Airbnb Marketing Strategies

[Date]
International Business
Airbnb

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Executive Summary
Disruptive innovations refers to an innovation that disrupts the status quo and creates a new
market by identifying a need and fulfilling that gap. Airbnb is one such disruptive innovation
which has largely impacted the hospitality industry. Instead of buying properties and offering
accommodation to customers, Airbnb offers a unique business model that creates a bridge
between property owners who are looking to rent their property for short durations and guests
who require short term accommodation. This strategy has allowed the brand to serve millions of
customers across the globe. Airbnb has become the leader of the hospitality industry without
owning any real estate.
This report highlights upon the competitive advantage offered by Airbnb, the value derived out
of these advantages as well as their sources. The report also recommends strategies to sustain the
competition created by Airbnb after carefully analyzing the hospitality industry. Airbnb has a
massive customer base across over 190 countries and a rock solid brand image. This enables the
business for continued expansion and enhanced brand positioning.
Table of Content

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s
Executive Summary.........................................................................................................................1
Introduction......................................................................................................................................2
Consumer analysis...........................................................................................................................2
Market segments of hospitality industry......................................................................................2
Airbnb model...............................................................................................................................3
Target market of Airbnb..............................................................................................................3
Industry analysis..............................................................................................................................4
Porter’s five force model..............................................................................................................4
Bargaining power of buyer’s....................................................................................................4
Bargaining power of suppliers.................................................................................................4
Threat of new entrants..............................................................................................................5
Threat of substitution................................................................................................................5
Competition..............................................................................................................................5
Competitive advantage....................................................................................................................5
Business trends impacting Airbnb competitive advantage..............................................................7
Increasing value added service offerings by hotels.....................................................................7
Growth of traveling industry........................................................................................................7
Package tourism...........................................................................................................................7
Increasing competition via new entrants......................................................................................8

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Big data and service customization..............................................................................................8
Disruption.....................................................................................................................................8
Response to Airbnb growth by EU hotel chain...............................................................................9
Package tourism...........................................................................................................................9
Niche targeting.............................................................................................................................9
Innovative advertisement.............................................................................................................9
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

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Introduction
Airbnb also known as ‘Air – Bed and Breakfast’ is a leading organization in the hospitality
industry that operates on an online marketplace (Zervas et. al., 2017). The business is aimed at
providing people with leasing or renting properties for short durations. These properties include
hostel beds, guest houses, residential apartments, cottages and hotel rooms. The most unique
attribute of the business is that none of these properties are owned by Airbnb (Guttentag, 2015).
Therefore the business just provides a platform for property owners and property renters.
Airbnb is a perfect example of a disruptive innovation. The uniqueness of the idea, the flawless
execution, excellent consumer understanding and the increasing demand for the business has
allowed Airbnb to enhance their consumer base and witness expansive growth throughout the
world. The company was formally launched in February 2008 by founders Brian Chesky and Joe
Gebbia. At present the brand operates in over 190 countries and processes millions of bookings
annually. This report highlights upon the brand’s competitive advantage, the hospitality
industry’s trends and the company’s target market.
Consumer analysis
For the success of any business, it is imperative to identify the target market of the brand during
early stages of formation. Identifying the target market assists brands in understanding consumer
needs.
Market segments of hospitality industry
There are various segments are targeted by the hospitality industry in EU and abroad. Players of
the hospitality industry divide the customers of the brand on the basis of following segments.
These segments include:
Geographical segmentation: Geographic segmentation of the customers refers to dividing the
business’s customers on the basis of their geographical locations.
Length of stay: Customers can also be divided on the basis of their lengths of stay. Customers
who stay longer generate better revenue for the hotels.

