goodwill, A. (2018). Pricing in the sharing economy: A hedonic pricing model applied to Airbnb listings. Journal of Travel & Tourism Marketing, 35(1), 46-56. Web.
Nathan, R. J., Victor, V., Tan, M., & Fekete-Farkas, M. (2020). Tourists use of Airbnb app for visiting a historical city. Information Technology & Tourism, 22(2), 217-242. Web.
Developing efficient marketing strategies is vital for a companys success. Airbnb is a vivid example of a company that required reconsideration of its strategic marketing in order to revitalize the brand. This paper will present a brief summary of the essential marketing strategy issues of the Airbnb case, which are relevant to this day, as well as some contemporary issues. What is more, three recommendations concerning solving these issues will be provided.
Main body
One of the first and most significant issues concerning Airbnb marketing strategies has always been intense competition. The rival companies are widespread not only in Spain but all over the world, ranging from international giants like Booking.com to private local rental properties. Overcoming such active competition presents an important challenge in the hospitality and tourism industry. Therefore, this area should be taken into consideration while developing a marketing strategy.
Another issue relating to Airbnb marketing strategies nowadays is attracting new categories of customers, apart from tourists. It is noted that Airbnb has been putting significant efforts to increase the appeal of the platform for those traveling on business (Carson, 2018). The focus of the company is on attracting high numbers of corporate travelers rather than some employees on occasional business trips.
Finally, one of the recent challenges Airbnb has to address is effectively dealing with negative publicity. This publicity mostly stems from the various safety issues encountered by the customers. The most frequent examples of safety violations that affect the Airbnb brand include the uncontrolled possibility of scams or last-minute cancellations on the part of hosts (Graham, 2018). All in all, these aspects present certain challenges and have to be handled carefully.
Revitalizing the Airbnb brand in Spain and other target markets requires a number of marketing strategies aimed at coping with the issues described above. First and foremost, to address the challenge of intense competition, it is recommended to expand Airbnb activities. It is crucial that the new services cover the gaps in rivals options, identified through thorough market research. Offering unique experiences is already a part of Airbnbs rebranding activities. However, these experiences can be expanded in partnerships with local companies.
The study of each city or area destined for further development would allow encountering a number of businesses offering various services, which are genuinely unique. Partnerships with these businesses would attract more visitors to the given destination. For instance, partnerships with local guides or agencies offering individually created adventure holidays could enhance the tourist flow to a particular area. Overall, such partnerships would facilitate travel arrangements for customers and increase the convenience of Airbnb services.
The second recommendation relates to Airbnbs current goal of increasing the number of business travelers. This can be done by developing a network of accommodations suitable for corporate events. In order to achieve this, different requirements have to be analyzed, and conditions have to be reconsidered to meet the business needs. Most importantly, the value of time for business travelers has to be taken into account. Firstly, the check-in time should be adapted to the needs of corporate travelers. What is more, any delays in key exchanges that frequently occur on the part of hosts are unacceptable in the business context. Therefore, the policy of collaborating with hosts has to be reassessed, and special conditions have to be incorporated for hosts dealing with corporate clients.
In addition, the accommodations intended for corporate use have to meet certain standards. For instance, such work-related essentials as Wi-Fi, stationery, desks, and printers, as well as a necessary number of power outlets, should be provided. Other important conditions are sufficient space and access to transportation or leisure activities. In general, creating a network of suitable accommodations adapted for business needs is a lengthy but essential process.
The third recommendation to revitalize the Airbnb brand involves improving the companys public image. In order to address the safety issues raised by a significant amount of customers complaints, Airbnb would have to enhance the safety regulation policies. This is one of the most important steps in image improvement. At the moment, the company does not offer any measures to prevent scams or last-minute cancellations by hosts, which is one of the main customers complaints.
This issue can be addressed by introducing a basic host checking procedure, including ID and address verification. It is crucial to verify both registered hosts and those who are new to the platform. These new policies require careful implementation, as the risk of decline in the number of hosts exists. Nevertheless, enhancing safety policies for clients is a necessary condition for preventing scams and improving Airbnbs public image.
Conclusion
To sum up, to revitalize the Airbnb brand, it is important to consider a number of marketing strategy issues. The recommendations, concerning Airbnb marketing, include handling the issue of intense competition by offering unique services to customers in partnership with local businesses. Also, it is crucial to adapt the accommodations and host collaboration policies to the needs of corporate clients, as well as improve safety regulation policies.
The global housing industry has been undergoing a crisis over the last few years. In some cities around the world, Airbnb is considered the biggest culprit for the decline of affordable housing. Airbnb offers short-term rentals for travelers and tourists. It provided a solution to the shortage of hotel rooms around large events. Nonetheless, despite its success, Airbnb has been faced with criticism over discrimination in some of its listings, lack of safety standards, and poor customer experiences. There are opportunities for the company to change its public image by focusing on its positive contributions to the industry. A PR campaign is essential for the company to enhance its reputation among customers. A five-year plan should enhance the perception of Airbnb and maintain its position in the global market.
Introduction
Airbnb is an American company that deals with short-term rentals and homestay experiences. The company recruits homeowners and landlords to offer their rooms for a limited time for tourists and other guests traveling worldwide. Airbnb is a broker and takes a commission from each booking (Barron et al., 2018). Founded in 2008, Airbnb aims to create a world where you can belong anywhere and where people can live in a place instead of just traveling to it. The company sought to address the issue of overbooked hotels, especially in areas with large events such as sports, political rallies, or corporate functions. Its core values are championing the mission, being a host, embracing adventure, and being a serial entrepreneur. Airbnb encourages hosts to facilitate an experience that gives customers a sense of belonging. The hosts, guests, and communities where Airbnb operates are all stakeholders in the company. Therefore, the organization must serve them well, alongside its employees and investors.
The company operates in a changing market that is constantly affected by different market forces. Airbnb has over 150 million users, 5.6 million listings, and more than half a billion guests annually in over 220 countries (Airbnb, 2022). Across the world, there are 100,000 cities with active Airbnb listings (Barker, 2022) The gross revenue for Airbnb was $48.9 billion in 2021, a 76.6% increase from $27.69 billion in 2020 (Airbnb, 2022). In 2020, Airbnb had an IPO, which determined its estimated value at $86.5 billion (Airbnb, 2022). The company is valued at around $110 billion, with a 20% market share in the vacation rental industry as of 2022 (Airbnb, 2022). The growth of Airbnb in the past decade has, however, not been short of controversy. Airbnb has been accused of contributing to the surging housing prices in cities such as Los Angeles and Seattle (Barker, 2022). Critics argue that short-term rentals are taking out permanent residences off the market. Further, there are accusations of racial discrimination against hosts and guests when determining their rental options (Barker, 2022). Therefore, the company needs to develop a strategy that helps it maintain market share while addressing the critical issues among its consumer base.
Airbnb PR Campaign
Objectives
Airbnb should embark on a five-year term to revamp its public image. First, it should focus on the essential issue of host and renter relations. There have been incidences of strained relationships with guests due to theft, terrible customer experiences, and discrimination. Airbnb is built on the principle of customer engagement and the reputability of its listings. The organization should hence embark on a program to promote safety and assure customer comfort. To address the problem of discrimination, Airbnb must cultivate trust with minority groups. This is possible through the promotion of diversity in its hiring policies (Barker, 2022). Further, hosts and guests should be encouraged to engage and interact with each other adequately beforehand to develop good relationships. Airbnb can broadcast the positive stories from its most loyal customers to change its unfavorable perception in public. Therefore, the main objective of the PR campaign is to enhance the image of the business among its key stakeholders.
PR Campaign
Social media offers an excellent platform for Airbnb to influence its image. The company can contact its most loyal and profitable hosts and collaborate with them in developing a diversity campaign. Airbnb hosts and guests worldwide will be encouraged to share their experiences through social media posts (Barron et al., 2018). This will change the perception of discrimination among its user base. Positive reactions should be the focal point of Airbnbs advertisement campaigns and the pursuit of a larger market share. Further, Airbnb can liaise with hosts from minority communities and engage with them on how best to boost their positive ratings and visibility on the website. The company leaders should incorporate diversity and inclusion into its mission statement and values. An Airbnb is for everyone ad campaign should help alleviate some of the stereotypes and negative perceptions of hosts and guests using the website. The advertisement should focus on creating a positive perception of the company, which can help enhance its revenues.
Airbnb should appeal to lawmakers and the public regarding the positive impacts of its services. In recent years, affordable housing has evolved into a critical issue in many urban centers worldwide. Airbnb is at the center of this storm in several US cities, giving the organization a negative image. It is important to shift the companys opinion by focusing on its impact on individuals and distancing itself from association with lobbyists and corporations. Airbnb should concentrate on the personal stories of hosts and guests to appeal to lawmakers regarding their impact on the industry. Most importantly, the message should be that Airbnb is providing real solutions to a real problem impacting travelers across the world (Barron et al., 2018). It is vital to prove that Airbnb has positively impacted vacationers and improved the travel experience. This should be the selling point of their appeal to lawmakers and groups focused on legislation to regulate the temporary housing industry. The public relations department can motivate users of Airbnb to post images of their stay and provide information on the impact on their overall experience.
Airbnb has been a great boost to the tourism industry in many areas. A wider variety of affordable and available holiday listings has significantly benefited local economies (Barron et al., 2018). The Airbnb campaign should shed light on these benefits while debunking the claims of their negative effect on affordable housing. The company should provide compelling statistical evidence to prove that its impact on local house prices is less significant than portrayed in the media. Moreover, Airbnb should strive to show that the gains from tourism outweigh the potential losses caused by the potential shortage of permanent rentals. The organization might seek lawmakers attention to establish a compromise on temporary housing laws. For example, Airbnb can include limits on the number of days in a month that a renter can list a property on the website. Further, the prices of listings should be tailored to a specific range that reflects the accurate market value of housing. The organization should conduct extensive research on house prices across the world and identify the most appropriate price range for each region (Barron et al., 2018). Airbnb should focus on its global impact on travelers and the possible consequences of issuing strict bans on short-term rentals. Ending the wrangles between the company, legislators, and homeowners will create a stronger foundation for the PR campaign to succeed. Positive stories from renters will create an emotional appeal that will turn the opinion of legislators in Airbnbs favor.
Airbnb should incorporate a submission section where travelers can post their images, videos, and stories of their experiences across the globe. The messages should highlight the positive impact across multiple cities and how it has impacted the lives of local communities. Airbnb can also hire travelers whose sole responsibility is to spread positive PR for the company. It should focus on travelers with a significant social media following so that the message can reach as many people as possible (Barron et al., 2018). Additionally, Airbnb should increase engagement across its social media platforms as a way to improve its public perception. A positive social media campaign can serve to shift the opinions of lobbyists and lawmakers, especially in the US. A comprehensive social media program should indicate that Airbnb is aware of its current issues and provide an outline of the solutions and their proposed implementation timeline. The company can also work with influencers to change the way customers and other stakeholders view the business. The influencers can work together with travelers to highlight important issues that potential clients should view.
Conclusion
Airbnb has grown significantly over the last decade and provided real solutions for travelers worldwide. Its impact on the industry has been felt in various sectors of the economy, mainly tourism and housing. The issues facing the company currently have real solutions that can be implemented quickly and efficiently with the cooperation of all stakeholders. Airbnb strives to be a customer-friendly organization that curates a good holiday experience for everyone, everywhere. Therefore, it should shed light on its positive contributions to society and offer a framework to address its most pertinent issues.
In the present day, Airbnb may be regarded as the most popular online marketplace that connects travelers and homeowners from all over the world. On its platform, it provides an opportunity to rent and rent out private homes, apartments, and rooms. Although the company experiences continuous growth and development being chosen by millions of individuals across the globe on a daily basis, it is essential to provide its external and internal analysis in order to update its core strategies when necessary and keep its positions.
The external analysis within the framework of the five forces model allows defining main competitive forces that exist in a particular industry. Although Airbnb is closely connected with lodging, it belongs to the online rental industry providing accommodation-rental services on the basis of existing offers. In turn, five forces that contribute to the competition and create the markets competitive pressures include competition from rival sellers, potential new entrants, and substitute products along with supplier and customer bargaining power (Thompson et al., 2021). All in all, it is possible to say that there is a high competition between rivals in the online rental industry there are several major companies in the market, including Airbnb, Booking.com, Wimdu, Vrbo, TripAdvisor, GlampingHub, Agoda, Expedia, HomeAway and multiple local and niche players.
Due to a low differentiation, all of them offer relatively similar products and services that may be easily substituted. In addition, the market is open for new entrants and with competitive advantages, they may replace even highly successful companies. That is why, rivals that already operates in the market undertake all efforts to improve their marketing strategies gaining competitive advantages and attracting customers through affordable prices, unique and exclusive offers, the higher quality of services, new opportunities, and multiple other features for comfortable use. At the same time, while there are no suppliers as both homeowners and guests may be regarded as platforms users and customers, their bargaining power are considered by companies. As travelers want affordable prices, comfortable conditions of rent, and support from the company while homeowners require warranties for their property, they are constantly looking for platforms that will be able to satisfy their needs to the fullest extent.
In a highly competitive environment, for any company, it is essential to define its main strengths, weaknesses, opportunities, and threats. In this case, SWOT analysis may be regarded as the most suitable tool for the assessment of these categories (Thompson et al., 2021). Thus, for Airbnb, it will be the following:
Strengths:
Airbnb is a globally-recognized and well-established international company that operates all over the world in different locations;
It offers a unique community that connects hosts and visitors, allowing them to interact;
Airbnb provides a well-developed web platform with a variety of features for a safe and enjoyable rent, such as scheduling, community assistance, pricing tips, host security measures, integrated payments, customer reviews, and more;
It may be regarded as an alternative to the cost-inefficient booking of hotels.
Weaknesses:
Airbnb is frequently criticized for high prices of accommodation;
It faces the violation of housing regulations and laws;
The company cannot guarantee the absence of disreputable hosts and guests who, in turn, impact its reputation as well;
Opportunities:
Airbnb may expand its products by offering car rentals or tour packages;
It may invite celebrities who will be able to attract millions of new customers by offering their accommodation for rent;
Airbnb should develop its mobile application including new features and functions.
Threats:
Airbnb has a business model that may be easily copied by rivals and new entrants;
The continuous involvement in housing law violation may destroy the companys reputation;
Airbnbs services are highly vulnerable to global events, such as pandemics and economic crises, that may limit travelling and lodging.
Reference
Thompson, A., Peteraf, M., Gamble, J., & Strickland, A. (2021). Crafting & executing strategy: The quest for competitive advantage: Concepts and cases (23rd ed.). McGraw-Hill Higher Education.
The growth of multifaceted technology platforms has revolutionised how people do business (Turban et al. 2017). For example, technology-aided sharing platforms such as Airbnb and Uber have allowed people to exploit underutilised assets by making transportation and hospitality businesses more efficient. Their contribution could be largely summed as developments in the “sharing economy” (Meyer 2016; Zhu 2013). Although these innovative additions to the global economy are largely commendable and impressive, their impacts on the global economy are best analysed through a segmented framework.
In the hospitality industry, Airbnb has had the greatest disruption on the traditional mode of doing business. The business is a virtual service that allows people to list their homes for short-term lease in the same way hotels do. The business thrives on the basis that it gives homeowners a platform to get extra income by renting out a portion of their houses or apartments (Tranton 2016). At the same time, customers benefit from having “a home experience away from home” because unlike the conventional hotel business, most listings on the Airbnb platform are actual homes.
Since Airbnb was founded in 2008, more than 30 million people have used its services (Fauvel 2017). This type of accommodation model has dramatically changed how people conduct business in the hospitality industry because it offers a substitute for the traditional hotel business where people check into a standard hotel room and order room service or eat at designated points (Kroft & Pope 2014). The challenge posed by Airbnb to the hotel business is partly explained by the fact that many people have enthusiastically adopted the service on a peer-to-peer platform that has allowed the hospitality industry to scale exponentially and in a seamless manner (Tranton 2016). The array of goods and products available on the Airbnb platform has also increased the variety of available accommodation products. The success of Airbnb can be seen through recent market valuations, which have shown that the business is worth more than $10 billion (Meyer 2016). This figure means that the company is now worth more than traditional and established hotel brands such as Hyatt (Meyer 2016). Despite this interesting dynamic in business valuation, many traditional hotel brands continue to downplay the impact of Airbnb on their businesses. This paper proposes a study to evaluate the development of Airbnb in London and quantify its impact on the city’s hospitality industry.
