Business strategy

Airbnb Business Strategy

Airbnb was established in 2008. Brian Chesky owns it with 29.1% ownership, Nathan Blecharczyk with 25.3% ownership, and Joe Gebbia with 22.9% ownership (Petruzzi et al., 2020). The company charges guests a service fee by placing them at an accommodation. It matches people who own real estate properties and are interested in renting short-term lodgings. Over the years since its startup, the company has grown tremendously, from serving approximately 1000 customers in 2009 to serving more than 150 million customers in 2022 (Mousavi and Zhao, 2022, 303). It is a business that follows the holacracy model where its teams are arranged for projects to help move quickly, keeping a quick and iterate pace. It has six subsidiaries and 75 executives in 18 departments (Petruzzi et al., 2020). The vice president reports to Brian Chesky, the CEO, who then reports to the board of directors. It utilizes a hybrid model allowing its employees to work from anywhere, meeting quarterly to connect. The employees are also allowed to work anywhere in the 170 nations while receiving the same pay as they were at their normal workplaces (Petruzzi et al., 2020). As a result, the company has become an ample competitor to even the largest hotel chains and travel agencies. Some of the goals the company intends to accomplish include upgrading and developing its customer services and relations, especially during and after the host experience, improving security for its guests, belonging anywhere, and hosting people all across the globe with the use of internet-based accommodation and expansion and penetration into Africa and the Middle East, partnership with Uber that will help in the transportation arrangements with the guests, and increase repeater guests using Airbnb services. However, even with the goals, the company faces critics due to the failure to maintain proper customer service, thus getting negative reviews from the customers and rude and uncouth designated drivers, among other challenges.

The company has 26 acquisitions and eleven investments. It has been spent on online travel, social platforms, and food tech. It has acquired 15 companies, including HotelTonight. It also has an unfinished business deal with Uber as it wants to partner. The mergers and acquisitions have cost the company more than $ 700 million (Meenakshi, 2021, 5). The company has also invested heavily in the internet and information technology as the business is purely digitalized. However, all the mergers and investments have not given positive outcomes as would be expected. Concurring with Mousavi and Zhao (2022, 304) articulate, with the information technology, the company has not perfected the filtering of the listings, which might be misguiding or the information about its guests, who might be a challenge to their hosts. In addition, the review system has not provided perfect evaluations that give customers correct information, among other fails.

The company intends to give its customers the best experience and increase customer return to at least 50% of the served guests (Mousavi and Zhao, 2022, 306). However, as discussed below, some challenges might make achieving that difficult.

Concurring with Andreu and his fellows (2022, 18), the company works in a turbulent environment that demands it remains innovative and takes risks. The company does not own the host houses but is owned and rented by the hosts. The company only links the guests with the hosts. As the company intends to upgrade security and ensure that all guests are secure in their residential booked places, Mousavi and Zhao (2022, 307) are right while claiming that the environment does not give them enough power. According to Cheng and Foley (2019, 33), Airbnb’s environment is complex, whereas changing it can be difficult. Agreeing with Andreu and his fellow scholars (2022, 20), guests have concerns despite the fast growth of Airbnb in tourism and hospitality. The government does not inspect the places for safety, and standards like hotels are inspected. The Airbnb company does not inspect the homes, leaving the host with all the responsibility or freedom to decide how to keep their rooms. As Sthapit, Björk, and Jimenez (2021, 640) say, some Airbnb guests have reported that the hosts did not show up to receive or show their guests the place or during the stay to ensure that the Airbnb was clean. Others complained that their reservations were cancelled shortly before check-in. There are also indispensable complaints that host post photos that do not exactly depict the property’s appearance or amenities. For instance, in a study by Sthapit, Björk, and Jimenez (2021, 642), the number of bathrooms and bedrooms indicated in the picture did not match what one client found. Recently, significant concerns about such issues have risen, and there is less trust from guests.

Even though Wang, Asaad, and Filieri (2020, 686) say that the company has succeeded in ensuring security for the host and guest, there are insecurity issues. This year, the company’s major goal is upgrading security to ensure all guests are safe and secure at their residential Airbnb (Huertas et al., 2021, 102762). Unlike how Andreu and his fellows (2022, 21) argue that the company will succeed in that, the environment it works in to achieve this goal makes it harder. Purohit and colleagues report (2021) from their study that there are significant concerns relating to safety, security, and discrimination issues, which I agree with. Most guests have been robbed in those Airbnb. An example is the sexual assault of an American guest by his trans host on his trip to Spain (Huertas et al., 2021, 102762). Another example is the loss of $9000 by an IT specialist, who had the loss in a fake listing of a Hawaii villa. There was also a reported racial discrimination case where a host turned away an Asian American woman during a snowstorm due to her race. There was also a reported case of a guest whose host threatened to expose their private photos after leaving a four-star review (Sthapit, Björk, and Jimenez, 2021, 640). In another case, the host, whose case was in 2019, killed a guest over an unpaid bill (Huertas et al., 2021, 102762). Such incidents and many more leave the company responsible for developing safety measures that protect the guests, correlating with Mousavi and Zhao’s (2022) proposal. The horrific stories scare away other potential customers and the return ones, too, denying the company the chance to increase its new and return customer number.

