Airbnb and Its Impact on the Hotel Industry

Added on - 21 Apr 2020

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1AIRBNB AND ITS IMPACT ON THE HOTEL INDUSTRYThe economy based on sharing has come out as an alternate supplier of services as wellas goods traditionally provided by long-term establishment industries. In this essay, theeconomic impact of the sharing economy will be studied with reference to Airbnb, which is aprominent platform for short-term accommodations. It enables consumers to lease or to rent shortterm lodging which consists of apartment rentals, hostel beds, home stays, hotel rooms orvacation rentals. The company receives a service commissions from the hosts as well as from theguests with respect to every booking ( 2017). It is a growing company withoperations in 191 countries. The essay will also throw light on the impact of the lodging website,Airbnb on the hotel industry followed by the industry`s strategy to overcome the threat.The mechanism behind Airbnb is that it can be accessed through websites or mobileapplication. The registration is free of charge. The guests and the host are charged at the time ofbooking with a minimal rate of 6-12% for guests and 2-5% for the host. In case the host wants tooffer experiences to the guests, an additional commission of 20% will be charged (Edelman andLuca 2014). The user can customize their search for lodging and book a place using their mailand number. The guests need to abide by the rules of the hosts. In some cases, a photograph ofthe lodging will be provided to the guest who can even ask questions with respect to theproperty.The `stranger danger` obstacle has been overcome by Airbnb building a certain level oftrust between guests and hosts. It enabled this by making user profiles so that both the parties canlearn about one another. After stay, the guest is required to provide a feedback, which is takenseriously. The company provides insurance known as host guarantee against damage due tovandalism and theft (Einav, Farronato and Levin 2016). The company also has a 24-hour servicehotline, which can be accessed in case any suspicious activity is detected. The two parties can
2AIRBNB AND ITS IMPACT ON THE HOTEL INDUSTRYmessage privately before the reservations have been made. The payments are made on onlinesecure systems. The Airbnb account can be linked to social networking accounts such as Facebook and this helps the other party to obtain relevant data.The service has various options like Neighborhoods and wish list which take in thewishes of the guests and suggest lodgings accordingly.A group of three groups of friends, JoeGebbia, Brian Chesky and Nathan Blecharczyk, found the company. The idea was born whenJoe and Brian decided to put an air bed in their living room and changing it into a bed andbreakfast to earn some extra money (Farajallah, Hammond and Pénard 2016). NathanBlecharczyk later joined them and together they formed a new centre called Airbed andBreakfast.Systematically, the company obtained funds to grow their business. By March 2009, thesite had 2,500 listings and 10,000 users. It was in the same year, when the name of the companybecame The company expanded from shared spaces and airbeds to a variety ofproperties, which included entire homes, castles, tree houses, private islands other properties(Fradkinet al.2014).It has received funds from various sources including Grey lock Partners and Sequoia.February 2011 marked one-millionth booking of Airbnb since its inceptions. In 2012, Airbnbdeclared 10 million nights booked, which was double of their business 5 months earlier. Alongwith the acquisitions, the company launched its international offices in Hamburg and Londonrespectively. As the users increased, Airbnb opened offices in cities like Moscow, Milan, Parisand Sao Paulo.TheAirbnb acquired London based rival called CrashPadder (Geron 2013). Withthis acquisition, Airbnb became the largest lodging website in the UK. To keep up with its CSR
3AIRBNB AND ITS IMPACT ON THE HOTEL INDUSTRYopportunities, Airbnb collaborated with New York City Mayor to offer free housing for peopledisplaced by Hurricane Sandy.2013 marked the 9 million guest’s services for Airbnb, therebyadding 250,000 properties. 2014 saw the launch of a new logo and design revisions of mobileapplication and website. Airbnb became the first company to expand its operations in Cuba. As apromotional event, Airbnb sponsored the Manor F1 team in 2015. In the same year, Airbnbindulged in a partnership with Tesla Motors to provide chargers at some host houses (Guttentag2015).The year 2016, bought in some troubles for Airbnb. The Federal Trade Commissionstarted an investigation with respect to Airbnb and its impact on house costs. The government ofNew York also signed a bill against Airbnb for violation of local housing laws.The Luxurytreats international is the company’s latest addition.The lodging broker company has come in a long way since its foundation in 2008.Thewebsite has tried to expand its operations by collaborating with the transportation industry andtaking cab services like Uber under its wing (Jefferson-Jones 2014). A SWOT (Strength,Weakness, Opportunity and Threat) Analysis has been provided in the Appendix.The company`s target market is every traveler who wants to adopt a cheap and culturalway of lodging. This ranges from families, students, singles, couples to large groups. It alsoprovides and income source to hosts who rent out their places. The simple revenue model fromthe commissions is hassle free.This has affected the Hotel Industry extensively worldwide (Ke 2017) This Company hasturned out to be a great threat to hotels, as travelers prefer to opt for independent hosts ratherthan hotels. The Hotel Association came up with a report given by the HVS Consulting and
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