Research Problem
Although many hotels are aware of the possible impact of Airbnb on their businesses, few can quantify their effects or accurately predict how the virtual business influences specific aspects of their operations (Kozak & Kozak 2016). Furthermore, many of them are unaware of the extent that their businesses are affected by the growth and development of Airbnb. The problem is further compounded by the skewed distribution of the impact of Airbnb on different cities around the world because each market has unique dynamics that would moderate the influence of the California-based company on their businesses. The presence of these dynamics in the industry means that most hotels are blind to the effects of Airbnb on their operations. Additionally, those that are aware of its possible impacts cannot quantify the same (Ivanov 2014). The proposed study would provide a contextualised analysis of the impact of Airbnb operations in the London hospitality market.
Research Aim
To investigate the development of Airbnb and its impact on the London hospitality industry
Research Objectives
To investigate how Airbnb operations have affected the occupancy rates of London-based hotels
To investigate the effects of Airbnb operations on the prices charged by London-based hotels
To examine the development of Airbnb operations and its effects on hotel revenues in London
Research Questions
How have Airbnb operations affected the occupancy rates of London-based hotels?
What is the effect of Airbnb operations on the prices charged by London-based hotels?
Has the development of Airbnb operations affected hotel revenue in London?
Hypotheses
H1: Airbnb operations have caused a decline in the occupancy rates of London-based hotels
Ho: Airbnb operations have had no effect on occupancy rates of London-based hotels
H2: Airbnb operations have caused a decline in the cost of accommodation in London-based hotels
Ho: Airbnb operations have had no effect on the cost of accommodation in London-based hotels
H3: The development of Airbnb operations has affected hotel revenue in London
Ho: The development of Airbnb operations has had no effect on the revenues of London-based hotels
Purpose of Study
Airbnb is a direct threat to the traditional hotel business model because it has changed the dynamics of how people seek accommodation. Instead of using customer-to-business models to book rooms, Airbnb promotes individual-to-individual accommodation arrangements (Wood 2013; Turban et al. 2017). Therefore, traditional hotels are isolated from the lodging business. The purpose of this study is to understand the impact of such a paradigm shift in the industry through a contextual review of the effects of the Airbnb virtual platform in the London hospitality sector.
Significance of Study
Although some hotels have dismissed the impact of Airbnb on their businesses, they fail to realise that the new business model introduced by the online marketplace and hospitality service is here to stay and it affects how guests spend their money (Stephens 2016). It is important to study the impact of Airbnb on different markets and submarkets of the hospitality industry. The findings of the proposed study would add to the growing literature on peer-to-peer competition and the development of the sharing economy on the global hospitality business (Turban et al. 2017). Much of the analysis will exemplify the economic theory of two-sided markets. For example, it would add to the understanding of theoretical and structural models that explain the price structure of goods and services in the hospitality industry, as well as the use of the same products in the sector (Somervuori 2014). By studying the findings of the proposed study, it would also be easier for stakeholders to comprehend models that connect innovations in service design and re-examine how they connect with contemporary service platforms. Thus, the findings of the proposed study would help stakeholders in the hospitality industry to better understand firm behaviour in two-sided markets and comprehend how labour supply issues integrate with globally accepted technological developments.
Literature Review
Many analysts consider Airbnb as a threat to traditional hotels because some guests prefer to book with listed hosts as opposed to the traditional hotel booking method (Bowie et al. 2016). The commission for Hotels in New York recently published a report to ascertain the impact of Airbnb on the hospitality industry and established that its impact varies across different cities (Bowie et al. 2016). However, the report affirms that the US industry as a whole is greatly affected by the business and so are other countries and cities outside of it (Bowie et al. 2016). A deeper assessment of the facts published in the report reveals that hotels lose up to $450 million in annual revenues through lost businesses. The figure is further expected to increase as Airbnb entrenches itself in different markets.
Few studies have comprehensively explored the nature of competition between peer-to-peer markets. In one line of study, Pandian and Kalaivanthan (2016) explored the nature and structure of peer-to-peer markets by advancing several theoretical frameworks to understand their effects on incumbent firms. A key finding they made in the analysis is that peer-to-peer competition could significantly decrease price variability among competitors (Pandian & Kalaivanthan 2016). Empirical evidence on peer-to-peer platforms has mostly focused on Uber as the most notable example of a successful company in the sharing economy. Using the example, they have demonstrated a decline in price volatility through a decrease in gas consumption, miles travelled, and car ownership numbers (Meyer 2016; Zhu 2013). There is little empirical evidence in the hospitality industry regarding the effect of peer-to-peer platforms on incumbent businesses. Instead, the available literature is mostly comprised of opinion pieces and blogs, most of which are not academic in nature.
Airbnb-commissioned studies provide the closest analysis regarding the impact of the business on the hospitality industry that could be considered credible. The studies show that the online marketplace complements traditional hotel businesses (Schneider 2017). However, it is important to point out the possible bias in this point of view because the studies argue for Airbnb and seem to advocate for its adoption in various cities by highlighting the economic benefits Airbnb could offer local economies and hosts alike. Although the proposed study relates to some of these studies, the methodology chosen for analysis is more contextualised, sophisticated and adopts a segmented overview of the research topic. Therefore, the conclusions are expected to be more detailed, credible, reliable and nuanced.
Summary
Many researchers have outlined general descriptions of the impact of Airbnb on hotel businesses. However, many markets have unique dynamics that moderate the effect of the technology platform in the hospitality business. For example, some cities do not have the proper infrastructure to allow guests to access listed residences. In other markets, there are inadequate properties listed on Airbnb because of the lack of awareness of the business. Some of these dynamics (among others) make it difficult to generalise the effects of Airbnb on the hospitality industry. Therefore, there is a need to provide a contextual analysis of the research problem. Based on this need, this paper seeks to understand the development of Airbnb in London and examine its impact on the city’s hospitality industry.
Methodology
Research Method
The two main research methods used in academic studies are quantitative and qualitative approaches. The qualitative research method is often used in studies that involve human subjects and on topics that have a subjective appeal (Creswell 2014). Comparatively the quantitative research technique is often used in studies that involve numerical data (Creswell 2014). The proposed study will be based on the quantitative research approach. This technique will be employed in the study because most of the data collected will be in the form of numbers and statistical results. The quantitative research method is appropriate for the study because the analysis is based on a highly structured data collection method as described below.
Data Collection
The data collection process would be based on a survey questionnaire that would be sent out to several hotel employees in London (see appendix). Since it would be physically impossible to collect data through site visits, the data collection instruments would be administered online. The respondents would answer standard questions that would help in meeting the research objectives. The researcher deliberately chose the online platform for data collection because it is more convenient to collect data this way (considering the geographical dispersions of the hotels to be sampled) (Helen 2015).
Secondary data would also be included in the study to complement the primary information obtained from the research participants. The main purpose of including this data collection approach in the proposed study is to compare the primary research findings with what other researchers have written about peer-to-peer businesses. The researcher would collect published data from several sources, including the Airbnb website (listing data), the Census Bureau, industry reports, and hotel reviews from Trip Advisor.
Sample Population
The desired sample population would be comprised of 140 employees of various London-based hotels. The research participants should have served in their positions for at least five years because the researcher would want engage participants who have a long-term view of the hotel business.
Sampling Strategy
The respondents would be sampled randomly from a selected group of hotels operating in London. The researcher would seek permission from their superiors before engaging any employee. The simple random sampling method is deliberately selected for the proposed study because it provides the most unbiased view of the impact of Airbnb operations on London-based hotels. A request for participating in the study would be sent to the participants via email, while follow-up meetings would be done through mobile communication.
Data Analysis
The information collected in the proposed study would be analysed using the Excel software. This data analysis technique would be adopted because it is instrumental in helping the researcher to visualise and gain insight into the information presented by the respondents (Watkins & Gioia 2015). Some of the main tools that would be used in the data analysis process include pivot charts and slicers that are crucial in providing a visual representation of the data collected (Leavy 2017). The Excel software is justifiably proposed for use in the analysis because it aligns with the research approach (quantitative research) because they both focus on quantifiable information (McGuire 2016). Therefore, the use of statistical assessments to answer the research questions aligns with the Excel software.
Ethical Issues
Some of the main ethical issues that could emerge in the proposed study include privacy issues, consent, and treatment of data (Walliman 2015). To address privacy concerns, the researcher would transcribe the data collected from the respondents anonymously. This way, it would be difficult to attribute the responses to a specific person, or hotel. Additionally, all the respondents would participate in the study voluntarily. The researcher will also allow participants to withdraw from the study without any repercussions. At the same time, the researcher would not coerce them or offer incentives to secure their cooperation. Lastly, all the information collected in the study would be stored in a computer and secured using a password that would only be privy to the researcher.
Reference List
Bowie, D, Buttle, F, Brookes, M & Mariussen, A 2016, Hospitality marketing, Taylor & Francis, London.
Creswell, J 2014, Research design: qualitative, quantitative, and mixed methods approaches, SAGE, London.
Fauvel, E 2017,101 Tips to become Airbnb superhost: get more bookings, choose the right price, increase revenue, get 5 stars reviews, attract the best guests, be a remote host and more, My Publishing Company, New York, NY.
Helen, K 2015, Creative research methods in the social sciences: a practical guide, policy press, New York, NY.
Ivanov, S 2014, Hotel revenue management: from theory to practice, Zangador, Varna.
Kozak, M & Kozak, N (eds) 2016, Tourism and hospitality management, Emerald Group Publishing, London.
Kroft, D & Pope, G 2014, ‘Does online search crowd out traditional search and improve matching efficiency? Evidence from craigslist’, Journal of Labour Economics, vol. 32, no. 2, pp. 259-303.
Leavy, P 2017, Research design: quantitative, qualitative, mixed methods, arts-based, and community-based participatory research approaches, Guilford Publications, New York, NY.
McGuire, K 2016, The analytic hospitality executive: implementing data analytics in hotels and casinos, John Wiley & Sons, London.
Meyer, J 2016, Uber-positive: why Americans love the sharing economy, Encounter Books, New York, NY.
Pandian, V & Kalaivanthan, M 2016, Handbook of research on holistic optimization techniques in the hospitality, tourism, and travel industry, IGI Global, New York, NY.
Schneider, H 2017, Creative destruction and the sharing economy: Uber as disruptive innovation, Edward Elgar Publishing, London.
Somervuori, O 2014, ‘Profiling behavioural pricing research in marketing,’ Journal of Product & Brand Management, vol. 23, no. 6, pp. 462-474.
Stephens, D 2016, Essentials of consumer behaviour, Taylor & Francis, London.
Tranton, P 2016, Airbnb: the basics and tips for beginners, Conceptual Kings, New York, NY.
Turban, E, Outland, J, King, D, Lee, J, Liang, T & Turban, D 2017, Electronic commerce 2018: a managerial and social networks perspective, Springer, New York, NY.
Walliman, N 2015, Social research methods: the essentials, SAGE, New York, NY.
Watkins, D & Gioia, D 2015, Mixed methods research, Oxford University Press, Oxford.
Wood, R 2013, Key concepts in hospitality management, SAGE, London.
Zhu, F 2013, ‘Responses to entry in multi-sided markets: the impact of
craigslist on local newspapers’, Management Science, vol. 60, no. 2, pp. 476-493.
Appendix: Survey Questionnaire
Part A: Demographic Information (please tick on the appropriate box)
What is your gender?
Male
Female
What is your Age?
Younger than 20
21 years – 30 years
31 years – 40 years
41 years – 50 years
years – 60 years
Older than 60 years
Work Experience. How long have you worked as an employee of in your organisation
Between 5-10 years Between 11- 15 years
Between 16-20 years Between 20 – 25 years
More than 25 years
Educational Experience
What is your highest educational qualification?
High school Undergraduate
Master’s PHD
None of the above
Part B: Please state whether you agree or disagree with the following statements
Airbnb is a threat to the operations of my organisation
Strongly Agree
Agree
Neither agree or disagree
Disagree
Strongly disagree
Hotel revenue has declined because of the loss of customers to Airbnb
Strongly Agree
Agree
Neither agree or disagree
Disagree
Strongly disagree
We have lost some our customers because of Airbnb operations
Strongly Agree
Agree
Neither agree or disagree
Disagree
Strongly disagree
Occupancy rates have declined because of the loss of customers to Airbnb operations
Strongly Agree
Agree
Neither agree or disagree
Disagree
Strongly disagree
Managers need to adjust their prices downwards because of competition from Airbnb
Strongly Agree
Agree
Neither agree or disagree
Disagree
Strongly disagree
Airbnb operations will negatively affect the operations of my organisation in the future
Modern society is characterized by a high degree of complexity and is based on interaction and communication between groups or individuals. Companies actively use this aspect to generate product value for users. In particular, they use network effects to increase the number of participants in their network, which not only attracts more users but also generates product value for network members. Several main types of network effects affect a product’s value, increasing it and providing a competitive advantage to companies. Spotify and Airbnb are examples of the most successful use of various network effects to continuously generate the value of the network members’ products and increase their defense in the market.
Network Effects Definition and Overview
The principles of network effects in modern society and business are fundamental to the development of a competitive company. James Currier underlines that “every new user has the value in your product to other users who are using the product or will use the product” (NFX, 2020, [0:00-0:11]). Thus, the more people use the product, the more valuable it becomes to other existing and potential users. This factor also ensures the company’s growth and development, which provides a competitive advantage in the market.
Factors Affecting Product Value
Network Effects Types
Network effects are particularly significant in contemporary, highly digitalized society. In particular, there are four key defensibilities today, including network effects, embedding, scale, and brand (NFX, 2018). These factors allow companies to create value that cannot be copied or replicated, which increases the company’s competitive advantage in the market (Pidun et al., 2020). As part of technology startups, network effects account for more than 70% of the total value generated by the company (NFX, 2018, [0:20]). There are various types of network effects, which fall into major categories, including direct, two-sided, data, and social. A detailed network effects map is presented in
Fig. 1. Network effects map (Currier, n.d).
Fig. 1 and describes 13 types of effects as their impact on the value of a company’s product decreases.
Direct Network Effects
Direct network effects are the simplest and most powerful factors influencing business success. As shown in the map in Fig. 1, this broad group includes five effects: physical, protocol, personal utility, personal, and market network. The physical network effect is based on physical nodes and links, as a network of telephones and wires between them. This effect is the most defensible since it has a direct network effect, as well as “lends itself to the addition of other defensibilities; namely, scale effects and embedding” (Currier, n.d, para. 31). Businesses based on this type such as railway networks or electric networks, require large initial investments. Thus, most of the products and services offered by such companies are utilities that cannot be accessed through other effects.
The network effect protocol occurs when communication standards are set by the creator of the node and are available to anyone who can connect to the network using this protocol. For example, the latest blockchain technologies, such as Bitcoin and Ethereum, are created according to this principle. The personal utility network effect is built on the principle of personal communication between network members. The main disadvantage of this effect is that when the network is disrupted, people using it experience direct harm from the inability to maintain personal communication. Examples of these networks are instant messaging tools or applications such as WhatsApp or SMS.
Fig. 2. Direct network (Currier, n.d).
A personal direct network effect occurs when a product provides individual value to network participants. In particular, this is due to the fact that the reputation and personality of network participants are associated with and influenced by the product. In contrast to personal utility networks, this type of effect is not used for vital communication and is less personal in nature. Thus, when leaving the network or destroying it, users do not receive much damage. An example of such networks is Facebook or Twitter, where people can build long-term personal interactions. Finally, market networks are direct communication between marketplace participants. Thus, this effect is very similar to personal but focuses on interactions within a particular market. Examples of this effect are companies like HoneyBook or DotLoop that provide services to other businesses. Fig. 2 shows a typical structure of the direct network effect, which is built on nodes and links between them.
Two-Sided Network Effects
This group is also often called indirect effects, as it describes the interaction of demand and supply, which generate indirect value for each other. However, network participants on the same side also generate direct value when interacting, which explains the two-way nature of these effects. Most importantly, direct influences often negatively affect the value of a product, while indirect influences outweigh these factors to generate positive value. As shown in Fig. 1, there are three main network effects data types: marketplace, platform, and asymptomatic marketplace.
The marketplace network effect implies the presence of sellers and buyers. More opposing parties generate more value for the product. In this case, direct interaction on one side generates a negative value, which is offset by indirect influence. Examples of companies using this effect are marketplaces such as Amazon and eBay, matchmaking apps (Tinder or Craiglist, and payment instruments (Visa or American Express). The platform network effect is similar to the marketplace, but on the one hand, there are the creators of a product that is only available on a certain platform, and on the other, users. This effect is used by the creators of operating software, including Microsoft OS, and iOS, as well as the creators of game consoles and other similar systems.
