Case Study Analysis of Airbnb: Failure and Problems Faced

This report analyzes the failure of Airbnb and the current problems faced by the company. It evaluates the application of stakeholder theory by Airbnb and proposes solutions for growth.

Case Study Analysis
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 EXECUTIVE SUMARRY
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Contents
Case Study Analysis EXECUTIVE SUMARRY............................................................................1
Chapter 1: INTRODUCTION..........................................................................................................5
Chapter 2: Case Brief.......................................................................................................................6
Chapter 3: Problem Statement.........................................................................................................7
Chapter 4: Analysis and Findings..................................................................................................10
Chapter 5: Proposed Solution........................................................................................................11
REFRENCES.................................................................................................................................13
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Chapter 1: INTRODUCTION
Businesses have adopted different frameworks to handle changing external environment and
overcome barriers associated with providing shareholders the best results. This report is based on
the case study of air bnb, which is an American company operating online marketplace for
lodging primarily home stays for vacation rentals and tourism activities. Air bnb was founded in
the year 2008 and achieved success in that tourism and hospitality industry with many businesses
stating it as a threat to the current hospitality organizations such as hotel establishments. The
company appointed a new model for dealing with shareholder value in the business community.
Airbnb focused on changing its shareholder focus modern towards a more stakeholder
focused business environment create each stakeholder interests are valued equally instead of
prioritizing shareholders interests above all the other stakeholders. Soon after its launch the
company was able to attract many consumers and gain quick growth to become a Unicorn startup
in America. The COVID-19 pandemic affected the growth of the company and resulted in huge
losses for the firm. This report looks at the factors which resulted in failure of Airbnb and the
current problems faced by Airbnb.
The purpose of this report is to investigate the failure of Airbnb from achieving such high
success to facing huge losses because of the COVID-19 pandemic. In addition to this various
models and frameworks suggest stakeholder theories are applied to evaluate the growth and
failure of Airbnb. Finally future available options for Airbnb and prospective solutions are
appraised and reviewed in this investigation. The problem statement of this investigation is that
You off failure of Unicorn startup during the COVID-19 needs to be further investigated. This
research aims to address the factors leading to failure of Unicorn startup in hospitality industry
such as Airbnb along with evaluation of stakeholder theory.
Aim: An investigation into the failure of Airbnb in delivering value to shareholders.
Objectives:
 To identify the current problems faced by Airbnb
 To evaluate application of stakeholders theory by Airbnb
 To review the future options available for Airbnb
 To appraise solutions for growth of Airbnb
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Chapter 2: Case Brief
From the year 2010 to 2011 Airbnb so a rise in bookings by 800% with the company reaching
the milestone of well million nights rented in 89 different countries. This was the success. For
the company as the firm was able to right consumers various services including renting
bedrooms to tree houses to castles. At the height of its success in the year 2011 the company was
valued $1,000,000 making it a latest Unicorn hit in the Silicon Valley.
After this success the company also face challenges in new criticism as it continued to
grow. Many criticisms were focused towards the way it operated as a defector hotel chain an
should be subjected to taxation like rest of the hospitality industry. Airbnb arise as a knew
option from traditional travelling and its transactional process to offer consumers new model
based one connection and community. The company launched several new program and
acquired new enterprises from 2016 which included Airbnb adventures. The company continued
to grow until the end of 2019 with Airbnb raising $4.4 billion in funding and becoming a name
in the hospitality industry for disrupting the traditional travelling model.
After this huge success company focused on transitioning from shareholder value based
company to a stakeholder value based business community. This involved focusing on other
duties towards different stakeholders rather than solely focusing on increasing profits for a single
shareholder. In the year 2019 COVID-19 arrived in China and by the middle of March 2020
everyday life in United States was also affected as the virus spread across Asia Europe and the
Americas. this resulted in a volatile climate for businesses in various industries ask would 19
resulted in 240,000 alone in the United states by March 2020.COVID-19 also impacted travel
and hospitality industry as international flights and travel was restricted across different
countries.
AirB&B’s booking also lowered because of the pandemic as the gross number of nights
an experience is booked fell by 42% in March and 72% in April. Long service hosts with top
hospitality ratings face difficulties in attracting consumers and Airbnb provided remembers
finance too many posts which is resulted in expenditure of $250,000,000. the company also
changed its cancellation policy which was unsatisfactory to many hosts. The company also tried
to raise additional money in April 2020 and by late April air bnb’s leadership was pressured
because of loss and reduced prospects for IPO. The huge loss suffered by the company because
of forward 19 pandemic showcases inability of the company to handle crisis effectively. The
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form needs to take active involvement in do the mining solutions for future improvement in
order to survive and recover from this crisis.
Chapter 3: Problem Statement
A problem statement is defined as an explanation in research which describes the issue that is
being covered in the investigation and the problems which the research attempts to address. This
research is based on the hospitality industry and focuses on understanding the current failure of
one of the largest growing start ups in the hospitality sector. The hospitality industry faces
continuous changes in external environment as consumer demands related to travelling along
with usage of technology and travelling changes continuously. It is important for businesses to
adopt suitable business models so that they are able to handle the challenges of the continuously
evolving hospitality sector. The traditional business model of hospitality establishments such as
hotels and bed and breakfast is transactional in nature and deals directly with the consumer in
exchange of hospitality services suggests accommodation or dining.
