Is this the end for traditional hotels?

Airbnb is an online platform that offers accommodation to millions of people worldwide. Airbnb is very different from your typical hotel system. Firstly, people can offer their homes/flats and even singular rooms on Airbnb. Besides, the flexibility of the Airbnb platform allows consumers to add or remove rooms and properties at their own will. Airbnb is part of the sharing economy and is also classified as a peer to peer to the company. Also, there is no third party orchestrating the deal, whereas it is between the host and the guest while Airbnb provides the online platform for this to happen.

That shows you the flexibility which Airbnb provides consumers. Airbnb is regarded as one of the most successful start-ups of the millennium (Devanur, 2019). It has over 81,000 listed cities with over 2 million people using an Airbnb on any given night (Airbnb, 2020).

What separates Airbnb from its competitors?

Airbnb is now worth $35 billion (Ghaffary, 2019). Furthermore, Airbnb acts as prime competition in the already established hotel industry, with dominant chains such as Marriott who are the largest hotel group in the world. Marriott’s shares in the room and home rental industry have been impacted so much by the success of Airbnb that they decided on setting up their home rental, which is also app-based, according to (“Airbnb Faces New Competition as Marriott Offers Home Rentals”, 2019).

However, in the discussion of how successful Airbnb can be, some have argued that Airbnb is not in fact competition to hotels, but rather an alternative. “Airbnb’s potential impacts may be dismissed because Airbnb exists parallel with, instead of in competition with, traditional accommodation” (Guttentag, 2013, p.1205)

Moreover, Airbnb did not only disrupt the hotel industry, but it also disrupted the real estate industry. (Disruptive Innovation refers to a technology whose application significantly affects the way a market or industry functions (Twin, 2019). Airbnb does not own a single property; this is a big factor in which separates Airbnb from hotels. 

Value proposition

• Easy to use app
• Ratings allow users to have a perception on where they are staying before they book
• Insurance for property which does not live up to their reputation.

Lets get Digital!

Algorithms and Appealing to the Masses

One of the biggest contributors to Airbnb’s success is the fact that it appeals to the many rather the few. Airbnb allows the host and the traveller to adapt their experience, by customisation which is done through data collection and algorithms which provide recommendations more accurate than they have ever been.

 This allows people to have refined searches provided for them without having to go via third party companies such as booking.com or Trivago. In addition, these companies give different prices for potentially same hotel room. However, Airbnb is more transparent and straight forward. Also, Consumers get frustrated when they discover that they could have paid less via a different agent.

Referral system

Airbnb has been a massive success due to other digital aspects that have been previously mentioned. However, one of the potential game-changers for the company’s business model lies within the referral aspect.

Airbnb allows users to get a personal recommendation code. This recommendation code allows users to share their experience and get their friends involved. Also, the user who shares the code gets incentives such as money off their next booking. The link takes them straight to the Airbnb sign up page.

Trust and transparency

The case of trust in their accommodation industry is always a mixed subject. Airbnb especially relies on trust more than traditional hotels. However, Airbnb makes sure that with every host and visitor, they must verify their identification through scanning their passport and uploading a picture. This allows the host to have a better idea of who they are dealing with. Also, the review system of the website is great because you can see real-life people’s responses and interactions with the host before booking.

Airbnb encourages all communication and payments to happen via the app or the Airbnb website, whereas traditional hotels also offer phone booking which has resulted in a lot of phone scams. Therefore, the digitalisation of payment and communication has allowed Airbnb to gain success further through consumer retention.

Furthermore, Airbnb has developed and patented software which will screen potential guests/ hosts. This can alert them if the host or the guest is a threat, therefore, they can look to take action (Holmes, 2020). Moreover, this will be a future method of consumer retention due to the trust which they place in Airbnb.

How will Airbnb stay successful?

As brilliant as Airbnb’s digital business model has been in this time of a new digital age. It has still faced obstacles and has many obstacles to come in the form of regulations and laws to protect the real estate industry. Moreover, the digital business model of Airbnb has proven to be one of the success stories of modern technology and entrepreneurship.

However, Airbnb can retain its status by continuously innovation which is the key to economic growth as Schumpeter discussed in 1974. In addition, competition will be fierce with time as technology continuously to become integral in society, traditional models will adapt and develop new methods to regain their market share from Airbnb.

Be formless,shapeless like water– Bruce Lee

References

Airbnb. (2020). Airbnb Trust & Safety – Your safety is our priority. [online] Available at: https://www.airbnb.co.uk/trust [Accessed 2 Mar. 2020].

Consent.yahoo.com. (2020). TechCrunch is now a part of Verizon Media. [online] Available at: https://consent.yahoo.com/collectConsent?sessionId=3_cc-session_a0aa423b-703d-4893-8171-77df60267bd5&lang=&inline=false [Accessed 5 Mar. 2020].

Devanur, G. (2019). Council Post: The Secret To Successful Startups. [online] Forbes. Available at: https://www.forbes.com/sites/forbestechcouncil/2019/04/05/the-secret-to-successful-startups/#dbb7f897e87c [Accessed 3 Mar. 2020].

Ghaffary, M. (2019). Marketplace Checklist: How Airbnb Built A $35 Billion Business On Its Brand Strength. [online] Forbes. Available at: https://www.forbes.com/sites/mikeghaffary/2019/05/30/marketplace-checklist-how-airbnb-built-a-35-billion-business-on-its-brand-strength/#248ab96c6147 [Accessed 4 Mar. 2020].

Guttentag, D. (2013). Airbnb: disruptive innovation and the rise of an informal tourism accommodation sector. Current Issues in Tourism, 18(12), pp.1192-1217.

Holmes, A. (2020). Airbnb has patented software that digs through social media to root out people who display ‘narcissism or psychopathy’. [online] Business Insider. Available at: https://www.businessinsider.com/airbnb-software-predicts-if-guests-are-psychopaths-patent-2020-1?r=US&IR=T [Accessed 6 Mar. 2020].

Moore, P. (2011). Social trust factors. [online] Available at: https://www.business2community.com/social-media/social-trust-factor-10-tips-to-establish-credibility-088362 [Accessed 4 Mar. 2020].

Sorman-Nilson, A. (2020). Futurist Keynote: Digital Disruption In The Hospitality Industry (1/2). [online] Anderssorman-nilsson.com. Available at: https://www.anderssorman-nilsson.com/blog/futurist-keynote-for-the-hospitality-industry-part-1/2 [Accessed 3 Mar. 2020].

Twin, A. (2019). Disruptive Innovation: Change That Upends a Whole Industry. [online] Investopedia. Available at: https://www.investopedia.com/terms/d/disruptive-innovation.asp [Accessed 3 Mar. 2020].

Zee, R. (2016). The ‘Airbnb effect’: is it real, and what is it doing to a city like Amsterdam?. [online] the Guardian. Available at: https://www.theguardian.com/cities/2016/oct/06/the-airbnb-effect-amsterdam-fairbnb-property-prices-communities [Accessed 4 Mar. 2020].