The asymptomatic marketplace network effect differs from the two types described in that they offer a rapid increase in value at the start of product implementation and a decrease in efficiency as the company develops. Typical and deferred value marketplaces, in turn, offer businesses the opportunity for stable growth in the generated value (the factor is illustrated in Fig. 3). This model is the most vulnerable and represents the least competitive advantage for companies but allows a quick start. Examples of companies successfully using this network effect are Uber and Lyft.
The data network effect describes how an increase in the amount of data leads to an increase in the value of a product. In turn, the growth in the value of the product is associated with the generation of a large amount of data. The interaction between the quantity and quality of generated data, as well as the mode of its usage, can affect the value of a product in different ways. However, the increased use of data and the improvement of the quality of information products leads to an increase in the value of the product for users. Companies that actively use this effect include Google, Amazon, IMDB, and others.
Tech Performance Network Effects
This aspect describes a situation where the performance of technology grows with an increase in the number of users. A large number of users or devices on the network will make the technology more convenient, cheaper, and more accessible. A feature of this effect is that each new node increases the performance of the technology for all other nodes of the network. Basically, this system is actively used by peer-2-peer technologies and companies based on them, including BitTorrent, VPN services, Hola, and others.
Social Network Effects
This type of effect generates product value solely through the interaction between people. This group is the most difficult in the long run but can offer a great competitive advantage. Social network effects, including language, bandwagon, and belief, are a form of brand defensibility because they are based on the influence of people’s psychology. However, these aspects still represent a network effect since their effectiveness also depends on the number of nodes and connections within the system.
Language is the most common factor that increases the value of a product. In particular, the more people use the brand name in the speech, the more recognizable and defensible it becomes. Language is also a predicate of international development since, for example, a company with a name in English will be much easier to promote globally than using local languages. For example, the company name Google already has a generic designation for Internet search, which greatly increases the value of the product. Belief works in a similar way: the more people believe in the value of a product, the more value it generates. The simplest example of this effect is religions or ideologies that exist solely due to belief and has no physical embodiment. The bandwagon network effect also engages people’s psychology by putting pressure on them to join a movement or group. A good example is Slack, which created a prejudice among tech companies that using their product is what makes a successful business. Therefore, the utility and the product do not match the opinion created around it.
The Exploitation of Network Effects Examples
Spotify
Spotify has become one of the pioneers in using the principles of network effects. This streaming application allows any user to create a profile on the platform as well as share their own or others’ playlists. Additionally, users can add each other as friends, see what music other users are listening to, and create joint playlists. It is also important that the application is integrated into other media platforms and allows users to share their music on Facebook pages and other resources. Recently, the company added the ability to share remote listening for users. Thus, Spotify actively uses several network effects, which together constantly increase the value of the product.
First of all, Spotify uses direct effects, including personal utility and personal effects. The personal utility effect is to provide users with the opportunity to communicate with each other and express themselves, as well as search for communities. The personal network effect consists of giving users access to music and various playlists, which creates value in itself. More musicians and listeners in the network generate more and more value for all its participants. The company also uses the two-sided network platform effect, as Spotify delivers value exclusively within its platform, gaining additional value and defensibility. Moreover, the company uses the sided network marketplace effect to provide value-generating interaction between musicians and listeners. Finally, Spotify is actively integrating social networks such as language and bandwagon to promote the brand as well as set trends that influence public opinion. Together, these factors allow the company to constantly increase the value of its product, making it more and more indispensable in the market and increasing its competitive advantage.
Airbnb
Airbnb is another example of the successful use of network effects, but the company utilizes fewer factors than Spotify. In particular, the company model is based on the interaction of hosts and guests, which is a typical example of the marketplace network effect. Thus, the platform provides network participants with the opportunity to interact. In turn, more users generate increased value and attract new members. In turn, the constant growth of the network increases the value of the company’s product and provides a competitive advantage in the market.
Conclusion
Network effects are built on the interaction of system nodes and links to generate product value. As one can see from the examples of Spotify and Airbnb examples, companies can use various factors to attract more users and increase the company’s competitive advantage. The most important thing about network effects is that the process does not require any special investments or strategies from the company. The product itself generates value if it is useful to users, which is the main driver of value growth.
Approximately a decade ago, expensive hotel stays and the lack of authentic experience offered to a tourist encouraged future Airbnb owners to co-found one of the largest marketplaces for lodging and activities run by local hosts. Entering the sharing economy, the Airbnb team revolutionized the private market with a new concept of collaborative consumption, an economic model where access to goods and services is valued over ownership (Gorog, 2018). However, a recent outbreak of the Coronavirus compromised the smooth operation of the sharing economy, questioning the future utility of the sharing economy. In this assignment, sharing economy is defined as an economic model which centers around P2P marketplaces where underutilized assets, services, or goods are rented for material and non-monetary gain (Gorog, 2018). On the example of Airbnb company in the sector of tourism, this paper argues that sharing economy business model will survive the financial crisis caused by the global pandemic.
Sharing Economy Model
The sharing economy has quickly become a new trend in the business world. It operates on the basis of short-term peer-to-peer transactions to share the usage of minor services, assets, or to facilitate cooperation between professionals (Curtis and Lehner, 2019). Due to the digitization of services, it is now easier for people to connect and exchange underused assets in the dynamics of the so-called, sharing economy (Frenken and Schor, 2017). The main goal of this model is to allow groups and individuals to earn money under the premise of collaborative consumption, using the value of poorly allocated or underused benefits as physical assets (Curtis and Lehner, 2019). Frequently, sharing economy involves an online platform as a connecting unit for buyers and sellers.
The sharing economy model stands on the opposite stances that remain fundamental to the traditional economy. It rejects the concept of private ownership and makes a profit using the idea of shared consumption and production of goods and services (Frenken and Schor, 2017).
Instead of being driven by incentive and competition as members of the traditional market, those participating in the sharing economy commit to sharing their space, expertise, and time for the greater good.
Despite the growing popularity of the model, some experts remain sceptical toward its future success, legality, and profitability. One of the key minuses lays in the regulatory uncertainty of the rental services (Mehmed, 2016). Platforms connecting buyers and sellers do not regulate the activity of the unlicensed individuals, raising suspicions about the reliability of their policies and the rationality of their costs. Another disadvantage is focused on a series of abusive behaviors manifested both by buyers and sellers in the sharing economy (Mehmed, 2016). Those include but are not limited to unfair treatment, discrimination, and fraudulent rentals.
Airbnb Background
By 2020, Airbnb has dominated the co-living segment, positioning itself as one of the world’s biggest marketplaces representing the sharing economy model in the tourist sector. Though hotels, hostels, and motels still remain popular in the tourist sector, the model of bed and breakfast, used by Airbnb, advocates for more authentic experiences (‘Airbnb’, 2020). As more and more people have an opportunity to travel long-distance, the tourist industry strives to win the competition by bringing foreign culture closer to the visitor.
Airbnb unites sellers (hosts) and buyers (tourists) on a simple and user-friendly platform, providing short-term lodging and unique activities for leisure time for different age groups, costs, and preferences. The company also extended its home-renting services for weddings, work trips, and family reunions, targeting a wide group of clients (Adamiak, 2019). With more than seven million accommodations available and 50 thousand authentic activities offered, it works successfully in 220 countries (Adamiak, 2019). Coronavirus pandemic, followed by strict quarantine rules, restricted traveling, and social distancing recommendations, put the future of Airbnb at risk as millions of apartments remained empty due to the lack of demand. However, the company quickly found a new way to attract clients by introducing online experiences, making adjustments to meet legal requirements, and remaining loyal to the organization’s mission.
Why Airbnb Will Survive the Sharing Model
Actions taken by the Airbnb team since the COVID-19 outbreak give enough evidence to believe that the sharing economy model will survive once the global crisis is over. Though the tourist section might take years to recover, the scope of the company’s services is not fully targeted toward traveling visitors. Weddings, work meetings, family reunions, and long-term rentals constitute a sufficient portion of the organization’s revenue, suggesting that locals might enjoy the benefits of the company if foreigners are not allowed to travel.
The logic behind the sharing economy will most likely not be exactly the same as it used to be before the pandemic. As a result of the pandemic, Airbnb emphasized the long-term rentals as strict social distancing rules made a rapid, sharp shift from short-term to monthly stays. Private space will no longer be a luxurious asset offered by Airbnb but a legal requirement for lodging (Oskam and Boswijk, 2015). Despite the aforementioned changes, Airbnb will continue operating with a consideration of community and authenticity. Hosts will continue providing cultural experiences to tourists, even though some of them might switch to digital format to prevent the spread of the virus once the lock-down is over.
One of the initiatives the Airbnb team decided to launch to encourage trust, as the main component of the model, was the “Enhanced Cleaning Initiative” (‘Airbnb’, 2020). The project aimed to restore confidence in hosts who appear to be hesitant to rent their apartments in fear of getting sick with the Coronavirus. It was also meant to encourage open relationships between the buyers and sellers, balancing between the opportunity to share the unused assets and staying healthy during the worldwide pandemic. Trust would be the central aspect marketing specialists attempt to convey in their campaigns after the COVID-19 pandemic (Oskam and Boswijk, 2015). With close media attention and overt criticism of the shared spaces, Airbnb will have to promote not only the authenticity of its services but also their safety and security (Oskam and Boswijk, 2015). Another effective marketing strategy would be to stress the significance of community, communicating the message of unity in face of crisis. After the pandemic is over, the company should prioritize accessibility and affordability of the experiences offered on the platform, showing compassion to those affected financially.
Despite the successful efforts of Airbnb to move their services online, it is not safe to claim that the sharing economy model would prove to be successful in all 220 countries where the company operates. The success of the organization in the upcoming years will depend largely on the rate at which people will recover from the financial crisis. Traveling restrictions, capita per person, as well as unemployment rates should be taken into consideration as the company prepares a plan on retaining their customers. Some of the strategies that Airbnb might implement are the following: 1) digitalizing experiences; 2) providing dedicated remote customer service quickly and more efficiently; 3) limiting the option of renting a private room. The organization can also offer discounts for the most active users (both buyers and sellers) and the most innovative online experiences.
Conclusion
In conclusion, Airbnb represents a sharing economy model in the tourist sector, providing inexpensive short-term and long-term rentals, as well as authentic tourist experiences performed by local hosts. The company utilizes physical assets such as empty rooms, apartments, and beds as services to assist people of different age categories and social statuses. With the mission to unite the community in a genuine experience, the organization connects buyers and sellers on a simple, user-friendly tourist. Though sharing space is central to the way the company works, strict social distancing policies have not been able to stop the operation of Airbnb completely. During the quarantine, the team shifted focus to long-term stays and introduced online remote experiences to remain loyal to its mission, serving both hosts and visitors. In its marketing campaigns, the company emphasized trust to restore confidence in the sharing model in buyers and sellers.
It is yet early to judge the future success of the Airbnb sharing model due to the uncertainty around unemployment rates and traveling restrictions after the quarantine ends. However, the flexibility and openness demonstrated by the team give enough evidence to predict that the company will survive the crisis caused by the Coronavirus. By implementing strategies promoting safe and affordable tourist experiences, Airbnb can remain the leader in the bed and breakfast market. Despite the initial expectations and interpretations of the data collected, only time will show whether the sharing model survives the pressure of the global pandemic.
Reference List
Adamiak, C. (2019) ‘Current state and development of Airbnb accommodation offer in 167 countries’, Current Issues in Tourism, pp. 1-20.
What segments of customers did Airbnb serve? What is Airbnb’s positioning in the hospitality market?
The effectiveness of Airbnb’s strategy can be evaluated with the assistance of the served segments, as they tend to focus on the travelers and foreigners, who want to have a unique experience with the locals and affordable accommodation (Tranton 2016). In turn, visitors are free to select what price is affordable for them, as Airbnb tends to provide a vast variety of options while giving the apartments’ owners a possibility for additional income. Consequently, this unique segmentation strategy differentiates the company from its competitors.
Speaking of the positioning, the firm tends to unite the services of the individual service providers while using the concept of the hotel in one entity (Lane 2014). The company has a tendency to create a separate segment while offering reasonable pricing, an extended range of opportunities, and exceptional experience. This matter contributes to the rise of the market share of the organization while highlighting its unique features and differentiating the company from the competitors.
The firm utilizes effective advertising instruments to ensure the rapid spread of the information. In this case, the company used internet marketing, word of mouth, and participation in various events to encourage the information sharing about the existence of the service (Sundararajan 2016). This aspect is a vital attribute of the strategy’s effectiveness, as it creates the perception of the trusting organization due to the ability to highlight the vitality of customer’s preferences.
The initial goal of the company was to provide inexpensive services to increase the availability of the traveling for the individuals with low income (Lane 2014). Meanwhile, the company’s offerings tend to be cheaper than booking a regular room in the hotel. This price to quality ratio underlines the effectiveness of the firm’s strategy, as Airbnb tends to attract more customers than the competitors. Consequently, this matter can be regarded as one of the cultivators of the company’s growth.
As for the selling channels, the company is entirely internet-based with the user-friendly interface while displaying all the options associated with the search (Sundararajan 2016). The popularity of the internet is growing on the regular basis, and it is beneficial for the companies to utilize this approach for selling their services (Sundararajan 2016). Consequently, the utilization of its website and mobile applications allows the company to develop an association of the brand with the affordable living, exceptional experience, and the best service provider in the sphere while increasing effectiveness.
Identify and discuss the different factors in the concept of Airbnb as well as in its implementation that have supported this rapid growth?
The rapid growth of Airbnb in customer’s base is dependent on a variety of factors including the possibility to have an additional income for the accommodation owners, inexpensive options, unique experience, and external funding opportunities. Firstly, the company attracted many apartment owners by providing a safe environment for the individuals, who are seeking for the opportunity to share their accommodation with the visitors (Sundararajan 2016). This matter contributed to the quick growth of the customer’s base while extending the availability of options on the regular basis.
Another factor is the pricing strategy, as the firm was able to introduce an innovative pricing policy while being beneficial for the travelers with the different levels of income (Lane 2014). In this case, this matter contributes to the growth of the customer’s base due to the affordability of the options and extended coverage of the target groups. This aspect played a critical role in the company’s development while offering an opportunity for the individuals with the low level of income to pursue traveling and leading to the service’s popularity.
Simultaneously, staying with the locals allowed having a unique possibility for the cultural exchange, and this feature is exclusive due to its absence in the hotels. Meanwhile, Airbnb’s concept generates the sense of community, as the customers tend to share their experiences and portray the beneficial characteristics of the sellers (Lorentzen, Topso & Schoroder 2015).
Furthermore, the company ensures the safety of the operations while offering guarantees for the money return in case of emergency associated with the inability of the apartment owner to comply with the characteristics portrayed on the website (Sundararajan 2016). A combination of these critical features explains the popularity of Airbnb services, as the customers have quick access to the feedback and select the best options based on the opinions of other users.
Lastly, the external sources of funding have a substantial influence on the company’s rapid growth and continuous development, as the additional financial resources contribute to the expansion of the services and possibilities of the website (Parahoo 2016). In this case, this matter allowed having a significant investment in taking an advantage of the internet capabilities and contributed to the generation of the well-established service to attract customer’s attention. Nonetheless, a simultaneous application of the factors mentioned above has a positive impact on the company’s popularity, as it determines the matters, which form Airbnb’s distinct competitive advantage.
Using information from above case, appraise the approaches Airbnb used to finance its early startup phase as well as its later operations? Do you think this was an appropriate strategy?
The financing options were critical elements of the company’s success, as it has a tendency to provide additional resources for the functioning of the organization. In this case, the owners of the start-up decided to launch the substitute product lines to gather the financial sources for the website development (Parahoo 2016). Meanwhile, it could be said the participation in the business incubator allowed the users to utilize the acquired funding for the establishment of the company (Parahoo 2016). In the end, the sophisticated strategy led to the rapid growth of the firm while attracting the attention of the investors, who were highly interested in the development of the services.
As for the strategy’s appropriateness, it could be said that the effectiveness of the strategy cannot be underestimated as it has a substantial impact on the company’s development and expansion of the customer’s base. The introduction of the side product lines such as cereals had a beneficial influence on the advancement of the start-up foundation. Meanwhile, the participation of incubator led to the well-established managerial approach while attracting a substantial attention to the company’s functioning. Furthermore, the company should continue to utilize events as a promotional instrument to attract investors, as this matter forms a correlation with the company’s liquidity while generating an association with the trusting business.