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Psychographic segmentation: Customers are also divided on the basis of lifestyles within the
hotel industry. Customers belonging to a higher income group tend to avail value added services
offered at the restaurant.
Airbnb model
Airbnb business model aims to bridge the gap between property owners and travelers or lodgers
who need accommodation facilities for short durations. Airbnb runs on an online platform where
property owners can register their properties (lodging homes, rooms, bunk beds, hotel rooms)
with Airbnb (Ert et. al., 2016). Renters or travelers who are seeking short duration
accommodation facilities can register with the business and book rooms for the desired duration.
The property owners can decide the price that they wish to charge for their facilities and Airbnb
would list the same after adding their fees. Airbnb also allows people to host experiences. These
experiences may include a local city tour, cooking, weaving, cycling or painting. This allows
customers to experience different things with experts of various fields.
Therefore Airbnb is a two sided online platform. On one hand, the business enables owners to
earn rent money and on the other hand, it enables tourists to rent out places for short durations.
Tourists can choose the place that they wish to rent and similarly hosts can also choose who to
rent out their space to. Airbnb receives commission from two sources upon every booking. The
brand charges guests 6-12% of the booking fee and charges hosts 3% of every successful
transaction (Oskam & Boswijk, 2016).
Target market of Airbnb
Target market of a business include the set of customers whose needs the business aims to fulfil.
The target market of Airbnb includes the following:
Travelers: Airbnb target’s tourists and travelers who enjoy travelling but prefer being
economical. The specific kind of people targeted by Airbnb are those who would rather spend
more money of travelling to tourist places rather than on the place of accommodation.
Hosts: Hosts of Airbnb include those owners who are willing to rent out their place in order to
make some money or to meet interesting people from across the globe.

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Industry analysis
Within the hospitality industry, Airbnb specifically targets the following customer segments:
Geographic segmentation: Airbnb target customers from over 190 countries which includes
hosts as well as guests.
Psychographic segmentation: This segmentation refers to the process of segmenting customers
on the basis of their lifestyles (Wedel & Kamakura, 2012). Airbnb target travelers who travel
frequently and for short duration. The brand also target people who plan their holiday
economically and do not necessarily need a luxurious accommodation.
Demographic segmentation: Airbnb targets customers who fall in the lower income group. The
brand targets customers across all age groups. However, it is the youth which provides maximum
business to Airbnb as compared to families with children.
Porter’s five force model
Porter’s five forces helps brands in understanding the industry within which they operate (Dobbs,
2014). For the hospitality industry and specifically for a disruptive innovation like Airbnb, the
Porter’s five forces applicable are as below:
Bargaining power of buyer’s
The bargaining power of buyer’s is relatively less since the brand is targeting a huge customer
base. Moreover, there is no room for negotiation for any property’s price that is being shown on
the mobile application or website. The bargaining power of buyers is therefore limited as the
prices are determined by the hosts and Airbnb has little role to play in manipulating these prices.
Moreover, Airbnb has a large number of hosts and hence the guests already have sundry options
before booking their stay.
Bargaining power of suppliers
The suppliers in this case are various hosts who list their properties with Airbnb. The bargaining
power of suppliers at the moment is moderate. Airbnb’s entire business model is largely

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dependent on the availability of properties with these hosts. However, the monopoly, uniqueness
and strong brand of Airbnb ensures that the bargaining power of these suppliers remains under
control. If the competition in the industry increases, then the bargaining power of these suppliers
would increases drastically.
Threat of new entrants
The threat of new entrants currently is low. The cost involved in establishing a new brand,
garnering the large number of guests and hosts as well as building trust among customers is very
high. It will take a long time for a new entrant to pose threat to Airbnb. Moreover, at present,
Airbnb is charging 6-12% from guests and 3% from hosts. This is great deal for customers on
both ends and this has been possible because Airbnb is running on economies of scale. For a new
business, it will be difficult to sustain in the market with such margins (Nurlansa, 2016).
Threat of substitution
The threat of substitution refers to the threat posed by substitutes of the product or service that
exist in the market (Rothaermel, 2015). There are no practical substitutes for accommodation
facilities for travelers. Therefore the threat of substitutes for Airbnb is negligible.
Competition
The competition within the hospitality industry is extreme and hence it is imperative that Airbnb
continues to differentiate its services from other players of the industry. The uniqueness of
Airbnb’s business model will soon be imitated by other players or new entrants in the industry
and convert this blue ocean into a red one. Competition may cause price wars which may even
adversely impact Airbnb’s bottom line. This is why it is essential that Airbnb continues to target
new customers and put efforts in ensuring customer loyalty and repeat purchases.
Competitive advantage
Competitive advantage for any business throws light upon all those aspect that make the business
different from its competitors (Gobble, 2012). Airbnb is a disruptive innovation that has changed
the face of hospitality industry. The major competitive advantage of Airbnb is its wide reach,

