Apple is one of the most successful companies in history. It is likely not a surprise to hear that Forbes recently ranked Apple #1 for the 8th consecutive year as the world’s most valuable brand 1. When Apple decides to introduce a new product or service, its approach is typically one of the more strategically […]
What is next for Airbnb? One of the worlds most successful businesses under the “shared economy,” Airbnb has around 5 million lodging options across 81,000 cities in the world 8. In 2017, the company value was at $31 billion during its last round of funding 8. Airbnb has shown high adaptability and increased longevity, tapping into the heart of would-be travelers seeking a unique tourist experience at an affordable price and successfully competing against luxuriously catered hotel accommodations and pre-packaged travel dealers. Airbnb has used innovations to allow people (Host) to conveniently list their personal space and connect to other people (Guest) seeking a more cozy experience. In the growing peer-to-peer economy, this disruptive approach provides a massive business opportunity to property owners and competitive pricing for travelers seeking a place to stay. Even with its successes, Airbnb is not immune to the challenges that come with being a disruptive force in an industry with many competitive factors, and legal guidelines intended to ensure that travelers and destinations are protected. So how does Airbnb continue to move forward?
Listing Growth
In 2017, Airbnb found itself downgraded by Morgan Stanley as a recommendation for online travel and booking servicing. Instead, the nod went to online travel advisors like Trip Advisor with the belief that Airbnb had topped off with user adoption and growth 3. With the company well established, awareness driven adoption tactics appeared to be exhausted in the many countries with massive Airbnb listings.
Airbnb’s growth outside of the country has been astounding. Airbnb has developed its brand around the concept of delivering unique tourist experiences as evident through slogans like their “Don’t go there, live there” campaign suggests. Airbnb is targeting travelers who want to experience the environment and culture that comes along with a destination. However, as a significant promoter to the share-economy, Airbnb’s foundations are being broken down by issues stemming from a lack of sharing and a shift to property ownership. Many Hosts are purchasing property with no intentions of sharing. Instead, these Host owned properties walk a fine line between being a hotel or timeshare accommodation. Of course, Airbnb welcomes the business as they have successfully attracted many Hosts to their product; the expansion contributes to a growth model that may be unsustainable and difficult to manage. If the Airbnb traveler experience falters under an overabundance of accommodations that are poorly managed or lack regulation; not only will the Host and Guest suffer, but so will the destination and brand.
Overtourism
Airbnb’s strategies have allowed the company to expand into other countries successfully, but the rapid expansion has the potential to reduce the brand’s image ultimately. There are multiple examples where residents of other countries feel the burden of managing the vehicle of mass tourism that Airbnb has set out to become. In 2015, 44% of Paris, France’s Airbnb rentals were permanently available for rent 7. In 2017, Paris had an estimated 40,000 Airbnb listings 11. The center of the city had become deserted by residents with most of the accommodations occupied by the tourist. While this might be great for tourism, the influx of visitors threatens the liveability of the city. Without the locals who encompass vital aspects of the tourist experience, the destinations will lose their appeal.
In Japan, locals voiced concerns about unruly tourists, pollution and noisy parties brought about by visitors of Airbnb accommodations 7. In 2018, close to 80% of Airbnb listings were removed due to new laws putting pressure on owners who may have been operating illegal lodging. The law dropped Airbnb properties from 62,000 to 13,800, according to Hollywis LLC, a Kanagawa-based research firm that analyses the minpaku sector 12. This action is one
example of local governments pushing back on Airbnb to maintain safe and legally
operated rental facilities.
Sub-letting is another concern. In Australia, studies suggest that 35% of Airbnb listings were from people who do not own the property 14. Airbnb’s Hosts take advantage of the product’s capabilities, oversaturating the destination with properties that may not be legally operated and bringing in too many tourists who do not value or respect the destination’s rules and culture.