Nonetheless, the firm should use its connection with the principles of the sharing economy as this matter is critical to the national development and welfare (Lane 2014). In this case, Airbnb should devote significant attention to the participation in various events, which allows promoting the nature of the company while emphasizing the potential social benefit for the region. This approach will contribute to the upsurge in the company’s liquidity while increasing the awareness of the potential investors.
In the end, the company has to utilize all of the matters mentioned above for the company’s funding. However, some of the aspects were critical for the company’s financial development at the initial stage. Currently, it remains apparent that the firm should devote significant attention to the participation in the events, which increase its global recognition and attract substantial investments. In this case, the organization should promote the necessity to expand the services in the recent future. For instance, Airbnb can present the possibility of the similar service related to car rental while depicting the advantageous nature of this matter to the overall economy.
Based on theoretical concepts you learnt in the course, what advice you have to offer to Maysoon. Is this a good idea? Should she go ahead? What are the risks?
Maysoon’s idea of establishing a new business concept while providing similar services as Airbnb in Gulf region could be considered as beneficial. It is apparent that the concepts support the principles of sharing economy highlighted in Airbnb strategy, as these services tend to be advantageous for the apartment owners while leading to the rise of the wealth of the region (Lane 2014). Consequently, Maysoon’s notion might attract the funding from the local investors and governmental entities leading to the rapid development of the business.
Meanwhile, the establishment of the local service of the accommodation’s provider might be cherished by the local population due to the ability to comply with the cultural differences via company’s interface and design (Boeing 2013). Based on the factors provided above, it could be concluded that Maysoon should consider the idea for the implementation, but it is vital to conduct a sufficient risk assessment before launching the start-up.
Nonetheless, the risks tend to exist, as the hospitality and tourism sector is the most competitive business segment in the country. The rising competition could be regarded as one of them, as the companies such as Airbnb focus on the expansion of their geographical coverage (Hahn 2015). Meanwhile, the popularity of Airbnb might lead to the establishment of the similar services in the region and the introduction of the adjustments to the changing industrial trends by the hotels and hostels. The firm has to consider the possibility to reach no significant response from the potential users due to the novelty of the service (Rao 2011).
Furthermore, the foreign travelers might prioritize the international nature of Airbnb since the complication might be associated with the understanding of the dissimilar interface adapted to Gulf countries.
Despite the beneficial environment for this business idea’s development, Maysoon should consider various factors before launching the project. The evaluation of the actions of the competitors will have a beneficial influence on the design of the marketing campaigns and pricing strategy (Rao 2011). In turn, the assessment of the customer’s preferences will help determine the adequacy of the demand for the service with the selected price (Rao 2011). Furthermore, the well-established system is required before launching to ensure the maintenance and sufficient flow of the services. In the end, a combination of these evaluations will have a critical impact on the strategy’s formation to minimize the influence of the risks on the overall performance.
Reference List
Boeing, M 2013, Analysis of cultural differences and their effects on marketing products in the United States of America and Germany, Anchor Academic Publishing, Hamburg.
Hahn, J 2015, Rapid internationalization of internet companies: how do success factors of “Born Globals” apply to internet companies, Hesterlung und Verlag, Nordestedt.
Lane, R 2014, You only have to be right once: the unprecedented rise of the instant tech billionaires, Penguin Group LLC, New York.
Lorentzen, A, Topso K & Schoroder, L 2015, Spatial dynamics in the experience economy, Routledge, London.
Parahoo, S 2016, Airbnb: leveraging a sharing company, case study.
Sundararajan, A 2016, The sharing economy: the end of employment and the rise of crowd-based capitalism, The MIT Press, Cambridge.
Rao, K 2011, Services marketing, Dorling Kingsley, New Delhi.
Tranton, P 2016, Airbnb: the basics and tips for beginners, Conceptual Kings, New York.
Founded in 2008, Airbnb is a San Francisco-based company in the hospitality industry. Although it has reported a lot of success in the global market, it has been unable to replicate the same in China. For example, out of the company’s 2 million global listings, only 2% of them are based in China. This percentage could be smaller (1.5%) because it is estimated that about 30,000 listings are associated with Chinese homeowners.
The situation is further worsened by the fact that Airbnb has barely made an impact in areas or regions outside first-tier cities. For example, in Harbin city, the company only has about 300 listings, even though it is bigger than the size of Los Angeles city. The inability of Airbnb to have a significant impact in China is further complicated by the fact that its competitors, such as Tujia and Mai, have a higher number of listings.
The purpose of this research is to evaluate the current strategy of peer-to-peer accommodation companies and help Airbnb to better develop its Chinese business. Three key research objectives guide the investigation. They are designed to identify factors influencing the company’s business performance in the Chinese market, to understand the nature of relationships that exist between factors affecting its consumer choices as well as the company’s performance, and to explore new ways of how customers in the Chinese market can better accept and sustain its operations in the country.
Literature Review
Although a sharing economy poses several benefits to its users, market sustainability problems linger. For example, the sharing economy poses many challenges when it comes to regulation, such as tax evasion problems, which could suffice when Airbnb users fail to pay tourist tax. Furthermore, problems regarding fairness could also emerge because it is difficult to safeguard the rights of customers on a platform that is poorly regulated.
Consequently, there are many uncertainties associated with the behavior of users who use the sharing economy platform and authorities who regulate the industry. Although Airbnb wants to increase its market share in the Chinese economy, it requires a business model (generally composed of networks, propositions, architectures, and financial values) that matches with the country’s economy and culture.
This is because the development model of China’s shared economy is very different from other countries’ commercial operating frameworks. After all, the Asian country has a strong traditional cultural background. Therefore, an industry that is interested in the Chinese market must first understand the traditional Chinese culture, especially in the hotel industry.
Methodology
This study has four variables, which are accommodation experience, security, platform user experience, and price. Collectively, they form the independent variables for the investigation. Consumer behavior research was also implemented as the model of market research. It refers to a combination of quantitative and qualitative aspects of analysis, relative to the various actions taken by consumers to acquire, use, and dispose of consumer goods, as well as the decision-making processes that determine these actions.
In addition to understanding how consumers get products and services, consumer behavior research was undertaken to understand how the participants used Airbnb. It was also used to comprehend their experiences about the same process. Information was sought from 573 respondents who were recruited and contacted online. The questionnaire was the main form of the data collection tool. It was structured and divided into two key segments that explored the demographic information relating to the research informants and their views on the research variables (accommodation experience, security, user experience, and price).
Data were analyzed, as descriptive information, using the Microsoft Excel method. This technique reviewed the overall structure of the statistics, which was intended to make the results of the questionnaire survey more straightforward and intuitive. The analysis included simple data calculation techniques such as percentages and averages. The information was presented graphically using pie charts and histograms.
Findings
Broadly, the findings highlighted in this study show that Airbnb’s Chinese business is at crossroads because the respondents generally held mixed reviews about its operations. For example, most of them were uncertain about specific aspects of their operations, such as security and hygiene. At the same time, there were concerns that the service provided a low-quality user experience. Additionally, there was a general low sense of awareness about its products among the respondents.
Alternatively, the evidence provided in this study shows that the company has a strong social value to the informants because it made them connect well with their environment and with other people. The informants also said that the firm has a strong price value because of its ability to generate additional income. This information means that Airbnb has an opportunity to redeem its business in the Chinese market because it could capitalize on the positive aspects of the findings to bolster its business strategies and minimize its weaknesses to support the same goal.
Critical Analysis and Discussion
The negative reviews of Airbnb generated by the respondents could be partly attributed to the failure of the California-based firm to understand the unique cultural dynamics of China and its effects on the business’s operations. Comparatively, the positive reviews provided by the respondents about Airbnb could be used to explain the company’s positive impact, such as the provision of additional revenues for homeowners and a strong social value it offers users who want to visit new places and know new people.
Conclusion
Since the lack of direct communication between hosts and guests emerged as one of the concerns affecting Airbnb’s operations in China, it is important to point out the need for the company to improve customer user experiences as a precursor to growth. To address the problem of a low sense of awareness of Airbnb in China, the company also needs to enhance its marketing campaign on the continent. Particularly, it needs to increase its visibility in the market because it appears that its competitors are doing a better job in this regard. Airbnb should also improve its platform experience because its users are concerned about its functionality.
Declaration of Originality
I hereby declare that this thesis has been composed by myself and has not been presented or accepted in any previous application for a degree. The work, of which this is a record, has been carried out by myself unless otherwise stated and where the work is mine, it reflects personal views and values. All quotations have been distinguished by quotation marks and all sources of information have been acknowledged using references, including those of the Internet. I agree that the University has the right to submit my work to the plagiarism detection sources for originality checks.
Introduction
Background
The sharing economy is not only a market development trend but also an important academic topic (Cherry 2018). Multiple definitions of the sharing economy exist. For example, the concept of a shared economy is defined as a platform where people use underutilized assets to promote efficiencies in their consumption (Frenken & Schore 2017). The sharing economy has emerged from this trend and can be defined as a socio-economic ecosystem that is premised on the sharing of assets by promoting cooperation on most aspects of social and economic development (Hamari, Sjöklint & Ukkonen 2016). Several companies associate their business models with this business framework and Airbnb is one of them.
Stemming from the growth of the sharing economy, Airbnb has made a name for itself as one of the fiercest rivals for traditional hotel businesses. Its threat in the market could largely be attributed to its capacity to provide customers with alternative accommodation options, different from the traditional hotel business model, where customers book a room and eat at a restaurant (Hofacker, Malthouse & Sultan 2016). Airbnb provides a different type of accommodation to customers because it accords them a “homely” experience (Airbnb Incorporated 2017). Consequently, the company operates as an online marketplace where prospective clients view listings and contact apartment or homeowners to book residences for short-term or long-term stays.
This business model allows property owners to lease out their houses for short-term or long-term stays. There are often different kinds of accommodation options offered on the platform, but the most common ones include apartments, cottages, and holiday homes (Airbnb Incorporated 2017). It is pertinent to point out that the company does not own any of these properties. Similarly, it does not arrange for tours.
Instead, its business model is agency-based where it takes a specific fee for every booking made on the platform (Airbnb Incorporated 2017). Currently, reports show that more than 5 million listings have been published on the platform (Airbnb Incorporated 2018a). Its market presence is also spread across more than 81,000 cities and 190 countries around the world (Airbnb Incorporated 2018a). Statistics also reveal that the company has facilitated more than 300 million check-ins since its inception (Airbnb Incorporated 2018a).
Since Airbnb is known for providing customers with a different experience from traditional hotels, its global rise in the industry has been nearly unstoppable. Indeed, as Hempel (2018) points out, from the time the company’s founders first hosted guests in their apartments, the company has been able to scale the heights of success that most technology companies have failed to reach. Hempel (2018) says that the name “Airbnb” has become a verb. Today, estimates show that the San Francisco-based organization is worth more than $24 billion and this figure is expected to rise in the future.
Statement of the Problem
Although Airbnb has realized a lot of success in the global market, it has been unable to replicate the same in China. For example, according to Hempel (2018), out of the company’s 2 million global listings, only 2% of them are based in China. Some literature suggests that this percentage could be smaller (1.5%) because it is estimated that about 30,000 listings are associated with Chinese homeowners (Hempel 2018).
The situation is further worsened by the fact that Airbnb has barely made an impact in areas or regions outside first-tier cities. For example, in Harbin city, the company only has about 300 listings, even though it is bigger than the size of Los Angeles city (Hempel 2018). The inability of Airbnb to have a significant impact in China is further complicated by the fact that its competitors, such as Tujia and Mai, have a higher number of listings. Indeed, Tujia has 420,000 listings, while Mai has about 300,000 similar listings (Hempel 2018).
The poor performance of Airbnb in China could be partly explained by the views of Custer (2018), which presupposes that the failure of Airbnb to make a meaningful impact on the Chinese market is cultural. In other words, he suggests that Airbnb has not learned to address the needs, preferences, and desires of Chinese users. In line with this discussion, Custer (2018) points out issues about trust, which is a big challenge impeding the success of sharing platforms in China because its residents seem to have a problem believing those who sell their products virtually.
Similarly, the Chinese experience several challenges using Airbnb’s email platform because they are often used to instant messaging sites where they get a response (immediately) when they inquire (Custer 2018). At the same time, the Airbnb platform makes it difficult to contact a homeowner directly because all communications are channeled through the platform. Therefore, there may be issues relating to trust or miscommunication because the company maintains the right to edit or scrutinize such communications before they reach their intended audience. This messaging platform is unlike Tujia where the phone numbers of available homeowners are provided and a customer can message them directly.
The challenges of Airbnb in China also align with the views of Custer (2018) who suggests that part of Airbnb’s weakness has been the low speed at which it chose to enter the Chinese market. Reports show that the company only recently decided to venture into the market, thereby giving its competitors (like Tujia) a significant head start that they have used to perfect their business (Custer 2018). The entrenchment of its competitors means that for every Chinese city that Airbnb is present in; there is stiff competition from existing market entrants. Furthermore, most of these competitors have deeply entrenched business networks. Similarly, they have cultivated a sense of trust among the local populations. Therefore, it could be difficult for customers to choose Airbnb over local businesses.
Since this paper focuses on Airbnb’s operations in China, it is also important to point out the unique peculiarities of the Asian economy as a problem affecting the company because there are many regulatory uncertainties, which may prevent the growth of the business in the populous country. Custer (2018) suggests that the reason why China has not tightened its regulations around the activities of the American-based Corporation is its minimal impact on the economy. Therefore, there are concerns regarding how Airbnb will operate in a country where the rules are still fuzzy.
Indeed, China poses new kinds of problems for the company, as was the case with eBay, which failed to gain traction in the communist nation because a little-known company (Alibaba) made it impossible for the widely successful global corporation to make significant gains in it (Custer 2018). Nonetheless, unlike eBay and Uber, which failed to gain a significant market share in China, Airbnb’s story cannot be termed as a failure, but rather a “setback” because industry players say it has the potential to grow if it redesigns its business strategies (Hempel 2018).
It is from this premise that this paper seeks to understand factors affecting consumer choices for Airbnb in China. The justification for conducting this study is hinged on the fact that only through understanding customer preferences and tastes about Airbnb can the company make significant changes to improve its success.
Justification for the Study
Based on the inability of Airbnb to make a significant impact on the Chinese market, observers have created the perception that the Chinese market is difficult to understand. Airbnb seems to recognize this fact because its Chinese business is one of its four core focuses, whereby the other three are its “homes” business, its activity-driven experiences, and prioritization of luxury rental properties for its high-end consumers (Airbnb Incorporated 2017; Custer 2018).
The findings of this study will be useful to companies that are struggling to make an impact in China. For example, new start-ups that want to tap into the potential opportunities that exist in the communist nation could learn from the Airbnb experience to better develop their business strategies, especially because it has a big population.
Airbnb recognizes the potential that exists in this market and this explains why it has chosen to focus on improving its Chinese business, particularly because it aims to target the high population of Millennials who are in China (Hempel 2018). The findings of this study will help to provide a deeper context and understanding of Airbnb’s vision, and how best to achieve it by investigating factors affecting consumers’ choices of Airbnb in the Chinese market. A statement of the research aim appears below.
Research Aim
To evaluate the current strategy of peer-to-peer accommodation companies and help to improve Airbnb’s performance in the Chinese sharing economy market.
Research Objectives
To identify factors influencing Airbnb’s business performance in the Chinese Market.
To understand the nature of relationships that exist between factors affecting consumer choices of Airbnb’s and the company’s performance.
To explore new ways of how customers in the Chinese market can better accept and sustain Airbnb’s operations in the country.
Literature Review
Understanding the Shared Economy
The sharing economy is not only a market development trend but also an important academic topic (Cherry 2018). Multiple definitions of the sharing economy exist. First, the concept of a shared economy is defined as “customers trusting each other to obtain available personal assets, which are underutilized and also can create the new business model through the sharing economy to get benefits” (Frenken & Schore 2017, p. 5).
The sharing economy can also be defined as a socio-economic ecosystem that is premised on the sharing of human, material, and intelligence resources that often include cooperation on most aspects of social and economic life (Hamari, Sjöklint & Ukkonen 2016). Typically, the process would include different people and organizations to co-create, produce, distribute, trade, and share consumer goods and services (Frenken & Schore 2017). Although there are many existing definitions of a sharing economy, there are a few contentious definitions of the same concept. For instance, Eckhardt and Bardhi (2015) say the sharing economy cannot be seen as a platform where people use their assets in exchange for consumers’ money.
