Airbnb: A Comprehensive Analysis of the Hospitality Industry and its Market Segments

This article provides an in-depth analysis of the hospitality industry, with a focus on Airbnb. It covers the defining factors of the industry, market segments, and a Porter's five forces analysis. The article also discusses Airbnb's competitive advantage and trends impacting the industry, such as the integration of technology and the shift towards personalized guest experiences.

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Executive Summary
Despite the fact that many business niches are made up of only a few of different
enterprises, the hospitality industry fits nearly in most companies that deal with the satisfaction
of customers and is centered on ensuring that leisure needs are met rather than the basic needs.
With the vastness of the hospitality industry, it is critical to understand some defining factors.
The hospitality industry is one of the major components that make up the service industry and
comprises of lodging, theme parks, event planning and other additional sectors in the tourism
industry.
Airbnb has over three million lodging listings all spread and located in over 65,000
cities and in more than 190 countries. Airbnb is a virtual market and a hospitality service that
engages individuals to rent or lease on short-term basis accommodation that entails vacation and
apartment rentals, hotel rooms and hostel beds. Instead of individuals booking on a hotel, the
users stay on the property of other people enabling such people to enjoy an experience that is
quirky and personal. Airbnb does not have its own lodging facilities, it is a broker that charges a
certain percentage as a commission from the guests and the hosts as per the bookings. Users are
tasked with searching lodging using a variety of options such as the lodging type, location and
dates and the price charged by Airbnb can be found on the Airbnb website or other mobile
applications such as the Android and the Apple.

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A hospitality unit such as a restaurant or amusement park consists of units such as
direct operations and maintenance of a facility that entails kitchen workers, management,
bartenders and human resources. The hospitality industry is a multibillion-dollar investment that
relies on the availability of leisure time, income that is disposable and customer satisfaction
among other things (Novak, 2017). There are four components of the hospitality industry that is
food and beverages, recreation, travel and tourism and lodging.
Food and beverages
One of the largest segments of the hospitality industry is the food and beverage sector
that is denoted by initials such as F&B.The F&B industry is projected to serve 50% of all the
meals eaten in the United States of America as of today (Novak, 2017). It entails establishments
majorly engaged in meals preparation, snacks, and beverages needed for urgent consumption on
and off the enterprises. When a restaurant is one of the sectors of a hotel, the services rendered
by such a facility can improve the experience of the guest through providing excellent food and
customer service that can be ranked as first class.
Travel and Tourism
Travels and tourism specialize in dealing with the movement of people from place to
place. The buses, trains, and cabs are all components in the travel industry (Novak, 2017).
Leisure travel occurs when people spend their finances on lodging, recreation, and even food
while spending their vacation trip (Lee & Kim, 2018). On the other hand, business travel refers
to spending while a person is traveling for work and spends the money on food and lodging.
Some individuals also spend their money on recreation while traveling for business purposes.

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The primary motive behind tourism is to motivate people to travel. When people are traveling
either for purposes of business or leisure, they spend money in one way or another on hospitality.
Lodging
Lodging refers to accommodation for a specific duration of time or a place where one
can spend the night for one or two days (Novak, 2017). The lodging industry entails
campgrounds, hostels and even motels that provide a place where people can spend the night.
The businesses in the lodging industry are tasked with the responsibility for marketing other
segments such as business travelers, long-stay travelers and special travelers such as individuals
working for the government or airlines.
Recreation
Recreation refers to any activity that people engage in to rest, relax or for sheer fun and
enjoyment. The primary objective of recreation is to ensure that the body and the mind get
refreshed (Novak, 2017). Any enterprise that offers activities for purposes of rest, relaxation and
sheer enjoyment to refresh the body and the mind of an individual can be categorized to be I the
recreation industry. Entertainment enterprises that air shows such as movies and attractions that
serve as regions of special interest of visits such as museums, sports, and zoos can all be said to
be part of the recreation business.
Market segments by Airbnb
Airbnb targets mainly two groups of people namely travelers and hosts (Vizology,
2018). The two segmentations are crucial for the Airbnb structure since they are the center and
determinants of the profits generated by the company.

