Airbnb Case Study: Success and Challenges

The assignment provides an in-depth analysis of Airbnb's business model, highlighting its strengths and weaknesses. It discusses the company's response to challenges such as supply and demand control, legal issues, market competition, and psychological barriers. The case study also examines Airbnb's strategies to overcome these obstacles and maintain its competitive edge.

AIRBNB CASE STUDY
Alina Shutova
Anna Leibina
THM 121: International Tourism and Hospitality Management
Prof. Ariel Castillo
23th of October, 2020

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Airbnb is an online marketplace where travellers get to stay at the property listed on
the site by the local hosts and was born out of necessity. It is a community built on sharing
and started in 2007 as an original idea by two friends who had trouble paying huge rents and
had spare rooms. They got a mattress and started selling it offline as rental space. Later they
also began to provide breakfast and that is how Airbedandbreakfast, later Airbnb, was born.
Over time the project got transformed and shaped so we have got the chance to get to know
this phenomenon. Despite its growing popularity and opportunities, there are some troubling
issues that the company needed to attend and faced with in order to improve its functionality.
The case study will help us to navigate and identify the core problems, its symptoms as well
as trace outcomes and solutions that were implemented.
The first problem that has been detected is that Airbnb can't control neither supply nor
demand. For instance, the company cannot guarantee the quality of the service such as the
quality of the stay that is offered by the hosts and be responsible for the behaviour of the
guests. In 2011, for example, one of the hosts got robbed by an Airbnb user. This terrifying
situation reflected in the company's reputation since the name of the company started to
appear in some shameful headlines of the famous newspapers and on Tv. That forced Airbnb
to implement several measures such as a “host guarantee” offering the protection of
properties, a 24-hour hotline, the doubling of staff of the Airbnb Help Center, in order to
recover the trust of the customers and in the end to control somehow supply and demand.
Another problem that obstructs the company's development relates to legal issues, in
particular - legal unclarity. Thus, the action of Airbnb is not regulated properly in the current
legislation on renting and subletting properties which impedes the expansion of the platform.
The evidence of this problem is the fact that in some places the process of renting the
property via Airbnb is controlled or even prohibited. For instance, in New York exists the law
that bans the landlords from letting or subletting real estate for less than 30 days except for

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the case when the owner stays in the apartment during this period. Another example is
Barcelona, whose government in 2016 threatened to fine Airbnb in the amount of 600
thousand euros for the fact that the company's hosts do not have the permission to rent the
property. The judicial war continued for a year and a compromise was reached in 2017.
Airbnb managed to avoid the fine. In return, the company assured that all apartments whose
owners do not have the appropriate permits will be removed from its website.
In other cities, Airbnb owners have also faced restrictions. For example, in Paris, residents of
the central districts have the right to rent out housing only for 120 days a year. In Amsterdam,
premises can be rented to tourists for a maximum of 30 days a year. Practice shows that
Airbnb is ready to negotiate in order to solve the legal problem. In cities such as San
Francisco, Chicago, Philadelphia and Vancouver, interaction between the company and the
city administrations has been established. In some places, the online platform blocks
homeowners who do not have the necessary permits. This has been done, for example, in
Japan. Or the company cooperates with the local authorities and automatically collects a
tourist tax - as it is in Vienna or Dortmund.
Another concern that Airbnb experiences is a web site reputation which is threatened
by high competition level in the market. The fact is that company has elaborated a new
source of unprecedented potential for growth of this business model "putting people in
touch". Thus, such competitors as Couchsurfing (the most rated one among the others),
Guest2guest, Homeaway and others were born. Besides, a lot of indirect competitors
jeopardize the success of Airbnb. As some examples of those rivals, stand hotel booking
websites such as Booking.com and Expedia.fr., as well as meta searches (TripAdviser,
Trivago). Under such circumstances, a new "eco-system" got generated in order to resolve the
problem of the overwhelming market with competitors (bnbsitter.com, everbooked.com,
guidelikeyou.com). Moreover, due to its variety of accommodations the company

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successfully competes even with hotel groups itself, which is proved by statistics (Airbnb’s
listings increased by 1%, the quarterly revenues of hotels in the area decreased by 0,05%).
The last but not least challenge that is introduced in the case study is the
psychological barrier. The problem is revealed in the following symptoms: difficulty in a
recruitment process, as well as a complication of the reputation system and trust. That brings
us back to the example of the burglary. Such cases generate a lack of trust between both
sides: property owners and tenants. In order to prevent exacerbation of the problem, Airbnb
tries to promote trust and the feeling of belonging to its community by encouraging users to
write about their travel experiences in social media. Publishing stories of real hosts, for
example, creates a feeling of being integrated into the community following their slogan "feel
at home". Furthermore, to take down the psychological barrier of the hosts the company
organizes meet-ups where hosts get to know each other and share tips. Plus, as an interesting
fact, they introduced an award where they reward the best host at international and national
levels.
Despite all the efforts that were given to this problematic those solutions bypassed the
other side which is tourists. That smoothly flows into imbalance between hosts and travellers
and provokes the risk of disgruntling or leaving a part of the community indifferent. For
instance, one traveller wrote in his blog that "All marketing efforts of Airbnb are directed
towards Airbnb hosts.” In order to balance this, the company seeks to improve the travellers’
experience by simplifying the reservation processes by creating specific conditions for the
hosts: sanctions in the case of delays or cancellations, respond to a request within 24 hours
(with the penalty of appearing on the last page if not followed). Thereto, no confirmation is
needed from the host as a system of immediate reservation was introduced.
Taking into consideration everything that the company is going through during these
years and all of its undertaken action in order to solve all the problems listed above, it can be

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underlined that Airbnb is using a successful strategy to stay competitive on the market.
However, even with all the actions and activities that were implemented to enhance the
service, there is always a space in the room for further improvement.
REFERENCES
Brans, Business model, co-creation, community: what makes the true value of
Airbnb? (2013)
https://campus.gbsb.global/pluginfile.php/5397/mod_folder/content/0Airbnb%20Case
%20Study.pdf?forcedownload=1
Airbnb: Why tourists choose it and how they use it. (2016)
http://dg-research.com/airbnb-study.html
Airbnb hosting resources (2019)
https://airhostacademy.com/airbnb-hosting-resources-2019/
How Airbnb Works. (n.d)
https://www.airbnb.com/d/howairbnbworks
Десять лет Airbnb: успех, проблемы и их преодоление. (2018)
https://www.capital.ua/ru/publication/117382-desyat-let-airbnb-uspekh-problemy-i-
ikh-preodolenie