Although the concept of a shared economy only became popular in recent years, it is not a new concept in the market. Sharing refers to a universal model of economic production, which is people-oriented. It is derived from the sharing of traditional economic and material goods, which is a product of processes involving the co-creation of goods and services by all users (Benkler 2004). Compared with the sharing principle, virtue is not a sharing economy.
The sharing economy is a model of business operation; a way for companies to obtain economic benefits and a term that allows participants to trust marketing (Gobble 2017). The most obvious difference between the traditional concept of sharing and the new “sharing” referred to in business would be that the latter could be used as an economic model.
There are four major “sharing economy” activities, which people use in the above-mentioned economic model. They include the cyclical use of goods, growth in the sustainable use of assets, exchange of services, and sharing of productive assets (Puschmann & Alt 2016). The goal is often to make new friends, experience new technologies, innovate, and live a more environmentally friendly lifestyle (Schor 2014).
Consumer Acceptability Problems with the Sharing Economy
The business of sharing economy is comprised of many tenets, including (but not limited to) enterprises, customers, trust mechanisms, supervision departments, and internet technologies (Matofska 2018). Each tenet is indispensable. However, vendors and consumers are some of the most critical parts of the chain because if any one of them fails, the sharing process will be incomplete. New business models are composed of service providers (drivers, hosts, and valet), service enablers (such as Uber, Airbnb, and luxe), and customers (Wirtz & Tang 2016). The most important part of the chain is the service enabler who receives feedback between service providers and customers. He or she also reflects on the customers’ needs and adjusts business processes to reflect the same (Kumar, Lahiri & Dogan 2018).
Since the new sharing economy is mainly short-term in nature, “service” is at its core. Consequently, most service providers strive to improve the quality of their businesses to attract more customers (Kumar, Lahiri & Dogan 2018). Consequently, customers gain from such developments through reduced waste and resource use, increased access to affordable goods, and improved collaboration.
However, there are also some concerns associated with the sharing economy. For instance, the sharing economy does not meet certain social values of equality. Indeed, in a shared economy, social equality is difficult to achieve, and not everyone can participate in it (Ying 2016). For example, people’s backgrounds and requirements are a deterrent to the realization of equitable outcomes. Additionally, to take part in a shared economy, people need to fulfill certain requirements imposed by the service providers, such as making payments in certain currencies.
However, the requirements may be difficult for some to fulfill, thus it would be difficult for them to accept the shared economy. Inequality is also likely to be propagated in a shared economy because “people with higher-quality assets are more likely to benefit from it better than those who do not own any capital. Such structures increase the risk of creating a hierarchical society that many people detest.
Market Sustainability Problems of the Sharing Economy
Although a sharing economy poses several benefits to its users, market sustainability problems linger. For example, the sharing economy poses many challenges when it comes to regulation. Indeed, there can be tax evasion problems such as those associated with the failure to pay tourist tax. Furthermore, problems regarding fairness could also emerge.
Relative to this assertion, the former US Secretary of Labor, Robert Reich, criticized the concept of the sharing economy by saying that the “new culture of on-demand work is a reversion to the nineteenth century when workers had no power and no legal rights, took all the risks and worked” (Yeomans 2018, p. 5). Additionally, supervision is another important aspect of the sharing economy platform that undermines its sustainability (Nestor & Infranca 2016).
In terms of legal issues, the sharing economy emphasizes the need for supervision because stakeholders are required to maintain a high quality of operations, maintain consumer protection standards, a fair market, and so on (Hawksworth & Vaughan 2014). The development of this sharing economy has driven the government and local regulatory authorities to make suitable changes that reflect this need because such industries are currently in the “grey area” of the legal world. As a result, “this is not only a risk for consumers but also a hindrance to the development and innovation of new industries” (Orsi 2013, p. 17).
Some scholars who have published articles discussing the sharing economy think that the issues that arise from the sharing economy must be viewed from two sides- both positive and negative. On one side, opponents believe that such sharing will lead to crime, unfair market competition, and privacy violations, but proponents believe that smart supervision can solve these problems and bring more market potential (Frenken et al. 2015). Although there are still many problems associated with sustainability, the sharing economy could help businesses and societies to become sustainable.
The Current Development Strategy of Airbnb
Founded in 2008, Airbnb is a San Francisco-based company in the hospitality industry. The firm allows its customers to lease or rent short-term housing and receives service and transaction fees with every booking made. According to recent statistics, Airbnb’s rooms have received over 300 million customers in 191 countries and 81,000 cities worldwide (Airbnb Incorporated 2018a). Airbnb is a typical example of a business that thrives on the concept of a shared economy. Specifically, it is based on “peer-to-peer economics” because sharing is free behavior. Airbnb combines the sharing aspect with the economy as they found out that people are willing to pay a fee online to get an ideal private room when they travel or live outside their homes (Liang, Choi & Joppe 2018).
In contrast to traditional hotels, Airbnb has more rooms (rooms leased for rent by people) which makes it more diverse for its potential customers to select. The sharing concept is where people lease their homes for other customers to rent. This concept has created markets that rent assets to generate income. Before this concept, renting assets were not considered as a revenue-generating method. Back in the early days of Airbnb’s establishment, the founder was told that renting personal houses to strangers was a crazy, unbelievable, and impracticable idea (Turen 2017). However, Airbnb was different from other online short-term companies because it can make profits.
In the very first week of the business, the weir rental idea earned $1000. The surprising profit-generating method represents the sharing economy and successfully persuaded people to believe that the sharing concept is the best way to earn money. Even though Chesky, one of the founders of Airbnb, never considered the company as one that tapped into the sharing economy, he considered it as a tool to solve their problems (Geron 2013). The company’s strategy is explained below.
Airbnb employs many strategies to guarantee consumer satisfaction and maximize profit. The Airbnb business has continuously improved its services and introducing new products, as the needs of its customers are continuously changing. The strategy of Airbnb will be divided into three aspects. They include what the company does to ensure consumer satisfaction, its culture, tourism, and the limitations to its strategy. These three aspects of the analysis are further explored below.
What Airbnb Does To Ensure Customer Satisfaction
Airbnb recently diversified its services by launching different types of houses, such as apartments, dormitories for young people, whole houses, and shared accommodation where visitors and the property owners live in the same house (Lutz & Newlands 2018). After investigation, it was confirmed that customers who use Airbnb not only pay attention to cheap prices but also interesting local experiences on the Airbnb platform (Liang, Choi & Joppe 2018).
Since Airbnb offers a variety of accommodation options, consumers can enjoy different travel experiences. The company also recently launched a “super-host” badge for owners, which can guide customers in evaluating the rooms, owners, and service experiences (Zaleski & Chen 2016). This approach not only improves the quality of hosting services but also makes it faster for the other customers to better understand and choose their right accommodation option (Liang et al. 2017).
Airbnb’s managers are also aware of its shortcomings after discussions and criticism from various sectors of society. For example, there have been concerns about privacy on the platform. In response, the company introduced user authentication steps that require a user to provide real photos, ID’s, and social media accounts to increase the consumer’s safety index (Guttentag & Smith 2017). Such strategies characterize the approaches undertaken by the organization to bolster its overall strategy. Its culture is explained below.
Company Culture and Tourism
Airbnb’s business brand, culture, revenue, and tourism offerings have exerted an enormous amount of pressure on the traditional hotel business. From the Airbnb business brand’s point of view, the company’s branding philosophy is to allow guests to live in homelike surroundings, understand local customs and culture, and give visitors a special feeling and a sense of belonging, which contrasts the experience they would get from hotels (Liu & Mattila 2017). According to Aaker’s five dimensions model of brand personality, some users will associate one of its five tenets (excitement, daring, spirited, imaginative, and being up-to-date) with the Airbnb brand (Lee & Kim 2018).
Mark Levy, a manager responsible for managing Airbnb employees, said that the founder of Airbnb aligned the company’s corporate culture and values with the sharing behavior when he founded it (Bajer 2016). The most direct and objective reflection of this principle on the business is enshrined in the company’s business income data. Airbnb is an inestimable competitor and about 8% to 10% of the hotel’s yield is influenced by its Austin operations (Zervas, Proserpio & Byers 2017).
The hotel room’s revenue will decrease with an increase in its number of rooms. For every 10% Airbnb increase, hotel room revenue will drop by 0.37% (Zervas, Proserpio & Byers 2017). In 2015, the Airbnb business earned over $451 million in revenue, which accounted for 5% of the total hotel industry’s revenue, and it is set to increase exponentially in the future (HVS 2015).
From a tourism perspective, a key aspect that Airbnb needs to develop is taking travelers to places outside local traditional tourism attractions by adding a variety of residential homes around the world (O’ Regan & Choe 2017). The development of the hotel industry is inseparable from the development of the tourism industry. Research demonstrates that Airbnb services offered near the Lombok attraction found out that the growth of the company’s business and the development of tourist attractions complement each other (Ioannides, Röslmaier & Van Der Zee 2018).
It was also established that the frequency of Airbnb listing activities far away from scenic areas was relatively weak (Ioannides, Röslmaier & Van Der Zee 2018). It was also evident that the introduction of Airbnb severely hindered the development of hotels in locations that are economically tourism-reliant because their guests (including those who travel on a private basis) are more likely to choose Airbnb housing over traditional hotel business accommodation options (Weed 2015).
Limitations to Airbnb’s Strategy
Due to Airbnb’s popularity and success, the number of people who lease their homes on the Airbnb website to strangers is set to increase. However, these online sharing platforms are limited by acceptance problems from the public, and more importantly, from risks and legal issues in various countries. In terms of its acceptability, the Pew Research Centre published an article called The New Digital Economy and it mentioned that 11% of Americans had used online short-term rental services like Airbnb and Home Away in 2016 (Smith 2016). Some users think these services are good choices for travelers and it brings additional income for homeowners, but approximately one-in-five people regard Airbnb as risky to use because they think it is only suitable for “adventurous” guests (Smith 2016).
Furthermore, the survey showed that due to the lack of strict laws and regulations in some countries, some Airbnb users believe that short-term vacation rental companies like Airbnb and Home Away will operate for a long time to live because they bring about additional economic benefits to homeowners. However, they increase the risks for residents and change the relationship between neighbors at the same time (Jordan & Moore 2018). For residents that live in local areas, the sharing economy will make a great impact on their life (Jordan & Moore 2018).
In terms of legal issues, Airbnb is also breaching laws in certain cities in the US. For example, “in New York, owners or tenants cannot legally rent their apartments out for short periods (less than 30 days) unless they are also living in the property” (Coldwell 2018, p. 13). Furthermore, there are also tax issues because “in many cities in the US, people that rent out holiday accommodation are expected to pay a hotel or tourist tax” (Coldwell 2018, p. 14). Although aspects of operations under the shared economy model, such as Airbnb, have been criticized, it cannot be denied that there are still three main reasons why people would choose this platform: it is an innovative service model, provides job opportunities, and allows people to make more money than regular jobs (Kumar 2015).
The Development of the Chinese Sharing Economy Market
The development of a shared economy can solve urban problems, such as insufficient resources, employment, and sustainable development. It brings great advantages and positive effects in cities and countries. A sharing economy is a sustainable form of consumption under certain conditions, and it can also be a solution to decentralization, equity, and sustainable economics (Martin 2016). Therefore, developing a shared economy may provide new ways for sustainable development (Heinrichs 2013). Many literature and case studies about Airbnb have also confirmed that sustainable development is beneficial to users as the sharing economy continues to change and improve (Daunorienė et al. 2015; Minter 2015).
The first is that it solves the problem of insufficient resources. In many definitions of the concept of the sharing economy, it can be seen that the keywords are the sharing of unused or underutilized assets, which intangibly saves individual assets and social resources. Sharing can promote the development of communities, save society resources, and create a certain degree of synergy among people who live in them (Belk 2007). For example, Uber’s service philosophy is to provide efficient travel, reduce vehicle exhaust emissions, and save transportation costs (Orsi 2013).
The second benefit of Airbnb is to solve employment problems. Relative to this assertion, the development of the sharing economy made people consider the difference between formal employees and part-time workers. In the past, formal employees were at the core of an organization’s human resource plan. However, now, the activities of the sharing economy consist of a large number of “part-time” personnel (Mair & Reischauer 2017). Some studies have shown that the sharing economy can solve the problem of unemployment among urban residents to a certain extent, especially in the tourism industry (Mair & Reischauer 2017). Therefore, the government should formulate appropriate policies to control the positive development of the sharing economy (Fang, Ye & Law 2016).
The Market of Chinese Sharing Economy
As we know, China is a developing country in stage 3 of the demographic transition model. It is also the most populous country and it has a high potential for development. The Asian giant has also become the largest consumer of international tourism and the sector is an important aspect of its economy, with its rapidly growing market influence (Amaro, Andreu & Huang 2018). Currently, the major industries in the sharing economy that are developing in China are transportation and rental businesses.
The hospitality and rental business in China is fierce, and Airbnb has the potential to do well in the country. According to Airbnb’s statistics, the company already has 5.3 million Chinese tourists and 80,000 Chinese listings (Airbnb 2017). However, China’s short-term rental company Xiaozhu has 100,000 listed projects, which makes them Airbnb’s largest competitor (Amaro, Andreu & Huang 2018). The Xiaozhu website launched in August 2012 and it currently provides 80,000 housing options in 250 locations in China (Amaro, Andreu & Huang 2018).
Xiaozhu’s business income rose rapidly due to an increased number of housing options and locations, which represents the rapid development of China’s sharing economy. In 2015, another leasing company, Tujia, made approximately US$ 1 billion in the same business (Wu 2017). Therefore, both Xiaozhu and Tujia are Airbnb’s biggest competitors in China. The leasing industry is booming as well and everyone would like to ‘get a piece of the pie’ (Wu, Ma & Xie 2017).
Venture capital is the operation mode for most companies in the Chinese sharing economy (Cheng et al. 2016). This business model is easier to replicate because companies as opposed to individuals operate it. It is also easy to understand because most of the profits from rented products belong to the holder of capital. For example, the sharing concept in China can be understood as if the staff of the Tujia Company owns the properties listed (Marquis & Yang 2014). Furthermore, some scholars who have analyzed factors affecting the choice of Chinese consumers found out that there are many uncertainties in the behavior of their scheduled sharing of rooms, such as curiosity, room facilities and services, and experienced travel reviews on the platform. Furthermore, some researchers mentioned that most Chinese users would not be impacted by a property owner’s response rate when they book a short-term room (Wu, Ma & Xie 2017; Wu 2017).
Airbnb and the Chinese Sharing Economy
Although Airbnb wants to enter the Chinese economy, it requires a business model that matches the country’s economy. The business model (generally composed of networks, propositions, architectures, and financial values) is crucial to the company’s operations and development (Gao & Zhang 2016). The development model of China’s shared economy is very different from other countries’ commercial operating models because China is a country with a strong traditional cultural background. An industry that is interested in the Chinese market must first understand the traditional Chinese culture, especially the hotel industry (Chen 2018).
Airbnb’s sharing model contradicts the traditional Chinese culture based on the relationships between hosts and guests in the Chinese culture (Discover the Authentic 2018). For example, the Chinese culture suggests that the host is “obliged to keep their guests fully occupied” by showing guests to touristy sites, treating them to meals, and accompanying them at most times (Discover the Authentic 2018). In this regard, culture can influence the rules and operating systems of a business operating within the sharing economy. It can also explain the different organizational structures of the sharing economy and the practices of diversified businesses (Mair & Reischauer 2017).
Since Airbnb does not subscribe to traditional rules, it may not be successful in China. However, according to official statistics, 3.5 million people in China are registered as Airbnb users in 2015 (Mair & Reischauer 2017). However, these results do not extensively represent Chinese users’ acceptance level of the business. This is why most of the registered population are users who are familiar with Western culture (mostly non-Chinese citizens) (Mair & Reischauer 2017). Therefore, Airbnb would need to make changes, to fit in the Chinese sharing economy.
Methodology
Research Methods
This section describes the specific data collection and analysis methods used to complete the investigation. Specifically, the first section of this chapter introduces the basic analysis model of the research, which is used to study and investigate factors that influence Airbnb’s acceptance and sustainability in the minds of consumers.
The next subsection explains the data collection methods, while in the third subsection, the specific research methods applied to this study are presented, along with the design of the questionnaire for this study (see the appendix for the specific questionnaire). The final section of this paper proposes the corresponding research hypotheses based on the dimensions of the analytical model and the specific research problems explored. Meanwhile, the specific analytical techniques and various statistical methods for the research hypothesis are detailed below.