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The travelers comprise of a market segment that entails individuals enjoy traveling as
opposed to spending their entire finances in a hotel room (Zunila, 2015). The travelers prefer
spending on visiting tourist attraction places as they travel since they spend less money on the
place they will be staying. Some travelers prefer staying in a place where they can relax and
spend many days in such a place without necessarily emptying their pockets.
The hosts, on the other hand, involve the owners or renters who are willing and able to
rent out their places. The reasons why the hosts rent out their property vary and depend on the
needs of the hosts (Zunila, 2015). For some hosts, they will rent out their premises so that they
can make some money from an unoccupied space and for others, they have an interest in meeting
new people. Whichever the reasons, all hosts lookout for a place in the Airbnb so that they can
have the ability to know the people renting their property.
Porter’s five forces analysis
The motive behind Porter’s five forces is to establish the competitive edge of Airbnb to
reach more travelers.
The threat of substitutions
The threat of substitutes can be said to be quite high due to the fact that the switching
costs do not apply to the users of Airbnb. Customers can easily choose a conventional hotel, a
hostel or even couch surfing as the next best alternatives in future (Liu & Mattila, 2017). As
Airbnb is growing so are its rivals who are offering the same concept. The hotels, for instance,
are considered as the most readily available and the most convenient for many travelers to stay.
The establishment of Airbnb has made hotels to take note of changes in the customer preferences

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as a result of new social centered products, homier settings, and availability of many functional
apps.
Hotels are thus managing to achieve demands in the hospitality industry by expanding
their portfolios through the development of new brands intended to attract and appeal to
millennial consumers in conjunction with those who want more connectivity with less service
with regards to technology and shared space. Hostels, on the other hand, tend to be appealing to
backpackers that are traveling alone and having the desire to meet travelers that are like-minded.
Such accommodations not only offer ample opportunities for purposes of social interactions but
also are cheap and more rejuvenating with an intimate vibe compared to a traditional hotel.
Bargaining power of customers.
The bargaining power of customers with regards to Airbnb can be stated too high since
there is a wide variety of services to be chosen from by the clients (Morand, 2017). The
development of tourism and hospitality industry has always been propelled by economic growth.
In comparison to other services such as hotels and motels, Airbnb is the most preferred since it is
cheaper as per the views of most travelers (Guttentag, 2016). Despite the fact that there is no
room for price negotiations for the rooms with the host as per the Airbnb platform, customers
have buying power with regards to an alternative of prices and styles they pick from and a thus
consumers can decide the residences they want without exhausting their funds (Gurran & Phibbs,
2017).
Bargaining power of suppliers
The vendors’ bargaining power is meager since Airbnb controls the connection
between the hosts and the customers makes it difficult for individuals who rent their apartment

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and rooms do not have access allowing them to connect with clients using the Airbnb App.
According to Airbnb, the supplier is viewed as the host and is thus responsible for offering
rooms or apartment to travelers. The host propels the business. The hosts are the primary level
and thus provide services that potential clients need. Airbnb works in liaison with the host in
ensuring that there are no problems with the clients. Though there are no unions for the vendors
that can place demands on Airbnb, Airbnb accords host the freedom to set the conditions to their
borders. It is the right of the host to decide if they want to alter the price depending on the
condition. The rents, in this case, are exclusive and concentrate on unusual places for a large
number of travelers thus providing a variety of prices for all types of consumers.
Inter-firm rivalry
Rivalry among competing firms is usually the greatest force among the five forces. In
this context, the inter-firm rivalry can be categorized as moderate or low. There are a number of
competitors offering quality services and similar to Airbnb with networks and similar websites to
Airbnb. Sites such as HomeAway.com are fighting hard and overtime to supersede Airbnb from
its incumbent position.Onefinestay.com is one of the competitors that caught the attention of
Airbnb shareholders. Onefinestay has been I the industry for only five years and was a startup
from London and operates an upmarket renting out homes to tourists in global cities while the
owners of such homes are away. Currently, Onefinestay is operational in London, Paris and New
York and has over 10000 homes listed in its records. The homes in the Onefinestay site are much
swankier as compared to those on Airbnb site. However, Onefinestay property gets charged
above $ 600 per night (Ward, 2017). Onefinestay also ensures that the property has been washed
after and before individuals rent the property and also offers linen and skincare products offering

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the same service that a hotel would serve. The company also goes a step further in taking
properties photos to market such properties.
Gaining competitive advantage
The development of an industrialized world increases fierce competition among firms
in the same industry. In this century, the success and development of firm depend on the
availability of information so that the firm can serve its customers better (Kurtz, 2014).
Businesses that fail to embrace the power of information may be thrown out of the business
because such enterprises are viewed as ineffective. The market is characterized by the existence
of many structures and many services that are identical and identical that aim at meeting the
growing demands of customers. Though the operations of Airbnb have stood the test of
time,2009 saw the company being declared bankrupt and the company managed to prove itself as
a survivor as it went through the tribulations encountered in the operations of the enterprise.
The competitive advantage of Airbnb
The ability of Airbnb to work on the basis of large-scale enables the firm to gain a
competitive advantage over its rivals. One of the biggest competitive advantage that it has is the
effects of the networks it has established over time (Adamkasi, 2017). This means that the large
number of hosts that have subscribed to Airbnb translates to a greater number of guests thus a
big number of booking will be affected by visitors through Airbnb. The great number of guests
booking also means that many hosts will subscribe to the Airbnb websites due to the existence of
many clients who are willing to be accorded the renting services (Adamkasi, 2017). The word of
mouth and the reviews of the people on the lists make Airbnb distinct and unique from its
competitors. However, despite the fact that there are no entry barriers, late entrants are