The growth of Airbnb disrupted the traditional model of travelling in the hospitality
industry because it was not transactional directly and offered consumers a platform through
which they are able to connect with individuals focusing on renting their property or providing
some other hospitality service. This created a problem of company holding no real value in itself.
Values in business is derived from the units sold added on top of platform represent inventory.
Under other hand a platform in business is defined as the institution to which infrastructure and
tools are provided on which others can build or add value. A business platform inherently does
not have value of its own and rather requires the work of others to add value to its infrastructure
and tools by delivering something which can be consumed by a specific target audience.
In context of Airbnb the company was simply a platform with no inherent value which
provided infrastructure and tools in the form of an easy to use application through which buyers
and renters can communicate with each other and build something of value by renting their
property. This showcases that Airbnb had nothing of inherent value and it relied heavily on
Commission system that adds cost to the users for access to their platform collecting 3% of
renters income every time they get a customer through the platform. This type of business also
introduced high amount of risk in achieving long term profitability as there was nothing of
inherent value of food by the company and it was dependent on the availability of buyers and
renters to initiate service delivery. There was a possibility of top performing hosts leaving the
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platform after they realized that they can find other areas to achieve had Roberts back getting the
middle man of Airbnb.
This investigation focuses on understanding the factors behind the rise and fall of Airbnb
as the idea and main concept of alien before initially high risk because of no inherent value.
Understanding the challenges faced by Airbnb in its quick downfall from success as a Unicorn
startup in Silicon Valley can shed light on the main factors which made this high risk venture
profitable and their absence affected the growth of the company. In addition to this the focus of
this investigation is also on the stakeholder theory applied by firm. The change from shareholder
value to stakeholder value by Airbnb is an interesting area which need to be understood in order
to identify its viability for different businesses. the stakeholder theory was introduced in the year
1973 at the World Economic Forum which focused on introducing the idea of professional
management serving clients shareholders workers and employees as well as societies with the
purpose of humanizing different interests of the stakeholders.
The stakeholder theory was a new idea in the business world with many influential chief
executive officers being interested in the theory. In 2018 a revised statement on the purpose of
corporation signed by 181 CEOs was released during the business round table which focused on
bringing stakeholders at the centre of business model instead of solely focusing on shareholders.
The idea of stakeholder theory was embraced by Airbnb in order to ensure that consumers return
their feet in institutions which was lower because of corruption and profit focused nature of
many corporates in the modern business world. Airbnb focused on finding harmony between
stakeholders so that the firm is able to strengthen local communities by ensuring diverse
expansion and acceptance across the world.
Airbnb started with the idea of developing an online marketplace or community for
renting and buying different hospitality industry services. This idea of building a community
increase the number of stakeholders attached to the company which included the Airbnb
community which are the guests and the host offering to buy or rent specific accommodation in
any region of the world. In addition to this employees shareholders and society along with
government organizations in different countries is also a part of the stakeholders related with
Airbnb. It is important to understand the ways in which Airbnb applied the stakeholder theory to
offer consumers and other members of its community better environment so that the
effectiveness of the stakeholder theory can be understood for the real life organization.
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Understanding the effectiveness in role of stakeholder theory in success and failure of
Airbnb is essential because it addresses the problem of determining they need to shift focus from
shareholders interest to stakeholder interests in the current business environment. focus from
shareholders interest to stakeholder interests in the current business environment. It is important
to look at the implementation and success of stakeholder theory at Airbnb because it can help
identify the strengths and weaknesses of real life application of this theory. This investigation
reveals the application of stakeholder theory by Airbnb in order to understand the impact of this
theory on failure of Airbnb so that it can be more effectively applied by other businesses in the
future to address the interest of other stakeholders apart from shareholders while also ensuring
successful future for the company. After this the investigation also looks at determining possible
options and solutions for the problems faced by Airbnb.
The success or failure of Airbnb be with the help of proposed solution can help identify
the factors which support online marketplaces in achieving success and the steps which need to
be avoided in order to ensure continue success of the firm and quick recovery from crisis such as
COVID-19. This is an important problem which will be addressed in the Investigation as it help
understand the impact of coordinating on failure of Airbnb along with the possible solutions
which can help businesses in the hospitality industry the cover from the impact of COVID-19.
It is understood from the case study that the primary factor which affected growth of Airbnb is
COVID-19. Before the rise of over 19 they expect if organization was able to achieve success in
different international market and attract interest from investors with many speculating huge IPO
for Airbnb. After the rise of covid-19 across the globe many hospitality industry faced losses
including multinational corporates such as Marriott and Hyatt.