The Model
Based on the literature review findings highlighted in this study, factors, which affect Airbnb’s current acceptance and continued use (by Chinese consumers) are linked to the following four categories: accommodation experience, security, user experience, and price. These elements of discussion were used to develop the model structure, which is outlined in figure 3.1 below.
Figure 3.1. Model Structure (Developed by the Author).
As shown above, there are four variables in the model of this study, which are accommodation experience, security, user experience, and price. These attributes will be the independent variables for the investigation. Stated differently, they will be the elements affecting Airbnb’s acceptance and sustainability in the Chinese market. Comparatively, the term performance was the dependent variable in the model, which represented Airbnb’s performance in the Chinese market. In the subsequent section of this analysis, an explanation will be provided detailing how specific data representing these variables were obtained. The information was used to conduct the relevant analysis to achieve the research aim in the end.
The Data Collection
Typically, research information can be divided into primary and secondary data. Primary data also refer to raw data, which means it is the content obtained directly through personal interviews, inquiries, questionnaires, and measurements. Comparatively, secondary data refers to data that is not collected by ongoing investigations, such as interviews and questionnaires, but from other researchers who have done the same. This information is often public and easy to obtain (Guise, et al. 2010).
All variables in this research model are focused on understanding the consumers’ feelings and personal opinions. That means that all the relevant data required to analyze these variables are based on an individual and subjective. For example, the term “accommodation experience” refers to the living experience of a consumer using the Airbnb platform. The term “security” refers to a client’s perception of feeling safe when staying in a tourist destination chosen by Airbnb. Additionally, references made to attitudinal issues regarding Airbnb are linked to Chinese consumers’ attitudes towards the use of Airbnb.
This is a completely personal choice. In other words, these data will be based entirely on personal experiences and opinions. Although some references can be obtained from other related or similar research reports, it will be more reliable if they are obtained through primary information (Granello & Wheaton 2004). Therefore, for all the variables that will be investigated, the researcher will collect relevant primary data for subsequent analysis.
Here, it is also important to emphasize that the term “performance” represents Airbnb’s business performance in the Chinese market. This metric is usually represented by the company’s financial performance. Since this is a comprehensive reflection of the company’s performance, it will include the extent of its acceptance by the market and the prospects for development in the industry. The company itself usually discloses these financial indicators in their relevant annual reports. According to Unerman (2000), the annual report is the most concentrated medium for company disclosure. Based on its credibility, it is also regarded as the most important document for a company. Moreover, the annual report is an open document, so researchers are easily accessible.
The financial analysis will use different indicators such as net profit, Return on Assets (ROA), and Return on Earnings (ROE) to represent Airbnb’s performance in the Chinese market. The data source of financial indicators in this study is secondary, which is inconsistent with the data sources of the other four variables investigated. Moreover, for the other four sources, few secondary data can be collected and used for the analysis.
Therefore, to maintain the consistency of the data sources of this study and reduce the research limitations caused by different data collection techniques, this researcher used primary data to represent Airbnb’s performance in the Chinese market. That is, Chinese consumers’ willingness and attitudes to use Airbnb to book short-term travel accommodations.
Research Design
Once again, through the literature review in section 2, it can be understood that although the context of this research is on the sharing economy, with the new consumption model of internet platform short-term rental model represented by Airbnb, the essence of this study is still a typical consumer behavior study. Consumer behavior research is the most common and often implemented study in market research. It refers to a quantitative and qualitative investigation of the various actions taken by consumers to acquire, use, and dispose of consumer goods, as well as the decision-making process that determines these actions (Cummins, et al. 2014).
In addition to understanding how consumers get products and services, consumer behavior research also strives to understand how people consume and dispose of products after they are used up. Therefore, it is the basis of marketing decision-making and is inseparable from the marketing activities of the enterprise market. It can be said that it is of great significance to research on consumer behavior, especially regarding the improvement of the level of marketing decision-making and enhancement of the effectiveness of marketing strategies (Charles et al. 2016).
Regarding the research methods of consumer behavior, commonly used techniques include observation, interview, and questionnaire methods. The observation method is meant to understand the behaviors, actions, and expressions of consumers purposefully and systematically under normal conditions and analyze the internal causes to study the pattern of consumer psychology (Cummins, et al. 2014). The interview method is a way to understand the motivation, attitude, personality, and values of the respondents through conversations between the interviewer and the interviewee.
Finally, the questionnaire survey includes a set of questions that are specifically designed based on the research objectives and questions, along with an instruction for using the questionnaire, which includes the conditions, guidelines, and rules for the questionnaire answering process. After the subjects have answered the questionnaires, the raw data are collected, and then the corresponding conclusions are drawn by analyzing the results of the questionnaire (Kothari 2004).
The choice of specific research methods should be based on the objectives of the study and the corresponding analytical methods. The type of analysis methods available can be divided into qualitative and quantitative analyses. Qualitative analyses refer to the review and research of the attributes of certain facts through qualitative reasoning, philosophical thinking, and historical verification. These attributes are mainly used to study the social structure and function of communication, social control of communication, and the interrelationship between communication and social development (Miles, Huberman & Saldaña 2014).
It can be seen that this analytical method usually does not have professional statistical significance and does not require the application of statistical software. Therefore, research methods such as case studies are more suitable for qualitative analysis (Malina, Nørreklit & Selto 2011).
On the other hand, quantitative analysis refers to a review of the quantitative relationship of the components contained in the research object, or the quantitative analysis and comparison of certain properties, characteristics, and mutual relations of several research objects. The results of quantitative analysis are often described in terms of “quantity” and usually require the use of specialized mathematical tools and models for analysis. Therefore, the research method such as a questionnaire survey is more suitable for quantitative analysis (Malina, Nørreklit & Selto 2011).
The purpose of this research is to evaluate the current strategy of peer-to-peer accommodation companies and help Airbnb to develop better under the Chinese sharing economy market. In other words, the study aims to review what factors affect consumers’ choices of Airbnb in the Chinese market, and what kind of relationships exist between these factors and Airbnb’s performance. This study needs some data processing with scientifically based methods in the process of analysis. As a result, the questionnaire survey is the main data collection method of this study.
Questionnaire
The method of collecting data is critical to the overall analysis of this study because it is the basis for the collection of truthful data and thus in turn a reliable analytical conclusion and research process (Guise et al. 2010). In this study, as explained earlier, the research method of the questionnaire survey is going to be used as the main data collection method. A questionnaire survey is a widely used quantitative research method, and its most obvious advantage is that it can save a lot of time, money, and labor.
At the same time, the results of the questionnaire survey are relatively easy to be statistically processed and to be quantified, which is more suitable for the follow-up analysis in this study. The questionnaire survey is also applicable to large-scale surveys, especially when respondents are widely dispersed. This advantage supersedes those of other research methods, such as face-to-face interviews.
In today’s extremely developed internet society, questionnaires can be obtained from survey data faster and more efficiently, as this method does not require dedicated personnel to operate and perform every minute, and is not affected by geographical restrictions (Lopez-Fernandez & Molina-Azorin 2011). Moreover, it is important to note that since the scope of this study has been limited to the performance, acceptance, and sustainability of Airbnb in the Chinese market at the very beginning, this means that the sample that needs to be investigated is Chinese consumers who are in China. In other words, sending a paper questionnaire and asking Chinese consumers to answer is a less practical method.
Therefore, instead of distributing paper questionnaires or combining online and offline distribution methods, this study decides to use only the method of distributing questionnaires through the Internet to obtain relevant data. Specifically, the researcher chose to place the questionnaire on some large Chinese social online platforms (Douban and Sina Weibo) and then collected the data after some time.
Regarding the structure of the data collection instrument, the questionnaire survey was designed to collect relevant data to perform subsequent analysis to complete the study. In other words, the questionnaire was designed according to the model of the study. In this research, five variables needed to be studied. Consequently, the structure of the questionnaire was divided into six parts because there were five independent variables, and one dependent variable:
The first part investigated the basic information of the respondents, such as the characteristics of the individual, including gender, age, how familiar they were with Airbnb, whether they have used the platform before, when was their last visit. The goal of collecting this information was to have a preliminary and general understanding of Airbnb’s popularity in the current Chinese market.
The second part of the questionnaire was designed to measure the consumers’ experiences of staying in the short-term travel accommodation platform. The third part of the questionnaire was designed to measure the extent to which consumers have a sense of security about the short-term travel accommodation chosen by Airbnb. The fourth part of the questionnaire was designed to measure their experiences of operating and using the Airbnb platform.
The fifth part of the questionnaire was designed to measure the consumers’ experience of operating and using the Airbnb platform, while the sixth part was designed to measure their points of view regarding the prices of the short-term travel accommodation options chosen by Airbnb. In addition to the first part of the questionnaire, the scoring system was used to quantify the results of the study for easy analysis. In the analytical scale, “agree” represented 3 points, “neutral” represented 2 points, “no Idea” represented 1 point, and “disagree” was marked as 0 points.
Research Hypothesis
Summarising the main points of the previous sections, the research goal of this study was to evaluate current peer-to-peer accommodation company strategies to help Airbnb better develop its Chinese operations. This means that the study investigated factors affecting the consumers’ choices of Airbnb in the Chinese market. The data needed for this study to conduct the research was primary data, which was collected using a questionnaire survey.
The analysis model of this study contained five variables: accommodation experience, security, user experience, accommodation price, and Airbnb’s performance in the Chinese market (attitude of Chinese consumers in using Airbnb). The last variable was the dependent variable of the research model, while the first four variables are independent variables that form the four dimensions of this model. Based on the above analysis, along with the research problems proposed in Section 2, the specific research hypothesis of this study is as follows.
RQ 1: What are the current influencing factors affecting Airbnb’s business performance in the Chinese Market?
This is an opening research question in this study and a research entry point for this study. Its purpose was to determine factors affecting Airbnb’s performance and its subsequent development in the current Chinese market. More specifically, this research question was designed to find out whether the four independent variables in the above research model can affect Airbnb’s performance or its consumers’ willingness to choose them, or determine whether there are certain relationships between them? Therefore, the following relevant hypotheses are proposed:
Hypothesis 1: The accommodation experience significantly affects the attitudes of Chinese consumers’ towards Airbnb and thus influences the performance of the company in the Chinese market.
Hypothesis 2: Perceptions of security significantly affect the attitudes of Chinese consumers’ towards Airbnb and thus influences its performance in the Chinese market.
Hypothesis 3: The platform users experience significantly affects the attitudes of Chinese consumers’ towards Airbnb and its performance in the Chinese market.
Hypothesis 4: The accommodation price significantly affects the attitudes of Chinese consumers’ towards Airbnb, thereby influencing the performance of the company in the market.
RQ 2: What kind of relationship do these influencing factors have with Airbnb’s performance in the Chinese market?
This is a further research question compared to the first research one. Its purpose is to find out what kind of relationship exists between these independent variables and the dependent one. For example, consumers use Airbnb more frequently when they find that the accommodation experience for short-term travel booked through Airbnb is better. Through relevant research and the above literature review, in the acceptance and use of consumers, many scholars believe that the consumer experience will affect the willingness of individuals’ choices of use (Constantinide, Lorenzo‐Romero & Gómez 2010). Similar situations exist in the remaining three independent variables as well. For instance, if consumers are more secure about short-term travel and accommodation options, the likelihood that they will choose this accommodation option again is high (Noone & Mcguire 2016). As a result, relevant research hypotheses are as follows:
Hypothesis 5: The accommodation experience has a positive and close relationship with the Chinese consumers’ attitude towards Airbnb and thus the performance of Airbnb in the Chinese market.
Hypothesis 6: The feeling of security has a positive and close relationship with the Chinese consumers’ use attitude towards Airbnb and thus the performance of Airbnb in the Chinese market.
Hypothesis 7: The platform use experience has a positive and close relationship with the Chinese consumers’ use attitude towards Airbnb and thus the performance of Airbnb in the Chinese market.
Hypothesis 8: The accommodation price has a positive and close relationship with the Chinese consumers’ use attitude towards Airbnb and thus the performance of Airbnb in the Chinese market.
RQ 3: According to the above analysis results, how can Airbnb be better accepted and sustained by customers in the Chinese sharing economy market?
This is a research problem that needs to be solved based on the results of data analysis and the relevant conclusions drawn from it. In other words, the answer to this research question is obtained from research problem 1, research problem 2, and the validation results of their related research hypotheses, individual own research hypothesis is not needed.
Data Processing
After the questionnaire is uploaded for a certain period, the answering process will be closed, and valid raw data will be collected and organized. After this, the study will use statistical Excel software with scientific and statistical methods to analyze the relationship between the variables proposed in the research model and to test the research hypotheses and theoretical models. A descriptive statistical analysis was used. It describes the overall structure of the statistics, which is intended to make the results of the questionnaire survey more straightforward and intuitive. This analysis is mainly going to be conducted by simple data calculation techniques such as percentages and averages, and corresponding charts include pie charts and histograms.
Findings
Demographic Findings
Voluntary Consent
In the first part of the study, the researcher sought the respondent’s consent to participate in the investigation. The findings are highlighted in figure 4.1 below.
Figure 4.1. Voluntary Consent (Source: Developed by the Author).
According to the illustration above, all but 15 respondents gave their consent to participate in the study. Those who did not give their consent were terminated from the research investigation.
Age
Age was the first variable explored in the study and it was categorised into four key groups, which are “18 years – 30 years,” “30 years – 40 years,” “40 years – 50 years,” and “50 years or older.” The results are highlighted below.
Figure 4.2. Distribution of Respondents according to Age (Source: Developed by the Author)
According to figure 4.2 above, a majority of the respondents were between the ages of 18 years to 30 years. The second largest group of respondents was comprised of informants who were between the ages of 30 years and 40 years, followed by those who were between 40 years and 50 years. The smallest number of respondents was comprised of those who were older than 50 years. A computation of these findings in percentages appears in figure 4.3 below.
Figure 4.3. Distribution of Respondents according to Age – Pie Chart (Source: Developed by the Author)
Broadly, the above findings show that a majority of the respondents were relatively young because they were under 30 years. This finding is further affirmed by the fact that older respondents accounted for the smallest number of respondents.
Gender
The second demographic variable explored in the study related to the respondents’ gender. Two categories were provided: male and female. The findings are as highlighted below in figure 4.4 below.
Figure 4.4. Distribution of Respondents according to Gender (Source: Developed by the Author)
According to the above analysis, there was an almost equal number of respondents from both genders. Males were 282, while female respondents were 291. Collectively, 573 respondents took part in the investigation. Broadly, the above statistics imply that the findings presented in this report were representative of both genders.
Familiarity with Airbnb
Another question explored in the questionnaire referred to the participants’ familiarity with Airbnb. Here, the respondents were required to state whether they “never heard of,” “heard of, but barely,” “heard of, but not familiar,” “heard of and familiar,” and “heard of and very familiar.” The findings are highlighted in figure 4.5 below.
Figure 4.5. Familiarity with Airbnb (Source: Developed by the Author)
Based on the above statistics, most of the respondents (167 people) appeared not to have heard of Airbnb before. The population of participants who had barely heard of Airbnb was also high because they were 164 people. Broadly, these statistics show that there was a low sense of awareness about Airbnb in China.
Use of Airbnb
Another aspect of analysis investigated in the study was whether the respondents had used Airbnb before. Here, they were supposed to respond as either “yes” or “no.” About 385 respondents said they had used the service, while 188 of them said they had not used it. The results are highlighted in figure 4.6 below.
Figure 4.6. Analysis of Whether Respondents used Airbnb (Source: Developed by the Author)
Respondents who said they had used Airbnb before were further asked to state the last time they had used the service. Their responses were categorised into four key criteria, which were “within the past six months,” “six months to a year ago,” “a year to two years ago,” and “more than two years ago.” The findings are highlighted in figure 4.7 below.
Figure 4.7. Last Time Respondents used Airbnb (Source: Developed by the Author)
Factors That Influenced the Acceptance of Airbnb among Chinese Consumers
Accommodation Experience
In the first part of the assessment, respondents were asked to report on their accommodation experience. In the first statement, the informants were asked to state whether staying in Airbnb homes was enjoyable. The results are depicted in figure 4.8 below.
Figure 4.8. Participants who enjoyed Airbnb Accommodation (Source: Developed by the Author).
When the respondents were asked to state their opinions regarding the variety of accommodation options at Airbnb, most of them “agreed” that the variety of Airbnb accommodation options were interesting. Figure 4.9 below summarises these findings.
Figure 4.9. Views on Airbnb Variety (Source: Developed by the Author).
According to the diagram above, it can be generalised that a majority of the respondents agreed with the view that the variety of accommodation options was an interesting factor associated with Airbnb.
