{"id":17461,"date":"2016-11-18T07:35:14","date_gmt":"2016-11-18T12:35:14","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/airbnb-using-technology-to-reimagine-travel\/"},"modified":"2016-11-18T07:35:14","modified_gmt":"2016-11-18T12:35:14","slug":"airbnb-using-technology-to-reimagine-travel","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/airbnb-using-technology-to-reimagine-travel\/","title":{"rendered":"Airbnb: Using Technology to Reimagine Travel"},"content":{"rendered":"

Initially created in 2007 as a short-term solution for founder and CEO Brian Chesky to cover rent in San Francisco, Airbnb has rapidly grown over the past nine years to become the go-to online booking service for peer-to-peer accommodations. The company, now valued at $30 billion[1]<\/a>, has transformed global travel using technology to connect over 60 million guests with hosts in more than 34,000 cities and 191 countries[2]<\/a>. Yet questions remain about the sustainability of the company\u2019s business model from attracting and retaining hosts to identifying future growth opportunities.<\/p>\n

\"airbnb-stats\"<\/a>
Source: Airbnb<\/figcaption><\/figure>\n

From the outset, Airbnb sought to fill a gap in the lodging market for people seeking unique vacation experiences beyond traditional touristy options. In an interview with Charlie Rose<\/a>, Chesky notes, \u201cThe basic idea is that you could go somewhere and feel like you live in that community[3]<\/a>.\u201d Airbnb delivered on this premise by creating an online marketplace to connect homeowners with guests who pay a nightly rate for their stay. Airbnb handles payment between both parties, charging fees of 3-12% to hosts and 9% to guests[4]<\/a>. Hosts earn on average $8,000 annually from listing on Airbnb, receiving a source of supplemental income[5]<\/a>. Guests on the other hand can find nontraditional accommodations to suit their preferences, including longer stays at affordable rates, whole-home rentals and enriched cultural experiences. Over time, Airbnb has expanded the number of listings, growing from approximately 75,000 in 2012 to over 2,000,000 in 2016[6]<\/a>. This enlarged network has improved the value for hosts and guests by making Airbnb the primary destination for peer-to-peer accommodation bookings. Airbnb has benefited from the growing network since the incremental cost of an additional listing is functionally zero, with revenues flowing directly to their bottom-line[7]<\/a>.<\/p>\n

\"Source:<\/a>
Source: Airbnb<\/figcaption><\/figure>\n

Airbnb facilitates the exchange between hosts and guests through their website and mobile app. The service allows hosts to list their home and describe its features, availability and price. Hosts convey their listing\u2019s quality using pictures, comments and past reviews. Airbnb helps hosts dynamically price their listing with Smart Pricing by leveraging its massive database containing historical rates categorized by seasonality, location and size, thus maximizing revenue for both hosts and Airbnb[8]<\/a>. Guests are able to find an appropriate match using customizable search tools to specify location, dates, room type, price and other criteria. Guests also receive reviews for past stays to track their reputation on Airbnb. After the guest selects a location, the host reviews the request, communicates with the guest through Airbnb\u2019s messaging service and decides whether or not to transact. Airbnb collects the guest\u2019s electronic credit card payment and distributes the net amount to the host. The remaining logistics are handled directly between the host and guest.<\/p>\n

\"Example<\/a>
Example Listing. Source: Airbnb<\/figcaption><\/figure>\n

Seems pretty simple, right? Well, not exactly. While Airbnb has generally maintained guest satisfaction through stricter listing requirements, managing the host\u2019s expectations has been more challenging. Airbnb is regularly at the center of negative press, ranging from ransacked apartments to drug-fueled parties[9]<\/a>. The company reacted by forming a \u201cTrust and Safety Team\u201d and providing tools to screen guests. Yet screening creates other concerns, with increasing complaints of racial bias experienced by guests[10]<\/a>. Solving the trust issue between hosts and guests is no simple matter, but is critical for Airbnb\u2019s long-term viability. One potential improvement could involve Airbnb partnering with companies like Nest to provide hosts with monitoring devices to remotely check-in on their properties. Should problems arise, hosts could contact Airbnb to resolve the issue. Airbnb could also connect their analytics platform with the monitoring devices to notify hosts and guest if there is suspicious activity. To avoid privacy concerns, monitoring tools should be limited to entryway cameras and decibel meters. Given the significant upfront cost, Airbnb could subsidize these devices at different rates depending on the frequency at which hosts rent their properties and charge higher fees to recoup the expense. Additionally, Airbnb could negotiate with Nest for preferred pricing through bulk purchases and cross-promotions.<\/p>\n