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encountering difficulties in competing with Airbnb in the industry with regards to geographical
factors. Airbnb still has to work harder in gaining a competitive edge on grounds such as the
niche inventory.
The services offered by Airbnb reflect current manifestations of disruptions that have
prevailed in the travel and lodging industry (Adamkasi, 2017). A change has been initiated and
brought reforms in the traditional system that was run by intermediaries such as the travel agents
who are getting replaced by Airbnb. Airbnb has a competitive advantage over traditional agents
since it is able to avail a variety of services, interactive channels that are the direct and easy
accessibility of information. Airbnb has invested massively in the ICT department and this has
played a critical role in gaining and attracting a large number of online customers.
Airbnb is also unique in the manner in which it helps its customers experience a
reduction in the transaction costs through the use of ICT framework (Adamkasi, 2017). It also
revolutionized the trade by bringing consumers to consumers together in an industry that relied
on the traditional business to consumer model.
Trends and the Impact on Airbnb
The technology currently is the main driver for change in the hospitality industry
(Oskam & Boswijk, 2016). In the past, the technology would influence the hotel operations and
visitors’ entertainment, however that has changed as technology is now considered as one of the
enablers that enhances business models. There is a need for integration between the physical and
offline hotels that guarantees unimaginable connectivity (Liang, et al., 2018). The presence of
high tech delivers a personalized approach with regards to the hotel visitor. The hotels of today
do not deliver such exciting hotel guest experience but as of 2020, hotels will focus on the guest

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experience (Oskam & Boswijk, 2016). Airbnb will have to change the focus of putting heads in
beads through facilitating guests’ meetings to between guests and locals as they will become a
vital component of their business. The focus will shift from rooms to public spaces. The
boundary between business and leisure will no longer exist in future. New hotels will now be
strategically located in existing buildings. Hybrid concepts such as hospitality and care will
emerge as collaborations with cultural institutions will also be the core of the business.
Apart from the demographic and social-cultural changes, millennials and BRIC visitors
are also trends that influence the behavior of future hotel guests (Oskam & Boswijk, 2016). With
this kind of guests, they are in control of their trip and will thus expect a well-customized
experience and the usability of their own device in operating room facilities. From the
experience of travelers, it is evident that tourists in future will move away from offers that are
standardized and engage in local contacts and events that they have been using from Airbnb. The
most fundamental consideration about guests is whether there will be more numbers in future
(Oskam & Boswijk, 2016). According to a report by UNWTO, there are predictions that there
will be the growth of tourism and there are opportunities in low-cost travel and thus the
concentration of tourism in urban destinations will help facilitate impressive growth in cities
such as Amsterdam as per the previous experiences (Airbnb, 2012). With such an increased
demand, there will be an openness to accommodations that are non-traditional.
It is expected that the number of visitors will increase in major cities (Oskam &
Boswijk, 2016). In cities such as Amsterdam and Berlin, tourism weariness will continue to stir
debates. Tourism will continue based on policies that are developed and also as natural
phenomena of displacement based on the visitor numbers. This will generate a positive impact

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on the economies and also lead to gentrification. However, with the existence of globalization
and cultural integration, differences between cities will be blurred.
CEO of a 3 start hotel
One effective way of combating with a firm such as Airbnb is to engage in massive
advertisement through the proper media channels. The website, for instance, should have all the
portals needed by the guest with all options and pricing on the company’s website. The use of
appealing images of the hotels and rooms that are exclusive should be posted and updated
regularly on the company’s portal.
Also, it is crucial to offer first class services to the clients such that they will have a
lasting image and this has the effect of ensuring that such clients always come back for more in
future. Innovation is always the concept that enhances company growth and success. The
company should strive at providing products that are not offered in any other place if it is to
establish a competitive edge over Airbnb.
The offers and packages should also be offered at a discount ensuring that the prices
charged are customer-friendly. Investing in technology is also important if the company is to
thrive in such a fierce industry. Information is the driving force for modern companies as it
enables firms to understand the needs of customers thus tailoring the needs and demands of such
customers as per their needs. Developing products and packages that are tailored to suit the needs
of various clients should be the number one priority as people have varying tastes and
preferences.
Conclusion

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Airbnb has been at the forefront in the hospitality industry and has transformed the way
things were operated in this Industry. The firm has established a competitive edge over its rivals
despite the fierce competition from its competitors. With increased expectations of tourist
increments in future and also the increased demand for rental houses by visitors, there is a bright
future for Airbnb in the hospitality industry. The hefty investment in information technology by
the firm ensures that the company gets timely information that helps Airbnb understand the
needs of its clients and address them in a timely manner.
References

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