The third aspect of analysis relating to the respondents’ accommodation experience of Airbnb sought to find out whether local activities associated with Airbnb are exciting. The findings are summarised in figure 4.10 below.
Figure 4.10. Views on Excitement associated with Airbnb’s Local Activities (Source: Developed by the Author)
The last part of the analysis that examined the respondents’ views about Airbnb experiences sought the participants’ views about the intimacy provided by the Airbnb business model. The findings are highlighted in figure 4.11 below.
Figure 4.11. Views on Intimacy Provided by Airbnb (Source: Developed by the Author).
A summary of the four statements relating to the respondents’ accommodation experience appears in figure 4.12 below.
Figure 4.12. Summary of Accommodation Experience Findings (Source: Developed by the Author)
Generally, the above illustration shows that the respondents had a favourable experience of the accommodation experience offered by Airbnb because they deemed its services to be (largely) enjoyable, interesting, exciting, and intimate.
Social Needs
The second part of the questionnaire explained the social needs of the respondents concerning Airbnb. Here, the informants were asked to react to five statements. In the first statement, the researchers were largely “neutral” about the statement “Airbnb business model allows me to get insider tips on local attractions.” Figure 4.13 below summarises the findings.
Figure 4.13. Views on the Ability of Airbnb to Provide Insider Tips on Local Attractions (Source: Developed by the Author).
In the second statement, they were supposed to react to whether Airbnb gave them a meaningful experience. Figure 4.14 below summarises the findings.
Figure 4.14. Views about the Meaningful Interaction of Airbnb with Locals (Source: Developed by the Author).
The respondents were also asked to give their views about how Airbnb allowed them to know people from their local neighbourhoods. The findings are summarised below.
Figure 4.15. Views about the Ability of Airbnb to Help Users to Know People from the Local Neighbourhood (Source: Developed by the Author).
According to figure 4.15 above, most of the respondents agreed with the fact that the Airbnb business model allowed them to know people from the local neighbourhood. When they were asked to give their views concerning Airbnb’s ability to help its users develop social relationships, most of them agreed with this statement. Figure 4.16 below summarises these findings.
Figure 4.16. Views on Ability of Airbnb to help People Develop Social Relationships (Source: Developed by the Author).
The last part of the analysis investigating the social effects of Airbnb sought to find out the respondents’ views regarding the company’s ability to help people connect with locals. The findings are summarised below.
Figure 4.17. Views on the Ability of Airbnb to Help People Connect with Locals (Source: Developed by the Author).
According to figure 4.17 above, those who “agreed” and were “neutral” about the above statement were overwhelmingly higher than those who disagreed with the same. Figure 4.18 below summarises the findings for all the statements described above.
Figure 4.18. Social Value of Airbnb.
Overall, based on the illustration above, it is assumed that the majority of the informants agreed with the view that Airbnb’s business model created a relatively significant social value to its users.
Price
The respondents were asked to react to the statement, “Airbnb business model benefits me financially.” The findings are summarised below.
Figure 4.19. Views Regarding the Financial Benefits of Airbnb (Source: Developed by the Author).
According to figure 4.19 above, most of the respondents were neutral about the ability of Airbnb to improve their financial situation. Alternatively, from a consumer perspective, the respondents were supposed to react to Airbnb’s ability to lower travel costs. The findings are highlighted in figure 4.20 below.
Figure 4.20. Views on Airbnb’s ability to Lower Transport Costs (Source: Developed by the Author).
According to the graph above, most of the respondents agreed with the fact that Airbnb lowered their travel costs. When they were required to state their views regarding whether the company was a better economic choice compared to hotels, most of them agreed that the service was a better choice to traditional accommodation options. Those who felt this way were 126 people out of the total sample of participants who took part in the study. These results are summarised in figure 4.21 below.
Figure 4.21. Views on Airbnb being a better Choice than Hotels (Source: Developed by the Author).
A summary of the findings relating to the three statements analysed above appear in figure 4.22 below.
Figure 4.22. Findings Relating to Airbnb Price.
Relative to the above findings, it can be deduced that most of the participants felt that Airbnb has a strong price value.
Security
Issues pertaining to security on the Airbnb platform were also explored as part of the investigation into the factors that influenced the acceptance of Airbnb among Chinese customers. Findings relating to respondents’ ability to stay in a stranger’s house are highlighted in figure 4.23 below.
Figure 4.23. Views on Staying in a Stranger’s House (Source: Developed by the Author).
According to the graph above, most of the respondents were neutral about staying in a stranger’s house. The next phase of analysis involved an evaluation of the respondents’ views regarding a sense of security associated with staying in the Airbnb accommodation. The findings are summarised in figure 4.24 below.
Figure 4.24. Views associated with Airbnb’s Sense of Security (Source: Developed by the Author).
The respondents’ views regarding the hygiene facilities offered in Airbnb platforms are summarised in figure 4.25 below.
Figure 4.25. Views on Airbnb’s Sense of Hygiene (Source: Developed by the Author).
The last aspect of security investigated in the study related to personal information provided on the Airbnb platform. Most of the respondents agreed with the view that the provision of personal information on the service was worrisome. The findings are summarised in figure 4.26 below.
Figure 4.26. Views on Airbnb’s Management of Personal Security (Source: Developed by the Author).
A summary of the four statements analysed above is presented in figure 4.27 below.
Figure 4.27. Security of Airbnb (Source: Developed by the Author)
Based on the analysis above, it is important to point out that most of the respondents were concerned about the security provided on the Airbnb platform.
Platform Experience
The fifth part of the investigation concerned the participants’ acceptance of Airbnb’s services as an offshoot of their platform experience. Figure 4.28 below shows findings relating to the first statement, which sought to find out the respondents’ views regarding the ambiguity of information provided on the Airbnb platform.
Figure 4.28. Views on Ambiguity of Information Provided on Airbnb (Source: Developed by the Author)
Relative to the findings depicted above, most of the respondents agreed with the view that they were worried about the possible ambiguity of information provided by Airbnb hosts. The other aspect of analysis investigated in this section of analysis related to the time taken for hosts to confirm bookings. The respondents were asked to react to the statement, “I am worried that it will take too much time to wait for confirmation from the host.” The results are depicted in figure 4.29 below.
Figure 4.29. Views on Confirmation from the Host (Source: Developed by the Author)
As seen from the graph above, a majority of the respondents (138 people) were “neutral” about the above-mentioned statement. The second largest group of participants was comprised of those who agreed with the same statement. It was made up of 129 respondents. The third largest group of informants disagreed with the above view, while the fourth largest group “strongly disagreed” with the idea. The smallest group of respondents was comprised of those who “strongly disagreed” with the above statement. This group was made up of 12 people. Broadly, it could be assumed that most of the respondents held “neutral” views about the fact that some Airbnb hosts took too much time to confirm their bookings.
The other aspect of the analysis that was investigated in the study related to the payment process of Airbnb. Here, the respondents were asked to give their views regarding whether Airbnb’s payment process would be troublesome. The findings are highlighted in figure 4.30 below.
Figure 4.30. Views on Airbnb’s Payment Process (Source: Developed by the Author)
According to the findings depicted above, a majority of the respondents agreed with the view that Airbnb’s payment process would be troublesome. Those who held such views were 148 people. The second largest group of respondents was comprised of those who held neutral views regarding the same idea. It was made up of 112 people. The third largest group of respondents consisted of informants who “disagreed” with the same statement, while the fourth largest group was comprised of those who strongly disagreed with it. Both groups had 61 and 50 people, respectively. The smallest cohort of respondents was comprised of people who “strongly disagreed” with the statement. It was made up of only 14 respondents. A summary of the findings of the four statements highlighted above is depicted in figure 4.31 below.
Figure 4.31. Airbnb’s Platform Experience (Source: Developed by the Author)
Comprehensively, it could be deduced that the participants felt that Airbnb’s platform experience was unsatisfactory
Attitudes about Airbnb
The other aspect of analysis relating to the acceptance of Airbnb among the research participants was focused on understanding their attitudes about the business. In this analysis, the informants were supposed to respond to four questions, which stated, “What about the accommodation staying experience in Airbnb business?” “What about the social needs of Airbnb business?” “What about the Price in Airbnb business?” and “What about the sense of security in Airbnb business?” Their responses varied on a scale of one to five where “bad” equalled to one point and “good” equalled to five points.
The findings for the first statement, which investigated the accommodation staying experience at Airbnb showed that most of the respondents said it was relatively good because the most dominant reactions were between two and three points. Figure 4.32 below outlines these findings.
Figure 4.32. Views on the Accommodation Staying Experience at Airbnb (Source: Developed by the Author)
The other aspect of analysis investigated in the report related to social needs. According to figure 4.33, a majority of the respondents held “neutral” views regarding this aspect of analysis because a bulk of the reactions were between two and four points.
Figure 4.33. Views on Airbnb’s Social Needs (Source: Developed by the Author)
The respondents also generally had favourable views regarding the price of Airbnb accommodation options because a bulk of the reactions were between two and three points. A similarly high number of respondents held neutral views about the research issue. The findings are summarised in figure 4.34 below.
Figure 4.34. Views on Airbnb’s Price (Source: Developed by the Author).
The last part of the analysis that explored the participants’ attitudes towards Airbnb focused on investigating the respondents’ perceptions of security regarding Airbnb. Based on the findings of figure 4.35 below, a slightly higher number of people held favourable views regarding the company’s security compared to those who held “neutral” views about the same. This finding stems from the bulk of responses, which were categorised between two and three points, compared to those that were within three and four-point range.
Figure 4.35. Views Regarding Airbnb’s Sense of Security (Source: Developed by the Author)
A summary of the above-mentioned statements appears in figure 4.36 below
Figure 4.36. Individual Attitude Findings (Source: Developed by the Author)
Future Intention
The last part of the questionnaire explained the intention of the participants regarding the use of Airbnb. The participants were supposed to react to three statements, which included, “Overall, I still think Airbnb is a good accommodation option in the future,” “I am willing to recommend Airbnb to my friends in the future,” and “I expect to continue using Airbnb business in the future.” The findings relating to the first statement (“Overall, I still think Airbnb is a good accommodation option in the future”) shows that a majority of the respondents had favourable views of it. In other words, they believed that Airbnb was a good accommodation option for the future.
About 210 respondents felt this way. The second largest group of respondents held neutral views about the same idea. They comprised 193 people. The third largest group of respondents “strongly agreed” with the statement, while the fourth largest group of informants “disagreed” with the same. The smallest cohort of respondents “strongly disagreed” with the statement. It was made up of 30 respondents. The findings are summarised in figure 4.37 below.
Figure 4.37. Views on the Respondents’ Future Intention of using Airbnb (Source: Developed by the Author)
When the research participants were required to state whether they would recommend Airbnb to friends in the future, the number of people who agreed or held neutral views about the same statement was almost equal (199 people vs. 201 people). The third largest group of respondents “strongly disagreed” with this view. It was comprised of 79 participants. The fourth largest cohort of respondents disagreed with the same idea. It was comprised of 74 people. Those who “strongly disagreed” with the same view formed the smallest group of informants, which comprised of 20 people. The findings are summarised in figure 4.38 below.
Figure 4.38. Views on the Respondents’ Willingness to Recommend Airbnb (Source: Developed by the Author)
Findings relating to future intention of using Airbnb are summarised in figure 4.39 below.
Figure 4.39. Views on the Respondents’ Willingness to Use Airbnb in the Future (Source: Developed by the Author)
A summary of the three statements highlighted above appears in figure 4.40 below.
Figure 4.40. Future Intention of using Airbnb (Source: Developed by the Author)
Conclusion and Recommendations
Conclusion
To recap, the purpose of this research was to evaluate the current strategy of peer-to-peer accommodation companies, with Airbnb providing the study context. The investigation was intended to improve the company’s performance in the Chinese sharing economy market. Three key research objectives guided it. They were designed to identify factors influencing Airbnb’s business performance in the Chinese Market, to understand the nature of relationships that exist between factors affecting consumer choices of Airbnb’s as well as the company’s performance, and to explore new ways of how customers in the Chinese market can better accept and sustain the company’s operations in the country.
The findings of this study reveal that Airbnb has an opportunity to redeem its business in the Chinese market because the respondents held a positive view about some of the company’s operations. For example, when they were asked to state their views about the intimacy provided by Airbnb accommodation options, most of them (148 people) agreed with the view that Airbnb provided customers with an intimate experience during their stay.
Those who “strongly agreed” with the same view characterised the second largest group of respondents. They were 88 informants who felt this way. Those who held “neutral” views about the same statement were 82 people, while those who “disagreed” with the same were 58. The smallest number of respondents “strongly disagreed” with the above statement. They were nine in number.
The research participants were also asked to state whether Airbnb allowed them to have a meaningful experience with the locals. A majority of them (128 people) agreed with this view. The second largest group of respondents (105 people) held neutral views about the same statement, while the third largest group of respondents disagreed with this opinion. Those that “strongly agreed” and “strongly disagreed” with this view were 55 and 15 respondents, respectively. They comprised the fourth and fifth largest groups of respondents.
The positive views held by the respondents about Airbnb were also replicated in the opinions of the respondents’ regarding the level of excitement they felt when using the platform. A majority of them “agreed” with the statement that local activities associated with Airbnb are exciting. Those who felt this way formed the largest group of respondents comprising 157 people. The second largest group of participants was comprised of those who held “neutral” views of the same statement. It was comprised of 118 respondents. The third largest group of informants was made up of those who “strongly agreed” with this statement. It was comprised of 52 people.
The fourth largest group of informants consisted of those who “disagreed” with the statement. They were 43 people. Lastly, the smallest group of respondents was comprised of 15 participants who “strongly disagreed” with the above-mentioned statement. In sum, most of the participants agreed with the fact that many local activities are exciting in the Airbnb business model.
The same favourable views about Airbnb were also supported by the willingness of the respondents to use Airbnb in the future. This statement was buoyed by findings represented in figure 4.40, which showed that most of them agreed with the view that they would continue to use Airbnb in the future. Those who held a neutral view formed the second largest group of respondents, which was comprised of 29 people. The third largest group of participants “strongly agreed” with the statement, while the fourth largest group was made up of three respondents who “disagreed” with the idea. The smallest group of participants was comprised of one person who “strongly disagreed” with this view.
Some issues that emerged as being of concern to the research informants included security, hygiene, and an unsatisfactory user experience. According to figure 4.24, which was highlighted in chapter 4, most of the respondents were neutral about the idea that the security provided in Airbnb accommodation options worried them. Respondents who felt this way were 134. They formed the largest group of informants in the sample. The second largest group was comprised of those who agreed with the same statement. It was comprised of 118 people. The third largest group of informants was made up of those who disagreed with the view that Airbnb’s security was worrisome.
They comprised 71 respondents. Comparatively, those who “strongly disagreed” with the same view were relatively smaller in number (43 respondents). The last group of respondents said they strongly disagreed with the same idea. Comprehensively, it can be assumed that a majority of the participants were concerned about security concerns pertaining to Airbnb accommodation options.
Hygiene factors were also investigated in the analysis and it was established that most of the respondents were concerned about its standards when staying in Airbnb facilities. Those who felt this way were 111 people and they formed the largest group of participants. Comparatively, those who held “neutral” views about the same issue formed the second largest group of respondents (104 people), while those who “strongly agreed” with the same position formed the third largest group of informants (90 people). The fourth largest group of participants was made up of those who “disagreed” with this view (67 people), while the smallest cohort of respondents was made up of those who “strongly disagreed” with the same idea. These issues can be broadly traced to concerns about slow user experiences, especially regarding the lack of direct communication with respondents.
Broadly, the findings highlighted in this study show that Airbnb’s Chinese business is at crossroads because the respondents generally held mixed reviews about its operations. For example, most of them were still uncertain about specific aspects of its operations, such as security and hygiene issues. At the same time, there were also concerns that the service provided a low quality user experience. It is also important to note that there was a general low sense of awareness about its products among the respondents.
Alternatively, evidence also shows that the company had a strong social value to the informants because it made them connect well with their environment and with other people. The informants also said that the company has a strong price value because of its ability to generate additional income. These findings support the success of the company, which has been highlighted in previous chapters of this document.
For example, they have suggested that these reasons explain why the company has made a name for itself as one of the fiercest rivals for traditional hotel businesses. Indeed, its threat in the market could largely be attributed to its capacity to provide customers with alternative accommodation options, different from the traditional hotel business model, where customers book a room and eat at a restaurant (Hofacker, Malthouse & Sultan 2016). Concisely, Airbnb provides a different type of accommodation to customers because it accords them a “homely” experience (Airbnb Incorporated 2017). Consequently, the company operates as an online marketplace where prospective clients view listings and contact apartment or homeowners to book residences for short and long-term stays.