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strong brand name, trust among consumers and uniqueness of the business model. The value
added by these competitive advantages of Airbnb are as below:
Unity in diversity: Unlike other hotels, Airbnb does not provide accommodation, Airbnb
provides experience to customers. People from different parts of the world open up their homes
for different people. People coming from sundry backgrounds live together, share their
experiences and learn about each other’s cultures and lives. This creates a positive atmosphere
and also enhances brand loyalty. Since people who can afford luxury hotels may also book
Airbnb rooms to experience this.
Sharing experiences: A unique feature of Airbnb allows guests and hosts to share experiences
(Lehr, 2015). Apart from offering accommodation, hosts registered on Airbnb can also invite
guests to share experiences including weaving, cycling, swimming, pottery or any other unique
experience that people can enjoy together.
The sources of these competitive advantages are as below:
No real estate: The major source of the competitive advantage of Airbnb is that even after
organizing of the largest hospitality business, the brand does not own a single property under its
name. This largely reduces business costs. It is important to note here that hospitality industry is
highly expensive and a new entrant in the market would require a heavy investment to begin.
Airbnb has massively reduced its costs through its unique business model.
Massive reach: Another source of competitive advantage of Airbnb is the brand’s massive
reach. Airbnb operates in over 190 countries and has hosts listed from remotest parts of the
world. The reach captured by Airbnb is truly unfathomable and consistently growing. A large
hotel at any given point of time will only be able to service a couple thousands of customers. On
the other hand, Airbnb can serve millions of customers on a regular basis.
Strong brand name: In a span of a few years, Airbnb has earned a solid brand name for itself.
This brand name has allowed Airbnb to grow and reach out to millions of customers on a regular
basis and earn various advantages for the brand as compared to its competitor (Lee & Kim,
2018). The brand name of Airbnb instils trust and assurance of impeccable service and a user
friendly experience.

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Unique Promotion strategies: Airbnb’s unique promotion strategies have also allowed the
brand to garner the popularity and trust that it has received. Airbnb has resorted to unique digital
marketing and social media marketing strategies which has helped the brand in reaching out to
wide customer segment.
Business trends impacting Airbnb competitive advantage
Increasing value added service offerings by hotels
Value added services offered by businesses play a significant role in enhancing customer loyalty
and reach. Hotels are currently starting to offer numerous value added services to customers.
These value added services include in built gyms, spas, swimming pools and entertainment
centers. The increasing amount of value added services offered by these hotels would adversely
impact Airbnb’s business. This is because Airbnb can only offer what hosts are willing to offer.
Therefore, even if the brand wants to offer value added services, it needs cooperation from
several hosts which is difficult.
Growth of traveling industry
Global tourism industry is one of the largest industries in the world with total economic
contribution of over 7.6 trillion in 2016 (Statista, 2017). This growth of travel industry is
expected to sustain. Increasing number of travelers would benefit the competitive advantage of
Airbnb as the brand has a large number of properties and hosts listed. Leading hostels of the
industry have a limited number of properties and hence at a certain point of time, they can only
cater to that many customers. On the other hand, Airbnb does not own any property but bridges
the gap between guests and hosts. Therefore, with the increase in the number of travelers across
the globe, it would be easier for Airbnb to expand its reach and cater to a much larger number of
customers.
Package tourism
Another trend that is already being witnessed in the hospitality industry is that of package
tourism. Customers are not booking hotels, they are booking holidays. This means that it is the
responsibility of the hotel to ensure that their guests travel around the city, cover important