This is because COVID-19 lead to reduction in global travel as many countries
implemented quarantine an lockdown measures to reduce spread of virus and death of large
number of people. The difference between impact of COVID-19 on traditional hospitality
organizations and Airbnb first that traditional businesses were able to continue after reduction in
COVID-19 cases in different regions quicker than Airbnb the overall market demand for renting
space or accommodation from stranger for travelling purposes became a lot more dangerous in a
post COVID-19 world. Cover 19 increased awareness about hygiene and cleanliness and
consumers in the hospitality industry prefer using traditional establishments for accommodation
rather than renting place from stranger through online marketplace because there is much more
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assurance for cleanliness and hygiene in established hotel accommodation with special services
dedicated towards reducing spread of any kind of disease or virus when compared to rental space
of any local individual in a tourist spot. The changing consumer preferences and demand because
of COVID-19 affected the growth of the company even after reduction in COVID-19 cases and
resulted in huge loss of the company.
Chapter 4: Analysis and Findings
It is understood from the case study that the primary factor which affected growth of Airbnb is
COVID-19. Before the rise of covid 19 they expect if organization was able to achieve success in
different international market and attract interest from investors with many speculating huge IPO
for Airbnb. After the rise of covid 19 across the globe many hospitality industry faced losses
including multinational corporates such as Marriott and Hyatt. This is because COVID-19 lead
to reduction in global travel as many countries implemented quarantine an lockdown measures to
reduce spread of virus and death of large number of people. The difference between impact of
COVID-19 on traditional hospitality organizations and Airbnb first that traditional businesses
were able to continue after reduction in COVID-19 cases in different regions quicker than
Airbnb the overall market demand for renting space or accommodation from stranger for
travelling purposes became a lot more dangerous in a post COVID-19 world. Covid 19 increased
awareness about hygiene and cleanliness and consumers in the hospitality industry prefer using
traditional establishments for accommodation rather than renting place from stranger through
online marketplace because there is much more assurance for cleanliness and hygiene in
established hotel accommodation with special services dedicated towards reducing spread of any
kind of disease or virus when compared to rental space of any local individual in a tourist spot.
The changing consumer preferences and demand because of COVID-19 affected the growth of
the company even after reduction in COVID-19 cases and resulted in huge loss of the company.
Another factor which led to downfall off Airbnb is ineffective implementation of
stakeholder theory. The stakeholder theory focuses on ensuring that business policies and
practise consider impact on different stakeholders so that interests of each stakeholder are
satisfied and addressed by the business strategy. In context of Airbnb the company was not able
to completely embrace this theory as the principles adopted by the organization for
implementation of stakeholder theory focused on Minimal changes to the current business
model. The main action which Airbnb took for implementing stakeholder theory included
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changing metrics for serving stakeholders so that effective results are provided to different
stakeholders including guests hosts communities and employees. This is a minimal change which
did not result in complete acceptance of the stakeholder theory at the respective organization as it
did not change the basic operating model of Airbnb. The basic operating model of Airbnb it is
not value stakeholders other than shareholders because it does not provide any kind of values to
either guests or renters who put on their property for renting upon the online marketplace.
There is only a matter of coordination between the consumers and accommodation
providers to communicate with each other independently and cutting the middleman which is
Airbnb. This showcases that there is no and with the help of Internet and coordinated efforts
individuals can simply communicate with buyers to put up their properties for delivering
hospitality or accommodation services. This means that the founding principles of Airbnb do not
deliver any benefit to its main stakeholders enter instead completely focused on ensuring that the
mean value provided by accommodation providers in its platform is used for attaining profit
instead of developing something with original value.
The type of business model of Airbnb resulted in ineffective application of stakeholder
theory as the basic elements of its business model we're in a position to providing each
stakeholder equal focus rather than slowly attracting profitability from investment and efforts of
various stakeholders. Changing metrics to measure stakeholder satisfaction and implementing
policies suggest serving different stakeholders to address their interests did not result in suitable
application of the stakeholder theory because the main focus of the company from its inception
was to attract profitability without providing any value to its stakeholders. Finally during the
COVID-19 pandemic these policies resulted in ineffective reserves for the organization as most
stakeholders including hosts were dissatisfied with the policies of Airbnb towards handling the
pandemic.
Chapter 5: Proposed Solution
Crises Management: An option which can be taken by respective organization when it
comes to improving its current situation with huge losses is adopting an effective crisis
management program Crisis management is defined as application of strategies designed to help
the company deal with sudden and significant negative event. Many hospitality organizations
across countries have adopted crisis management initiatives to ensure that it is able to recover
from COVID-19 pandemic and make successful return to the new normal of the hospitality
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industry. This proposed solution for the respective organization is suitable because it will help
Airbnb deal with the challenges of COVID-19 pandemic without dissatisfying stakeholders and
moving towards path of profitability. The positive impact of this proposed solution for Airbnb is
that the company will be able to deal with changes in hospitality industry and consumer
preferences introduced back overnight in pandemic while the negative impact is that adoption of
crisis management very quiet financial resources which are currently low at Airbnb. The
company needs to adopt practices which build trust in its consumers to consider using its online
services instead of shifting back towards the traditional hospitality businesses such as hotels and
lodges. This can be completed with the help of social media campaign directed towards young
travelers in order to bring quick profits to you cover from the pandemic.
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