\"Nest<\/a>
Nest Outdoor Cam and Protect. Source: Nest<\/figcaption><\/figure>\n

Investors will expect Airbnb to deliver new growth avenues given its lofty valuation. To do so, Chesky believes the company \u201cshould focus on making sure people have great trips[11]<\/a>.\u201d Airbnb\u2019s latest innovation, Trips<\/a>, answers that aspiration by offering immersive cultural activities[12]<\/a>. The company also has plans to add flights and services in the future. While still in early stages, the feature could be improved by combining promotions and discounts with location data to entice guests to visit nearby restaurants and stores. Given the ease of tying outcomes with the app, Airbnb could justify charging fees to advertisers if guests make purchases in their stores. However, Airbnb would need to cautiously navigate the appropriate number of popups with the actual value customers derive from information and promotions. At the very least, Trips opens up an exciting new frontier for Airbnb to engage with its guests and is worth following in the near-term.<\/p>\n

https:\/\/youtu.be\/JaDcAs50rSM<\/a><\/p>\n

(Word count: 800)<\/p>\n

_____________________________________________________________________________________________________<\/p>\n

[1]<\/a> \u00a0Maureen Farrell and Greg Bensinger, \u201cAirbnb\u2019s Funding Round Led by Google Capital,\u201d The Wall Street Journal<\/em>, September 22, 2016, http:\/\/www.wsj.com\/articles\/airbnb-raises-850-million-at-30-billion-valuation-1474569670<\/p>\n

[2]<\/a> Airbnb Company Website, https:\/\/www.airbnb.com\/about\/about-us<\/p>\n

[3]<\/a> Charlie Rose, \u201cBrian Chesky, AirBnb co-founder and C.E.O., on the success of his lodging rental website,\u201d March 04, 2016, https:\/\/charlierose.com\/videos\/25522<\/p>\n

[4]<\/a> Andy Kessler, \u201cBrian Chesky: The ‘Sharing Economy’ and Its Enemies,\u201d The Wall Street Journal<\/em>, January 17, 2014, http:\/\/www.wsj.com\/articles\/SB10001424052702304049704579321001856708992<\/p>\n

[5]<\/a> Rose, \u201cBrian Chesky.\u201d<\/p>\n

[6]<\/a> Airbnb Company Website, https:\/\/www.airbnb.com\/about\/about-us<\/p>\n

[7]<\/a> Barry LibertYoram (Jerry) WindMegan Beck, \u201cWhat Airbnb, Uber, and Alibaba Have in Common,\u201d 性视界 Business Review<\/em>, November 20, 2014, https:\/\/hbr.org\/2014\/11\/what-airbnb-uber-and-alibaba-have-in-common<\/p>\n

[8]<\/a> Harriet Taylor, “Airbnb launches ‘Smart Pricing’ for hosts,\u201d CNBC<\/em>, November 12, 2015, http:\/\/www.cnbc.com\/2015\/11\/12\/airbnb-launches-smart-pricing-for-hosts.html<\/p>\n

[9]<\/a> Harry Bradford, \u201cMost Airbnb Rentals Go Perfectly. Then There Are These Horror Stories,\u201d The Huffington Post<\/em>, July 29, 2014, http:\/\/www.huffingtonpost.com\/2014\/07\/29\/airbnb-horror-stories_n_5614452.html<\/p>\n

[10]<\/a> Heather Somerville, \u201cDiscrimination is biggest challenge for Airbnb, CEO says,\u201d Reuters<\/em>, July 12, 2016, http:\/\/www.reuters.com\/article\/us-airbnb-discrimination-idUSKCN0ZT02M<\/p>\n

[11]<\/a> Rose, \u201cBrian Chesky.\u201d<\/p>\n

[12]<\/a> Airbnb Press Release, \u201cAirbnb Expands Beyond the Home with the Launch of Trips,\u201d November 17, 2016, https:\/\/press.atairbnb.com\/airbnb-expands-beyond-the-home-with-the-launch-of-trips\/<\/p>\n","protected":false},"excerpt":{"rendered":"

Airbnb has transformed global travel using digital technology to connect millions of guests with private hosts. 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