The Rise of the Sharing Economy: Estimating the Impact of Airbnb

The Rise of the Sharing
Economy: Estimating the Impact
of Airbnb on the Hotel Industry†

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
External and internal environment analysis................................................................................3
The selection of the main strategic options for the growth.........................................................5
The strategic solution for Airbnb ongoing health.......................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Rising economy growth create positive impact on hotel industry as it develop more
effectiveness and contribute major part in long term growth. With this regard, Airbnb majorly
create impact on hotels because it serves substitute as hotel. As a result, impact by exploiting
significant variation in pattern of adoption across city level markets (Zalengera, Blanchard and
Gondwe, 2014). For gaining insight information of the present report, it includes external and
internal environment analysis which serves to particular business and goals. Furthermore, it
includes main strategic options for growth and solution for the company's ongoing performances.
MAIN BODY
External and internal environment analysis
In order to consider external environment analysis PESTLE tool has been used that
assists to expanding business all over the world. In this regard, economic benefits also develop
successfully so that appropriate functioning will be successful develop (Bertozzi, Ali and Gul,
2016). Political factors: Airbnb is unique business in which people offer to rent their homes,
apartments, rooms, etc. However, companies run into legal issues. For example, certain
locations available to rent don't follow norms and regulations. Economic factors: Shared economy is considered by leader who is Airbnb. It develops
advantages for developing trends when resources shared between corporations and
individual. In New York, the company develop economic activity that is accumulated to
$600+million and provide more than four thousand jobs (Zalengera, Blanchard and
Gondwe, 2014). Social factors: Airbnb is social enterprise which works as hosts and offer home to guest
in exchange for money. In addition to this, hosts also share their experience with reviews
that often and discuss about tenant activity. Hotels and visitors discuss needs and
experience openly (Zalengera, Blanchard and Gondwe, 2014). Technological factors: The chosen organisation depends on advance technology so that
visitors can easily book rooms on app and website of the business easily. Website is also
where guests can write their reviews. Hence, bad and good things will judge by the

enterprise on which they can focus to increase positive advantages (Børthus, Braastad
and Nerbøvik, 2018). However, without technology, they are unable to communicate
appropriate comply to housing regulations. In this consideration, on websites they need to
address need to focus and follow rules on the basis of terms and conditions which
provided by Airbnb. Environmental factors: Furthermore, environmental factors also boost to the company to
reduce energy usage within the different nations and compared to hotels. It includes
lowering greenhouse gases, reduce water consumptions, waste avoidance and increase
more environmental awareness (Zalengera, Blanchard and Gondwe, 2014). As a result, it
can be stated that lowering travelling impact and chemical usage as well.
 Legal factors: There are several legal issues exists in front of Airbnb that are falling to
comply with housing regulations. On their app and website, it need to be reduced so that
rules can be successfully followed to focus on terms and conditions (Bertozzi, Ali and
Gul, 2016). As a result, Airbnb agreeing to follow taxation and tourism norms.
INTERNAL ANALYSIS OF Airbnb
Swot analysis is considered to be as an appropriate technique which can be utilised by
manager in Air bnb for analysing the strength, weakness, opportunity and threat of firm.
`Strengths : The biggest strength of AirBnb is that an organisation has good reputation.
Another major strength of Airbnb is that, business entity with the support of advance technology
facilitates suppliers of niche inventory to bring their products to market, online. Business entity
provides sufficient access as well as sufficiently low cost of revenue for
Suppliers to profitably list their leftover stock (Wang and Nicolau, 2017.). Airbnb is located at
such location from where customer can have easy access of products or services provided by an
enterprise. High brand visibility is the strength of organisation which has helped an enterprise in
maintaining sustainability in highly competitive business environment. Marketing strategy of
Airbnb has assisted business entity in increasing revenue. An organisation has developed an
online reputation system that enables and encourages each guest to provide feedback which has
helped an enterprise in gaining popularity.
Weaknesses : Major weakness of AirBnb is that market penetration strategy adopted by
business entity is negatively correlated with hotel revenue. In addition to this, changes in

economic condition of nation has great impact on the financial performance of an organisation.
Low market share is considered to be as other biggest weakness of firm (Zervas, Proserpio and
Byers, 2017). Airbnb provides fewer amenities as well as services as compared to other
companies. In hotel there is no conference space due to which business entity has failed to cater
the needs of people those who travel for the business purpose (Guttentag and Smith, 2017).
Opportunities : Airbnb has an opportunity to enter into Texas market, by applying this
strategy firm can foster growth. Business entity has an opportunity to provide more facilities as
well as services to customers at domestic, national as well as international level. An organisation
has as chance to increase hotel room supply which will help Airbnb in generating revenue and
profits. Airbnb can provide substitute products or services to customers. An organisation by
improving its infrastructure can cater the needs of all types of travellers (Blal, Singal and
Templin, 2018).
Threats: Changes in the laws as well as regulation in the nation have direct and
significant effect on the business operations of company. Increase in the competition is
considered to be as other major threat for organisation.
The selection of the main strategic options for the growth
Airbnb defines itself as “a social website that connects people who have space to spare
with those who are looking for a place to stay” it is the major growth of the organisation where it
has to define the different rooms and spare rooms for accommodation of the people. To define
the strategic options for growth the BCG matrix will be used.
BCG Matrix of Airbnb
Cash cows: From the beginning the company is providing the space of lease and rental
accommodation to people. As the organisation is the first one to explore in the market it holds
great market share due to the facilities it is providing. However, with such rental accommodation
and leased being more popular in many nations, along with this it is increasing its name in hostel
stays, this budget accommodation line can be seen as being in a matured market. Hence, it will
be classified in cash cow. In addition to this, the scheme for AirBnB’s it accepts the property
only after keeping a complete check on it. This will assure that good quality property is being
given by the organisation.
Question mark: The company has already assumed that it has to take location at prime areas of