Therefore, this business model allows property owners to lease out their houses for short-term or long-term stays. The findings highlighted in this study also suggest that the different kinds of accommodation options offered on the platform (apartments, cottages, and holiday homes) add value to their experiences. At the same time, it is important to remember that the company does not own any of these properties. Similarly, it does not arrange for tours.
Instead, its business model is agency-based where it takes a specific fee for every booking made on the platform (Airbnb Incorporated 2017). The findings highlighted in this report also make it easy to understand why the more than 5 million listings published on the platform generate billions in revenue for the California-based firm (Airbnb Incorporated 2018a). They also explain why the company’s market presence is spread across more than 81,000 cities and 190 countries around the world and why it has facilitated more than 300 million check-ins since its inception (Airbnb Incorporated 2018a).
Since Airbnb is known for providing customers with a different experience from traditional hotels, its global rise in the industry has been nearly unstoppable because of the conveniences highlighted by some of the participants consulted in this report. Indeed, as Hempel (2018) points out, from the time the first listing was published in 2008, the company has been able to scale the heights of success that most technology companies have failed to reach. Consequently, estimates show that the San Francisco-based organisation is worth more than $24 billion and this figure is expected to rise in the future (Hempel 2018).
The above-mentioned information can be used to answer the research questions of this paper. For example, the second question sought to find out what kind of factors influenced the relationship between Airbnb’s performance in the Chinese market. Relative to the findings gathered from this report, it could be deduced that the fifth, sixth, seventh, eighth and ninth hypotheses that were linked with the second research question were all true. This is because it was established that the respondent’s accommodation experience had a positive and close relationship with the Chinese consumers’ attitude towards Airbnb and its performance in the Chinese market.
It was also established that the guests’ sense of security had a positive and close relationship with their attitude towards Airbnb and, by extension, its performance in the Chinese market. Within the same analysis, the company’s user experience emerged as having a positive and close relationship with the guests’ attitude towards Airbnb and its performance in the Chinese market. Lastly, it was also established that the cost of accommodation in Airbnb has a positive and close relationship with the Chinese consumers’ attitude towards Airbnb and, by extension, its performance in the Chinese market.
The findings highlighted in this study also reveal that the first four hypotheses mentioned in the third chapter of this study are true. Stated differently, it was established that accommodation experiences significantly affected the attitudes of Chinese consumers’ towards Airbnb, thereby influencing the company’s performance in the Chinese market. The findings of this study also demonstrate that the perceptions of security significantly affect the attitudes of Chinese consumers’ towards Airbnb, thereby influencing its performance in the Chinese market.
The same is true for user experiences because it was established that it significantly affects the attitudes of Chinese consumers’ towards Airbnb and its performance in the Chinese market. Lastly, the same findings support the view that the price of accommodation significantly affects the attitudes of Chinese consumers towards Airbnb and, by extension, the performance of the company in the market.
The findings highlighted in this study could be explained by the views of Custer (2018), which presuppose that the failure of Airbnb to make a meaningful impact on the Chinese market is cultural. In other words, this paper’s findings seem to reinforce the belief that Airbnb has not learned to address the needs, preferences and desires of Chinese users. In line with this discussion, Custer (2018) points out issues pertaining to trust, which is a big challenge impeding the success of sharing platforms in China because many people have a problem believing those who sell their products virtually.
Similarly, the Chinese have a problem with the email platform that is synonymous with Airbnb because they are often used to instant messaging platforms where they get a response when they make an inquiry (Custer 2018). At the same time, the Airbnb platform makes it difficult to contact a homeowner directly because all communications are channelled through the platform. Therefore, there may be issues relating to trust or miscommunication as the company maintains the right to edit or scrutinise such communications before they reach their intended audience. This messaging platform is unlike Tujia where the phone numbers of available homeowners are provided and a customer can message them directly.
The findings of this study also add merit to the arguments of Custer (2018) which suggest that part of Airbnb’s weakness has been the low speed at which it chose to enter the Chinese market. Reports show that the company only recently made the decision to venture into the market, thereby giving its competitors like Tujia a significant head start that they have used to perfect their business (Tujia entered the market in 2011 and has since built a strong brand following since then) (Custer 2018).
The entrenchment of its competitors means that for every Chinese city that Airbnb is present in; there is stiff competition from existing market entrants. Furthermore, most of these competitors have deeply entrenched business networks. Similarly, they have cultivated a sense of trust among the local populations. Therefore, it could be difficult for customers to choose Airbnb over local businesses.
Since this paper focuses on Airbnb’s operations in China, it is also important to point out the unique peculiarities of the Asian economy because there are many regulatory uncertainties, which may prevent the growth of the business. In fact, Custer (2018) suggests that the reason why China has not tightened its regulatory noose around the American-based Corporation is its minimum impact on the economy. Therefore, in future, it is important that the San Francisco-based Corporation operates legally. However, even this strategy could still be a difficult one to implement in a country where the rules are still fuzzy.
Comparatively, the positive reviews provided by the respondents about Airbnb could largely be attributed to the company’s positive impact on local communities. Indeed, according to its website, Airbnb acknowledges that most of its customers are drawn to its services because they want to experience their visits to new places, not as tourists but as locals (Airbnb Incorporated 2018b). In fact, the information provided on the same platform suggests that more than 90% of its clients want to experience travel adventures this way (Airbnb Incorporated 2018a). It is also reported that up to 75% of the properties listed on the company’s website are outside of the main districts.
Within the same population, it is also estimated that up to 79% of Airbnb guests want to explore a specific neighbourhood (Airbnb Incorporated 2018b). These statistics support a narrative that most of the company’s customers like to stay longer and spend more time and money in diverse cities or neighbourhoods. In fact, it is established that such types of customers typically spend up to 2.1 times more time in such neighbourhoods compared to less diverse ones (Airbnb Incorporated 2018b). Data on spending patterns also reveal that Airbnb customers often spend more money than typical visitors do (up to 2.1 times) (Airbnb Incorporated 2018b). About 42% of the same guests spend such money in the neighbourhoods where they reside in during their stay (Airbnb Incorporated 2018b). These findings explain why the respondents said Airbnb had a strong financial benefit to its users.
Indeed, reports show that listing properties on the platform has helped thousands of property owners to supplement their household incomes. About 81% of hosts who have benefitted this way share a part of their home to strangers (Airbnb Incorporated 2018b). A majority of them (52%) usually fall within the low or middle-income strata (Airbnb Incorporated 2018b). Again, a majority of the same number of respondents (53%) said that hosting helped them to stay in their homes (Airbnb Incorporated 2018b). Some of the income generated through Airbnb (about 48%) is also used to pay ordinary household expenses such as rent and groceries (Airbnb Incorporated 2018b). Broadly, the information provided in this chapter explains why the respondents had mixed reviews about the company’s performance in China.
Recommendations
Since the lack of direct communication between hosts and guests emerged as one of the concerns affecting the company’s operations in China, it is important to point out the need for the firm to improve customers’ user experiences as a precursor to growth. More importantly, the company should strive to promote real-time communication between Airbnb hosts and their potential customers because its Chinese rivals, which even have the hosts’ numbers, offer the same service.
Comparatively, Airbnb curtails communication between both parties, thereby providing ground for potential mistrust between guests and hosts. Although it has traditionally used this model as a standard operating procedure in many of its markets, it is important to recognise the unique cultural dynamics of China and the potential effects of competitor activities as part of its overall business strategy. In other words, it is essential for the virtual giant to tweak its business operations to reflect the reality of the Chinese society because the lack of real-time communication between hosts and guests could create mistrust between both parties.
The findings highlighted in chapter 4 of this paper also showed that there was a low sense of awareness of Airbnb in China. To address this problem, the company needs to enhance its marketing campaign in China. Particularly, it needs to increase its visibility in the market because it appears that its competitors are doing a better job in this regard. However, when doing so, it is important for the California-based organisation to revamp its marketing initiatives within acceptable and popular limits because using western-based communication designs may not be effective in a country that has strict internet laws and strong censorship regulations.
More importantly, when developing its marketing plan, Airbnb should focus on communicating its core values to its customers as opposed to simply letting people know about it. In this strategy, the organisation should also ensure that its Chinese customers understand why it is a better choice for them compared to traditional companies, which currently control a huge market of the sharing economy. This way, customers could be better convinced that using Airbnb is more beneficial to them compared to the traditional Chinese-based companies.
Airbnb should also improve its platform experience because the findings highlighted in this study demonstrate that its users are worried about certain aspects of its functionality. The company’s information technology department should undertake such improvements because they have the power to make sure the customers’ user experience is “above average.” For example, they should redesign the company’s website to make sure that hosts do not give ambiguous information. At the same, they should undertake similar redesigns to shorten the response time between a client and host. Comprehensively, such modifications would improve the user experience of the clients and possibly lead to an increased acceptance of its services in China.
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Airbnb is an online platform for renting and listing local homes connecting travelers and hosts. It supports establishing a sharing economy by enabling property owners to find clients to rent their private flats. The company has grown to become the largest community-based and accommodation, provider. Today, the platform has more than 1,500,000 listings in at least 190 countries and 34,000 cities (Chen & Chang, 2018). It has made it possible for customers to make an online payment at their convenient place and time. This paper intends to use Osterwalder’s Business Model Canvas to explain the business model used by Airbnb Company, discuss the role does innovation, and how it can be improved.
Role of Innovation in the Business Model
The company has embraced modern internet technology to improve its daily activities and meet the rising demand in the market. It has applied disruptive innovation to alter the market preferences to favor its activities while giving a disadvantage to its competitors. One of the innovations that have enabled the company to attain massive growth is the development of an effective website allowing the host to list their cottages, apartments, and homes. The website offers room for the host to communicate with travelers and learn more about the provided services (Gibbs et al., 2018). It has enhanced immediately the competitiveness of the company since most of its competitors are unable to match its innovation. Modern internet technologies help Airbnb satisfy customer needs, achieve cost-saving and improve the local experience. Innovations on the cloud-based platform have enabled property owners to collect payments efficiently.
Value Proposition and Customer
The company makes it easy for travelers to learn about the available accommodation services in a given region and identify the ones satisfying their needs. Since the company offers services in many countries, travelers can find private spaces in many places they wish to travel (Chen & Chang, 2018). Moreover, the company keeps a record of the personal profiles, including reviewing system and rating information, helping travelers understand the provided services and details about the host.
Value Formation and Core Activities
The company serves as a transaction facilitator by connected hosts and travelers interested in finding quality and comfortable accommodation at their expected prices. It has gained trust and confidence from travelers offering effective review and rating systems (Gibbs et al., 2018). Many service providers enjoy the company’s host protection insurance since it eliminates the involved risks. User reviews and profiles have earned the company gain great reputation in the market and enabling it to attract many customers.
Revenue Model
The company earns a commission from both travelers and hosts for every booking made. The host must pay 3% of the booking cost for a successful transaction, while customers pay between 6 and 12% of the charged fee. Since the company makes many transactions in a day, it is earning massive returns and likely to grow further in the future (Chen & Chang, 2018). By charging a low cost to the host, the company encourages many accommodation owners to use its platform when sourcing for clients.
Key Partners
The company distinguishes key partners who are crucial to its success and the platform. The accommodation owners are some of the key partners to the business, including the super hosts. They are considered the company suppliers who offer the services desired by the travelers. Hosts provide the value proposition that satisfies the demand or the needs of guests (Gibbs et al., 2018). They bring their services and property to offer variety and mass supply of choice that is necessary for the customer value proposition.
Tourism partners and communities form other key partners to the business since they direct their clients to the platform for easy access to accommodation. Travel companies usually partner with communities around and tourism bodies to give visitors the best experience and enhance demand. Airbnb is determined to partner with under-represented groups and communities to improve their positions (Nathan, 2020). The company understands that interacting positively with every group can play a great role in its growth.
Technology firms are other companies that Airbnb is partnering with to enhance its relevance in the market and innovation. This is enabling the company to keep on improving its services and become more competitive in its operation. These firms are supporting Airbnb through enhancing innovation and technological advancement. Some of these partners include additional/preferred software partners such as technological providers (Gibbs et al., 2018). They provide inventory, travel inventory tasks, and support the management of bookings, among other services. Partnering with these firms enables the company to use technology to understand the best pricing strategy and check the availability of accommodation spaces. Moreover, the company works together with payment and map platforms, identification, and cloud storage (Nathan, 2020). Other key partners include associates, travel partners, investors, venture capitalists, and commercial partners.
Key Activities
Airbnb is involved in three key activities, namely improving the existing value propositions as well as establishing new ones, operational consistency and excellence, and continued host expansion. The company is determined to maintain its gradual growth using the innovation adoption trajectory. Most of the company’s activities can be grouped into transaction/post transaction costs, reductions of search, and promoting network effects while lowering negative implications (Nathan, 2020). All the company activities are focused on improving its services to customers and subsequent returns on investment.
Developing new and improving the existing value propositions has enabled the company to remain competitive in the market. It has engaged in many activities to achieve its dreams, such as adding new offering tiers with Luxe and Airbnb Plus. The eruption of the COVID-19 saw the company develop a product that aligned with the emerging demand. It grew and introduced an online experience for an incredible 14 days, and the feedback is positive (Gibbs et al., 2018). Moreover, the company is working with owners and property developers to include multi-home complexes in their system to extend its business to another level. Airbnb is determined to embrace innovation to improve its capabilities and offer better services in the future.
Customer Segment
The company applies innovative strategies to segment both sides: the host and guests. It uses micro and market segmentation based on the purpose such as business growth, development of a new product, and marketing. Airbnb may consider segmenting its guests depending on behavioral, geo-demographic, interest, and motivation. Behavioral segmentation considers the rental type, including the private room, shared space, and entire apartment/home (Gibbs et al., 2018). Trip type considers factors such as backpacking, visiting friends, and leisure travel. The behavioral segment may also cover accompanying guests such as kids, spouses, and parents. The interest of the guests and their activities helps the company determine the nature of services and spaces that customers would like to rent out.
Finding Customers
Customers enable the company to earn revenue and remain in business by either paying the accommodation service or providing spaces. The company uses innovative strategies to find both travelers and hosts, including word of mouth, social media, affiliate models, promotional offers, and digital marketing. It is determined to use emerging technology to reach out to as many customers as possible. Airbnb uses diverse social media platforms such as Facebook and Twitter to attract customers and offer as much information as possible (Gibbs et al., 2018). Marketing its services through social media has enabled the company to maintain and develop steady growth. The company uses innovative strategies to improve its image, reputation, and popularity around the globe to remain the most preferred by travelers.
Improving Innovation
Airbnb should make more effort to improve its innovation to offer better services and meet the rising demand. This should focus on eliminating issues affecting customers or hindering them from using the platform. The company should consider developing keyless access to the paid spaces to eliminate the hassle of handing over the keys to the travelers when they arrive and collecting when leaving. This implies that the company should invest in scanning technology or the use of codes to enable the guest convenient access. Moreover, the company should invest in the improvement of customer stickiness and business traveler acquisition.
In conclusion, innovation has enabled the business to maintain a steady flow of customers and achieve consistent growth. Its effective systems create room for owners to list their spaces and gain returns from renting their spaces and travelers to find a comfortable, affordable, and convenient space away from home. Its effective strategies in the marketing process and provision of quality services have seen the company grow to become the largest community-based platform. To achieve its objectives, the company has adopted innovative business models that encourage customers to keep on coming. Understanding the market and applying an effective business model has enabled the company to invest in more than 190 countries. It is determined to boost its daily transactions and attract more customers to remain ahead of its competitors. Creating convenience for both the travelers and host has won the company customer’s trust and confidence.
References
Chen, C. C., & Chang, Y. C. (2018). What drives purchase intention on Airbnb? Perspectives of consumer reviews, information quality, and media richness. Telematics and Informatics, 35(5), 1512-1523. Web.
Gibbs, C., Guttentag, D., Gretzel, U., Morton, J., & Goodwill, A. (2018). Pricing in the sharing economy: A hedonic pricing model applied to Airbnb listings. Journal of Travel & Tourism Marketing, 35(1), 46-56. Web.
Nathan, R. J., Victor, V., Tan, M., & Fekete-Farkas, M. (2020). Tourists’ use of Airbnb app for visiting a historical city. Information Technology & Tourism, 22(2), 217-242. Web.