Illegal Rentals
Hosts have taken advantage of Airbnb, using it to bypass legal requirements and continue to profit. Airbnb’s short-term rental services are extremely beneficial for homeowners (Host) who are willing to rent out their property for additional income, but many city governments are stepping up to ensure that properties are operating legally and that outside visitors do not disrupt the locals. Though Airbnb sells the idea of living like a local, opportunistic business owners are proving poor support for the idea, purchasing property solely with the intent to rent and not adhering to required licensing standards. In 2018, Barcelona instructed Airbnb to remove 2,577 listings that were found to be operating without a city-approved license 13. New York is Airbnb’s largest market, but according to the city, almost two-thirds of its listings are illegal. In 2014, a reported 72% of Airbnb properties in New York were listed as illegal because rental properties are required to be occupied a minimum of 30 days. Airbnb’s Hosts are increasingly ignoring what is required to rent a property. Airbnb has to step in and ensure its Hosts are compliant.
Recommendations
Airbnb is anxious to take the next step. The brand’s attempt to evolve is apparent, but Airbnb must continue to separate itself from booking services in this sharing economy. Airbnb’s mission is to help create a world where you can belong anywhere and where people can live in a place, instead of just traveling to it 15. To achieve its mission, Airbnb has to take ownership of all aspects of the experience it hopes to deliver.
Airbnb should start by reconnecting its brand message with its Host, who ultimately delivers what is at the center of the experience, a place to live. Hosts can play a part in connecting Guests to locals and packaging unique value through interactions along a tourist journey. Hosts don’t necessarily need to share the space, but instead considering hiring a travel guide to both share in the space and deliver the Guests a tourist experience.
Airbnb must also remind its Guests that the adventures that they embark upon are only great because of the unique cultures that support them. While it’s certainly reasonable for a group of 20 college students to pick a great place to party, the culture in Japan might not understand or embrace it. Airbnb’s product does not allow Guests to provide what type of experience they want before recommending a place to stay. Introducing these types of options might better connect the Guest to the destination and alleviate frustrations due to the wrong kind of tourism.
Airbnb should also consider expanding its target groups beyond Host and Guest. The overall travel experience is a partnership that also includes the destination, governments, and locals. Including governments and locals in the conversation would ensure everyone is prepared for the influx of tourism and provide a more holistic experience for everyone involved. The destinations government and local occupants have specific requirements that ensure they are able to properly support tourism and would benefit greatly from tourist having a positive experience. Developing new initiatives to better understand everyones needs and expectations might open the door for new advancements that support the entire tourist experience that Airbnb hopes to deliver.
Conclusion
Airbnb has proven it can deliver something that consumers want, but the success that has come with that discovery must be managed. As technology has found a way to make the world a smaller place, innovation is also introducing new cultures and expectations. If Airbnb wants to deliver unique tourist experiences, then the company has to step back and assess what that means beyond merely connecting a person to a room. For Airbnb to achieve its mission, there has to be a plan of action that guarantees its growth will not be illegally misused, its Host remains responsible, Guest remains safe, the environments are maintained at the highest level, and tourists are provided the experience they desire. Airbnb appears to have tapped into only a portion of it’s potential by limiting the focus to Host and Guest. If Airbnb starts connecting all players in the service experiences they provide, they will undoubtedly expand to more successfully satisfy tourists around the world.
References
1. https://hbr.org/2016/07/airbnb-is-facing-an-existential-expansion-problem
2. https://www.smartertravel.com/7-airbnb-problems-solve/
3. https://www.businessinsider.com/airbnb-could-be-in-trouble-2017-11
4. https://www.growthmanifesto.com/airbnb-growth-strategy/
5. https://medium.com/@etch.ai/how-airbnb-got-their-early-traction-cb059e902ea4
7. https://www.theinvisibletourist.com/why-you-shouldnt-use-airbnb-issues-you-didnt-know/
9. https://devrix.com/tutorial/marketing-challenges-2019-conquer/
10. https://www.valuewalk.com/2017/02/airbnb-30-billion-startup-wikipedia-cant-tell-infographic/
11. https://hbr.org/2016/07/airbnb-is-facing-an-existential-expansion-problem
12. http://www.travelweekly-asia.com/Destination-Travel/Japan/Japan-s-unregistered-rentals-get-the-boot
13. https://www.investopedia.com/articles/investing/083115/top-cities-where-airbnb-legal-or-illegal.asp
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