the city. It puts a question mark on the organisation that weather it will be able to track and hold
all the prime locations in every city.
Star: Instead if this boutique accommodation should be the major concentration of the company
so that one day it can turn it in to the star (Zalengera, Blanchard and Gondwe, 2014). As there is
higher growth in the future for the same. Other than this, the accommodation cam be expanded
by renting more properties and expanding its customer base.
Dogs: This situation has not been faced by the organisation due to its quality services and
accommodation. As already it is providing many jobs to people and developing its economic
activity that is accumulated to $600+million and provide more than four thousand jobs. It will be
done and managed well by the company.
The strategic solution for Airbnb ongoing health
Airbnb has faced massive growth from the day one as the organisation has come up with
a very good idea and a new concept. There are various solution which are being given by the
organisation so that people can enjoy accommodation just by clicking and on one tap. Currently
it has around 31000 homes and their target is to reach more by 2020. Airbnb has also seen
widely through the markets of global and national level. This market has expanded its major
business by using different promotional strategies. The organisation is coming up with different
solutions of providing many facilities like discounts on first five bookings and many other offers
of listing the same in the market. It helps in enhancing the reliability of the company that it sells
the best quality and services. There are various other solutions for the company as it can have an
opportunity to enter into Texas market, by applying this strategy firm can foster growth. This
will take the business to a different height and thus the same can be developed more by way of
increasing the same and providing employment opportunities to people.
There are some more solutions of Airbnb and for that the organisation has to take some
major steps by expanding its business and making proper plans and policies. It can also add more
Airbnb Plus inventory is to seek out purpose-built rental inventory in both urban and holiday
places more so that the business can be expanded to a great extent. V Trips’ Milo said that the
organisation is already been working with a number of real estate developers who want his
company to manage new, purpose-built holiday homes, made just for rentals.

The company can also develop the health by way of giving some more focus on its
technological sector as the organisation has to go through many innovative ideas. It will only it
in its major expansion. Targeted market can be reached through implementing real advance
technology so that customers can easily book rooms on app and website of the business easily.
Website should be such that guests can write their reviews. Hence, bad and good things
will judge by the enterprise on which they can focus to increase positive advantages (Børthus,
Braastad and Nerbøvik, 2018). However, without technology, they are unable to communicate
appropriate comply to housing regulations. In this result, the Airbnb websites has need to
address need to focus and follow rules on the basis of terms and conditions which provided by
company.
CONCLUSION
It has been concluded from the report that business strategy implemented by one of the
company can have direct as well as significant effect on the performance of other organisations
in industry. Study has concluded that an enterprise is performing well but still there are few areas
where improvement can be made. It has been concluded from the assignment that the substitute
product developed by any one firm can have effect on the profitability of whole industry.
An organisation has been provided with suggestion to bring improvement in marketing
strategy. There are various strategies have been recommended which can be utilised by
organisations for maintaining its position in market.

REFERENCES
Books and Journals
Zervas, G., Proserpio, D. and Byers, J.W., 2017. The rise of the sharing economy: Estimating the
impact of Airbnb on the hotel industry. Journal of Marketing Research, 54(5), pp.687-705.
Wang, D. and Nicolau, J.L., 2017. Price determinants of sharing economy based accommodation
rental: A study of listings from 33 cities on Airbnb. com. International Journal of
Hospitality Management, 62, pp.120-131.
Guttentag, D.A. and Smith, S.L., 2017. Assessing Airbnb as a disruptive innovation relative to
hotels: Substitution and comparative performance expectations. International Journal of
Hospitality Management, 64, pp.1-10.
Blal, I., Singal, M. and Templin, J., 2018. Airbnb’s effect on hotel sales growth. International
Journal of Hospitality Management, 73, pp.85-92
Bertozzi, F., Ali, C.M. and Gul, F.A., 2016. Resource Based View of an Organization and
PESTEL Analytical Tool; An Analysis of Hotel Corallo, Rimini. EPH-International
Journal of Science And Engineering (ISSN: 2454-2016). 2(11). pp.57-71.
Zalengera, C., Blanchard, R.E. and Gondwe, K.T., 2014. Overview of the Malawi energy
situation and A PESTLE analysis for sustainable development of renewable energy.
Renewable and Sustainable Energy Reviews. 38. pp.335-347.
Børthus, M., Braastad, J. and Nerbøvik, K., 2018. ZZZ: Business Consultancy Group Report
(Bachelor's thesis, BI Norwegian Business School).

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