Apart from the guests, the hosts are also unsafe in the hands of the guests, who might be looking for hideouts or places to carry out their malicious businesses. Disagreeing with Yang and colleagues (2019, 200) on how unthreatening guests are, the consumers also pose potential risks to the hosts. In 2019, there was a case of a host who received death threats from an Airbnb guest. The host tried to contact the Airbnb company customer service for 75 hours and made eight phone calls without answering or getting assistance (Huertas et al., 2021, 102762). Another host reported a case of getting extorted by a guest, and the company did not help even after showing them the messages. Other issues of guests lying about the number of guests accompanying them in occupying the residential are also rampant. In other cases, the guests want to arrive earlier or later than agreed, which might not work with the host. In worst-case scenarios, the guests steal the Airbnb property or destroy it in ways only noticed after they are already gone. Others conduct illegal businesses in those residential. Many cases are reported to be covered with millions paid by the company over the murder, deaths, and sexual assaults (Ding et al.,2021, 659481). The company does not protect the host against such, and it is evident that they even fail to come through when most needed to solve the issues.

Airbnb aims to attract more customers and offer them the best service to remain competitive over their competitors, such as travel agencies and hotels. Airbnb is a large digitalized company that relies on reviews and customer evaluations to decide what is good. Belarmino and Koh (2020, 102315) agree that potential customers have gained organizational trust. However, Potential reviewers are not always compensated for reviewing Moreno-Izquierdo, (2019, 54), thus, might lack the motivation to do so. Agreeing with Laouénan and Rathelot (2022, 107), the reviewing, which should help improve customer experience, might not be reliable. According to a study by Palliyaarachchi and Kariyawasam (2021, 4) that evaluates the reviewing behaviours, and reputation systems, Airbnb disregards anonymous recommendations. Reviews should have no reason to misreport their experience. Still, the company’s reputation system disregards those anonymous reviews that might depict a clear picture of the services and help with the truth (Petruzzi et al., 2020). Another issue with the reviews is the bias that might still exist in the review system. Without a doubt, as Laouénan and Rathelot (2022, 107 elucidate, the system might contain bias, so the reviewers might also provide biased feedback according to their cultures, expectations, and experiences, which might differ from other guests. The other review bias occurs when the reviewer does not explain their experience (Petruzzi et al., 2020). The other problem that might affect the reviewing is the random $25 coupon in exchange for a review that increases the share of five-star reviews and decreases the percentage of the low rating and actual reviews (Laouénan and Rathelot, 2022, 107). There are situations where hosts and guests might have relations which might also deter the reviews. Others are cases of coerced reviewing where the host might compel the guest to give a 5-star rating and a positive review, like in the case of a guest whose host threatened to expose their private photos if they did not give a five-star rating and positive review. Such bias and review errors are not always considered when the company displays the reviews to the public. As a result, new customers might fail to return if they get an unexpected experience. This would affect the company’s goal of increasing its return customer by at least 50%.

The company’s other major goal is finalizing partnership agreements with Uber for transportation services to their guests. As Palliyaarachchi and Kariyawasam (2021, 3) purport, the move will be perfect and simplify the guests’ mode of movement. However, according to Fleischer, Ert, and Bar-Nahum, (2022, 1180), the company has already recorded reported misconduct from the drivers. Some drivers have been discontinued due to related misconduct cases while working with Airbnb guests. As Moreno-Izquierdo, (2019, 55) purports, innovation and partnerships with companies that can help better the customer experience and increase income can be significant to any company. Good working relations with Uber boost both companies in terms of customer satisfaction and income increase. However, if Uber driver does not conduct themselves as per Airbnb expectations, the negative review and experience spoil the Airbnb reputation and customer return rate. As Fleischer, Ert, and Bar-Nahum, (2022, 1180) argue, some clients who leave a negative review do not even explain their experience so that others can understand the exact area or issue that went wayward. Thus, the partnership must be accompanied by regulations to govern the business accordingly.

