{"id":29191,"date":"2018-11-12T17:59:17","date_gmt":"2018-11-12T22:59:17","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/can-machine-learning-deliver-airbnbs-next-leg-of-growth\/"},"modified":"2018-11-13T17:16:51","modified_gmt":"2018-11-13T22:16:51","slug":"can-machine-learning-deliver-airbnbs-next-leg-of-growth","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/can-machine-learning-deliver-airbnbs-next-leg-of-growth\/","title":{"rendered":"Can Machine Learning Deliver Airbnb\u2019s Next Leg of Growth?"},"content":{"rendered":"

Launched in 2008, Airbnb has become a $31 billion behemoth in the hospitality industry. [1] A large part of that success is driven by a 2014 change: the introduction of its machine learning search ranking model. [2] Airbnb operates in a two-sided market, where it must match guests (people looking for accommodations) with hosts (people renting out spaces). Machine learning has been able to improve Airbnb\u2019s match rate and deliver significant growth. But, can Airbnb continue growing at the pace it does today?<\/p>\n

How Airbnb Uses Machine Learning <\/strong><\/p>\n

With 5+ million unique places to stay and 15,000+ activities, Airbnb uses machine learning to generate personalized rank search results. [3] When trying to find the best listings for each guest, Airbnb looks at over 100 factors, taking into account not only explicit requests, like length of stay and number of rooms, but also implicit signals like d\u00e9cor, setting, and preferences of similar guests. [2]<\/p>\n

But, Airbnb\u2019s machine learning capabilities are not just used to service guests. The company also offers a number of host services. One tool is its pricing algorithm, based on an open-source machine learning tool called Aerosolve. Offered to hosts through pricing tips and Smart Pricing, Airbnb\u2019s pricing algorithm constantly iterates based on key attributes (like size, location, and amenities), demand, and seasonality. [4] Airbnb also uses machine learning to understand host preferences, studying occupancy preferences (i.e. do hosts want gap days between requests?) and notice time preferences (i.e. how early do hosts prefer to receive requests?). [5]<\/p>\n

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By continuously improving its algorithms, Airbnb has rapidly grown its Homes segment. Going forward, the company should continue thinking of creative ways to leverage its data to offer new services to its hosts and guests.<\/p>\n

The \u201cEnd-to-End\u201d Travel Company <\/strong><\/p>\n

Airbnb hopes to one day become an \u201cend-to-end\u201d travel company. CEO and co-founder Brian Chesky has stated that by 2021, the majority of Airbnb\u2019s offerings \u201cwill be the new things that we are doing as of 2017 on.\u201d [6] A recent report from Morningstar states that Airbnb\u2019s future growth will likely come from global expansion, new product categories (i.e. Airbnb Experiences, transportation, and restaurant bookings), new accommodation offerings (i.e. luxury homes and boutique hotels), corporate travel business, and an Airbnb Superguest loyalty program. [7]<\/p>\n

As demonstrated by Airbnb Experiences, machine learning will continue to play a key role. Launched in November 2016, Experiences uses machine learning to generate personalized results for each guest through tracking experiences that guests have shown interest in, location, dates, and group size. The new product line has seen 2500% growth during 2017. [8]<\/p>\n

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With the launch of \u201cAirbnb Corporate & Business Travel\u201d and \u201cAirbnb Experiences\u201d and the acquisition of Luxury Retreats and Resy, the company has more data on its guests than ever before. Airbnb should use that data to develop new offerings. For example, as Airbnb continues to formulate its loyalty program, the company could consider creating a loyalty program that offers personalized benefits. Using the data gathered on each user, the company could offer access to unique rentals or difficult restaurant reservations, concierge services, or even gym benefits.<\/p>\n

Growing Pains<\/strong><\/p>\n

While it\u2019s data-driven approach has enabled Airbnb\u2019s growth, the company is also facing growing pains. \u00a0A few to be considered:<\/p>\n