AirBNB Business Model Critique

airbnb.com founded in 2008 and headquarters in San Francisco, California is a company that operates a website which allows its customers to list and reserve accommodation from a spare room to an empty apartment. AirBNB acts as the middle point which connects the travelers and their potential hosts. An idea which came to their co-founders Joe Gebbia and Brian Chesky, while they were struggling to pay their rent, AirBNB grew to become a worldwide company with investors such as Actor Ashton Kutcher and Amazon.com founder Jeff Bezos funding the company.

AirBNB business model is quite unique which makes it new and exciting. This provides the company to grow through the community based sharing economy. AirBNB’s value proposition is divided into two of the type of customers they are serving, Travellers and Any person with a Room, an Apartment, a villa or an Castle to rent. Travellers get the luxury of staying at unique places and meeting new people for a very low price and for any individual with a room to spare, Rent it out for a day, week or a month to a worldwide audience [1]. When added to the 6 C’s of value proposition we see AirBNB ticking most of the boxes;

Content Thousands of Listing and choices.
Community Community driven business. People share their extra rooms while travellers pay for accommodation.
Convenience Convenience of reserving a room well before travelling to the destination.
Choice Choose from a wide variety of accommodation which will fit the travellers taste and price.
Cost Reduction Reduce cost considerably when booking accommodation.

 

Revenue model of AirBNB business model is quite simple, for the services they offer they charge a percentage of the transaction cost making this a Transaction based revenue model. AirBNB charges a 6-12% guest service fee from a guest each time a reservation is booked [2] and a host service fee which is 3% which comes out from the payment the host gets for renting out his/her space [3]. This enables the the site to keep on operating and cover processing fees.

When it comes to Market Opportunities AirBNB again has 2 specialized markets that they can directly penetrate. Travellers who are looking for a good place to stay for a good price and people with an extra room which they are willing to rent out to get some extra cash. This market applies to the whole world as AirBNB has places from 190 countries, 34000+ Cities with over 800000+ listings.

Competitive environment of AirBNB is mainly based on the reservations and hospitality industry. Hotel chains and e-commerce ventures such as wimdo.com, homeaway.com, 9flats.com are the major threats or competitors to AirBNB. As of now AirBNB has listings of more than 800,000+ rentals and steadily advancing.

competition

Homeaway is the largest competitor AirBNB has at the moment but AirBNB has the distinct advantage of having a better “Brand Recognition”. Homeaway mainly deals with bookings in the US and although they have bookings around the world it is not as prolific as AirBNB. The pricing from both these companies are fairly competitive [5,6]. But, the Guest fee waiver on Homeaway gives them a better advantage.

rates

The Competitive advantage AirBNB has over its competitors is the “Brand”. They keep on making it more prominent and the website helps in this as well. airbnb.com is very user-friendly and very easy to navigate through. Having a global presence has really helped the company to become profitable.

AirBNB’s market strategy is to build though the community. airbnb.com can be logged in thoguh Google or Facebook and users are rewarded with “Travel Credits” for inviting and getting their friends to join. They also encourage Facebook login to gain access to user information.

AirBNB’s strategy to get people onboard will mean that more people will tend to use this service. Thus, generating income for the organization to operate.

AirBNB is an ecommerce venture that is operated from San Francisco, California. The main core development is done through the HQ while AirBNB is globally presence in Europe, South America and the Asia-Pacific regions is done through marketing and operations personnel. AirBNB has clearly succeeded in getting through to the community through their services and marketing functions. Core development has worked remarkably to bring out a very simple yet powerful platform while marketing has been a stop ahead of the competition. High profile investments such as Actor Ashton Kutcher and Amazon.com founder Jeff Bezos has really helped the company climb the corporate ladded faster.

AirBNB business model is unique and community driven. With the years to come AirBNB will become a giant in the hospitality/shared economy. Any startup competing with AirBNB will have to consider their global reach and weakness we see in the pricing (It can be free, with advertising coming in). But, AirBNB is already very strong and is able to quite simply scrape out the competition.

AirBNB Business Model Canvas

AirBNB_Business_Model

References:

[1] http://www.lumosforbusiness.com/blog/821/08-11-2012/Business+Model+Breakdown++Collaborative+Consumption

[2] https://www.airbnb.com/help/article/104

[3] https://www.airbnb.com/help/article/63

[4] https://rivalfox.com/competitors/airbnb-competitors

[5] http://www.homeaway.com/info/lyp

 

Disclaimer:

This is solely my analysis and is not intended to hurt any organization. Author is not liable for any damages (if any)

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