With such difficulties in attaining the goal the company intends most, implementing security and protection measures for the guests has a long way to be achieved. The brand credibility may also reduce, which results in the loss of trust from customers. Researchers in the field, as Andreu and his fellows (2022, 25) forward, argue that the company should be keener on their knowledge management. They should be stricter regarding the client’s history and the guests. When the use of experience and information does not work, like in the cases of new clients, the company should establish other measures that would help ensure that the host and guest, who are their two primary sources of income, are safe such as conducting Airbnb inspections to ensure that they are as per the standard or ensuring that they have sufficient information about the guests so that in case of any problem they can take accurate measures.

Airbnb has been growing since its establishment year 2008, definitely with challenges over and over. In the digital world, the company has managed to digitalize everything and link the guests with their hosts. The company is the umbrella, and its negative reputation affects its hosts. It has had mergers and acquisitions in the past years that have helped grow it and improve customer experience. It has also paid attention to knowledge management, where employees can work from anywhere and implement their innovativeness which makes its work environment conducive. However, its operation environment of acting as a brokerage has different challenges. The company does not manage the host and the guest well after issues arise. As a result, there erupt conflicts between the two, which might result in undesirable outcomes affecting the company’s reputation and income. The company has errors on listings where fake and incorrect listings go unnoted. The company also accepts dangerous clients who pose a threat to the hosts. Such challenges are negative to the company, and eradicating them according to its work environment might be challenging. 

References List

Andreu, L., Bigne, E., Amaro, S. and Palomo, J., 2020. Airbnb research: an analysis in tourism and hospitality journals. International Journal of Culture, Tourism and Hospitality Research, 14(1), pp.2-20.

Belarmino, A. and Koh, Y., 2020. A critical review of research regarding peer-to-peer accommodations. International Journal of Hospitality Management, 84, p.102315.

Cheng, M. and Foley, C., 2019. Algorithmic management: The case of Airbnb. International Journal of Hospitality Management, 83, pp.33-36.

Ding, K., Choo, W.C., Ng, K.Y., Ng, S.I. and Song, P., 2021. Exploring sources of satisfaction and dissatisfaction in Airbnb accommodation using unsupervised and supervised topic modeling. Frontiers in psychology, 12, p.659481.

Fleischer, A., Ert, E. and Bar-Nahum, Z., 2022. The Role of Trust Indicators in a Digital Platform: A Differentiated Goods Approach in an Airbnb Market. Journal of Travel Research, 61(5), pp.1173-1186.

Huertas, A., Ferrer-Rosell, B., Marine-Roig, E. and Cristobal-Fransi, E., 2021. Treatment of the Airbnb controversy by the press. International Journal of Hospitality Management, 95, p.102762.

Laouénan, M. and Rathelot, R., 2022. Can information reduce ethnic discrimination? Evidence from Airbnb. American Economic Journal: Applied Economics, 14(1), pp.107-32.

Meenakshi, N., 2021. Post-COVID reorientation of the Sharing economy in a hyperconnected world. Journal of Strategic Marketing, pp.1-25.

Moreno-Izquierdo, L., Ramón-Rodríguez, A.B., Such-Devesa, M.J. and Perles-Ribes, J.F., 2019. Tourist environment and online reputation as a generator of added value in the sharing economy: The case of Airbnb in urban and sun-and-beach holiday destinations. Journal of Destination Marketing & Management, 11, pp.53-66.

Mousavi, R. and Zhao, K., 2022. Examining the Impacts of Airbnb Review Policy Change on Listing Reviews. Journal of the Association for Information Systems, 23(1), pp.303-328.

Palliyaarachchi, R. and Kariyawasam, K., 2021. The rise of Uber and Airbnb: The future of consumer protection and the sharing economy. COMPETITION AND CONSUMER LAW JOURNAL, 28(1), pp.1-25.

Petruzzi, M.A., Marques, G.S., do Carmo, M. and Correia, A., 2020. Airbnb and neighbourhoods: an exploratory study. International Journal of Tourism Cities.

Purohit, S., Arora, R., Nunkoo, R., Goolaup, S. and Das, M., 2022. Airbnb experiences: Travelers’ purchase behavior and word-of-mouth. Journal of Travel Research, p.00472875221127679.

Sthapit, E., Björk, P. and Jimenez Barreto, J., 2021. Negative memorable experience: North American and British Airbnb guests’ perspectives. Tourism Review, 76(3), pp.639-653.

Wang, Y., Asaad, Y. and Filieri, R., 2020. What makes hosts trust Airbnb? Antecedents of hosts’ trust toward Airbnb and its impact on continuance intention. Journal of Travel Research, 59(4), pp.686-703.

Yang, S.B., Lee, K., Lee, H. and Koo, C., 2019. In Airbnb we trust: Understanding consumers’ trust-attachment building mechanisms in the sharing economy. International Journal of Hospitality Management, 83, pp.198-209.