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Airbnb- A Disruptive Innovator

Case Code: ITSY089
Case Length: 21 Pages
Period: 2008-2015
Pub Date: 2016
Teaching Note: Available
Price: Rs.400
Organization: Airbnb
Industry: Travel
Countries: US, Global
Themes: innovation, Sharing Economy, Startup
Global Economic Impact of Coronavirus – Assessment and Mitigation (B)
Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

Connecting travelers and affordable accommodation

Airbnb acted as a match maker between the hosts who wanted to rent their space and travelers who were looking for accommodation. The company’s website acted like a virtual marketplace where the hosts and guests could meet each other; it created a platform providing access to persons with apartments, spare rooms, or even an island to the global market of travelers. Conley said Airbnb was helping customers and hosts communicate with each other, fostering an “environment where humanity exists in technology. So, technology can actually enable trust and it can actually inspire trust.” (Refer to Exhibit I for Airbnb Business Model).

The hosts could list their space through the Airbnb website. While listing any space, certain details about the hosts’ space had to be filled in; for example, home type, room type available for renting, etc...

Revenue

Airbnb’s revenue came from charging a nominal fee for every booking processed through its website. It charged hosts 3% as host service fee. The guests were charged anywhere between 6 and 12% of the booking amount, depending on the type of property and booking price. The higher the booking amount, the smaller the fee percentage. The guest fee was non refundable, even if the guests cancelled the reservations. Observers said that Airbnb had tried to keep the commissions low to discourage customers from shifting to offline transactions..

The other side

Some analysts believed Airbnb’s lower prices had made it an attractive alternative to hotels while others were apprehensive of how Airbnb was changing the trends in society. Businesses based on the sharing economy, like Airbnb, relied heavily on mutual trust between the hosts and the guests. While the hosts had to overcome their fear of entertaining strangers, and the guests had to be ready to stay in places belonging to strangers. Although Airbnb received many positive stories, some hosts and guests shared their bad experiences. For example, a London-based host, Peter Tompkins, began subletting his flat through Airbnb and was dismayed when books or cutlery went missing several times. There were several similar cases of theft and ransacking of apartments...

Looking ahead

The economic impact of Airbnb could not be neglected. In New York, Airbnb’s economic impact was vast, with 87% of its hosts being primary residents in the homes and an average host making approximately $7,530 as annual income from Airbnb..

Exhibits

Exhibit I: Airbnb Business Model
Exhibit II: Listing the Space on Airbnb
Exhibit III: Booking Accommodation through Airbnb
Exhibit IV: Airbnb – Nine Hospitality Standards
Exhibit V: AirbnBest Survey – San Francisco
Exhibit VI: Airbnb’s Impact on Housing Market

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