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destinations and enjoy the local experiences. This reduces the stress of planning the tour for the
guests and shifts it to the hotels instead. Airbnb cannot adopt this strategy as it ties up with
different hosts from across the globe. Various travel agencies are also allowing travelers to do
the same. This is sure to negatively impact Airbnb’s competitive advantage.
Increasing competition via new entrants
As discussed before the threat of new entrants which is moderate at the moment may increase in
the future. This is because the cost of establishment is relatively lesser for business’s that imitate
Airbnb’s model of revenue. The reason why this threat is moderate currently is owing the large
reach and the immense amount of trust that Airbnb has garnered from across the globe.
Therefore, any new entrant would take time to reach the despicable lengths that Airbnb has.
However, over a period time, with increased innovation and differentiated services, it is likely
for new entrants in the market to impact Airbnb’s monopoly in their current business model.
Big data and service customization
The coming years will also witness the growth of big data analytics which will allow hotels to
enhance their relationship with customers by analyzing data at the minutest level and offering
customized services (Xiang et. al., 2015). In the years to come, hotels will be able to track down
and identify various details about their customers and work towards ensuring customer
satisfaction by offering highly customized services to all their guests. Data is one of the most
precious asset that every modern brand has. Owing to increased dependency of Airbnb on its
hosts, the brand may not be able to reach a significantly high level of service customization.
Disruption
Disruptive innovation is not a trend that is limited to hospitality industry but it is a trend that
impacts all industries alike. Over the recent years, we have witnessed that every industry faces a
new innovation that disrupts the status quo and adversely hampers the existing players of the
industry (King & Baatartogtokh, 2015). There no certainty of knowing if and when will this
disruption occur, but it is safe to say that Airbnb must ensure that must continue to work upon its
sustainability through innovation and differentiation in order to be prepared when such a
disruption occurs.

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Response to Airbnb growth by EU hotel chain
Airbnb has created a massive disruption in the hospitality industry owing to the uniqueness of its
business model. The strategies that must be adopted by an EU hotel’s chain in order to respond
to Airbnb are as below:
Package tourism
The hotel can offer package tourism rather than simply offering a source of accommodation to its
guests. Hotel chains have a clear advantage of being physically present and hence they can
participate in planning the entire holiday for customers rather than simply offering them a place
to stay. This would include their food, lodging, travel and tourism experiences would be planned
and executed by the hotel chain. This would relieve the tourists from the stress of conducting
extensive research and planning a holiday in an unknown destination.
Niche targeting
Niche targeting refers to the process of targeting a small set of customers which is unique to the
hotel chain (Hill et. al., 2015). The chain must creatively define a unique target market for itself
and ensure that fulfills every demand of that particular customer segment.
Innovative advertisement
Promotion of a business is crucial to the success of the business. Therefore in order to attract
customers from different parts of the world, the hotel chain must adopt extensively unique
marketing strategies. These strategies must include Digital marketing, social media marketing,
billboards and television ads. These ads must be creatively curated to ensure significant attention
from customers.
Conclusion
Airbnb is a leading name in the hospitality industry. The brand has created waves in the industry
through its unique business formula and extensive reach. Airbnb does not own any real estate
property but provides accommodation facility to millions of customers on a regular basis. The
brand has various competitive advantages which differentiate it from other players of the

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industry. The strong brand name, unique business model, wide reach and extensive
advertisement has allowed Airbnb to rule the hospitality segment and reach the pinnacle of
success. The brand must continue to strive heard, innovate more and ensure efficiency of service
in order to sustain the market and competition in the industry.

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References
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analysis templates. Competitiveness Review, 24(1), pp.32-45.
Ert, E., Fleischer, A. and Magen, N., 2016. Trust and reputation in the sharing economy: The
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Gobble, M.M., 2012. Innovation and strategy. Research-Technology Management, 55(3), pp.63-
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Guttentag, D., 2015. Airbnb: disruptive innovation and the rise of an informal tourism
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King, A.A. and Baatartogtokh, B., 2015. How useful is the theory of disruptive innovation?. MIT
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gender differences. Journal of Travel & Tourism Marketing, 35(1), pp.32-45.
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foundations (Vol. 8). Springer Science & Business Media.

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Xiang, Z., Schwartz, Z., Gerdes Jr, J.H. and Uysal, M., 2015. What can big data and text
analytics tell us about hotel guest experience and satisfaction?. International Journal of
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