Airbnb Report: Solving Business Problems in Accounting, Management

This report provides an analysis of Airbnb's business, focusing on various problems the company faces across legal, public relations, accounting, and management areas. It examines issues related to disruptive innovation, financial and accounting challenges including tax and regulatory hurdles, and management concerns regarding host and guest expectations. The report also addresses organizational structure issues related to trust between hosts and guests. Recommendations include limiting home-sharing to part-time businesses, improving communication with government officials regarding tax obligations, and ensuring tax exemptions. The report concludes with a reflection on individual career plans, and is available for students to study on Desklib, which provides past papers and solved assignments.

Running head: AIRBNB
AIRBNB
Name of the Student
Name of the University
Author note

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Executive Summary
This report focuses on the various aspects of the business of Airbnb. The report would help in
deciding the various problems within the business of the company. Based on the several issues
that are faced by the organization, the solutions to the problems have been discussed within the
report. The report also focuses on the various issues from the point of the view of the user.
Finally it provides a reflection of individual career plan.

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Table of Contents
Background:.....................................................................................................................................3
Problems faced by Airbnb...............................................................................................................5
 Legal Issues faced by Airbnb...............................................................................................5
 Public Relation Problems.....................................................................................................6
 Accounting Problems............................................................................................................6
 Management.........................................................................................................................6
Analysis Issues.................................................................................................................................7
Recommendations..........................................................................................................................11
Study Career and Future Study......................................................................................................13

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Background:
Airbnb is an e-marketplace, most popular for connecting hosts and travelers across the
globe. It was founded in august 2008 by only two individuals. The company is now grow to a
billion dollar company and stands as a one of the mooth sidest prominent in the sharing system
with competitors such as Lyft and Uber. The first service was started in the San Francisco,
California and now spread through more than 191 countries. Airbnb act as a virtual matchmakers
that assist traveler to find and rent desired property among many hosts. Their website also assist
the hosts to market their available house. Joe Gebbia, Brain chesky and Nathan Blecharczyk are
the founder of this company. Their simple idea to rent some available space forms a
multinational company in merely four years. This approach increased the value and revenue of
the company to 31 billion dollar. They provide value to both side travelers and hosts as well
while gaining profit from both side. The C2C platform enables hosts to gather rental money
when traveler books their space while showcasing affordable and moderate houses all over the
world.

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Figure 1: Number of Airbnb listings
Source: (Zervas et al., 2015)
Airbnb constantly maintain their organizational strategy while implementing new
approaches to improve and expand their business even more. There are some key partners
associates with the business as such investors, photographer, guests and hosts. This key partners
are directly involved to the company’s wellbeing. They partnered with Facebook and linked in to
identify the user identities and provide them an ease access to the website. They also partnered
with the Google to enhance and publicity and marketing strategy. The search engine optimization
not only helps them reach to enormous people, it also assist the user to identify the desired rental

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place while searching by several keywords. They were successful to develop a network of loyal
customers and hosts to utilize the C2C services.
Airbnb provides a convenient alternatives to a hotel that is easy to find and navigate in
several locations. They also offers different type of experience in different cost range. Currently
they are expanding their business by partnering with isolated resorts and villas. Where hosts are
unable to showcase their places which are available for rental and situated in minor places.
Throughout the eight years of experience they faced rapid progress as it hosts more than one
million listing in over 191 countries. Airbnb offers individual housings that sort from tree houses
to palace and everything in between. Airbnb also donates to native societies in myriad ways.
One study found that 400,000 Airbnb guests who visited New York City between 2012 and 2013
spent $632 million, supporting 4,580 jobs.
Problems faced by Airbnb
 Legal Issues faced by Airbnb
The future of the growth of Airbnb is mainly threatened by several kind of legal
problems. There are several kind of the models of business that is mainly based on the use of
advanced technologies. The legal based issues faced by Airbnb are also able to outperform the
relevant based legislation. They are also able to encounter several kind of issues that would
mainly be in relation with the general legitimacy or issues based on tax.
 Public Relation Problems
It is extremely important for the company to maintain a successful relation with the
public in order to satisfy their clients. The business of the hotels is primarily dependent on the
perception of the public and their level of acceptance. It is the utmost responsibility of the hotels

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to manage, control and thus would be able to influence the public (McNamara et al., 2015). The
main challenges that are included are to recruit and retain the right kind of people within the
business in order to influence the public and lack of applicable skills.
The implication of these kind of problems is that it would affect the long term
relationship with the public. The lack of proper kind of people within the hotel business would
affect the relation with the public. This would affect the profits within the business.
 Accounting Problems
The business of the hotels mainly face different kinds of problems such as payroll,
inventory tracking and scheduling. There should be a proper system of tracking of the inventory
within the hotel business. The organization should maintain a track of the account section of the
hotels in order to maintain a track of the profit within the organization.
The implications of the problems based on accounting might result in loss within the
organization of the business of the hotels. This would have a major impact for the organization.
 Management
There is a high competition within the business of the hotels of Airbnb. The high level of
competition within the market would need a high level of management in order to address all the
issues. The satisfaction of the customer is a major issue of concern. Maintaining the reputation of
the brand should be the major concern. Hence, a proper level of management would be essential
in order to address all the issues.
Analysis Issues
Disruptive innovation theory propose a disruptive product or service must experience
initial popularity then increase the extent as it arrives the mainstream market. Airbnb’s

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development somehow follows the patterns perfectly. After several years of experienced it faces
rapid growth over the past few years. After foundation in 2008, it was able to get a contract of a
million room nights. The number increases rapidly in following years. In 2011 they had booked a
total of five million nights and in 2012 the total of five million room nights. With the rapid grow
in the business they faced overgrowth in terms of economical and popularity. However, they also
faced several issues in earlier years which hider their exponential growth in some cases. They
were able to solve some of their problems but some of them are still considered as a vital issue.
Financial and Accounting:
Disruptive business models associated with the new approach or idea often faced several
consequently encounter and legal issues. Airbnb also faced this issues due to the unknown
models and environment. The business process of the Airbnb is a new approach that was
developed by them. Airbnb adopts a new technology to offer a premium experience for searching
a rental place. They faced several issues with general legality (e.g Relayrides and PayPal) and
taxes (e.g amazon and OTAs). The company faces challenges on both sides. Firstly, there are
allegations that Airbnb is avoiding the full tax and most of the rental activity are often illegal.
There “informal sector” are offering low entry requirements and small-scale operations. Airbnb
faced several law issues associated with the short-term rentals. The illegality spread through
many countries and some cities prohibited short-term renting without special permits. For
instance, San Francisco prohibited unlicensed rental agreements of fewer than thirty days.
Nowadays, the short-term rental is only available in some geographic areas. There are also some
regulation such limit of times per year a residence can be rented out and limiting the proximity of
short-term rentals to one another.

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There are several tax issues currently occurring heavily in the informal sector. The guests
usually avoid paying taxes that must be charged in traditional accommodation sector. The sale
taxes in the USA turn around 15%. For instance guests pay 14.75% (5.875 % occupancy tax and
8.875% sales taxes) for ranting a place in New York City. They are also charged $3.50 in night
fees for occupancy and tax development production. General opposition to tourism taxes, it has
often strongly supported legislation to levy lodging taxes to fund tourism promotion. Airbnb is
also familiar with the obligations but the company totally relies on the local law-enforcement to
avoid consequences and stipulated their terms and conditions.
Figure 2: Security & privacy concern
Source: (Gassmann, 2013)
Management:

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In earlier years, Airbnb faced several management issue as they were new to the market
and had lack of business to follow the footsteps. The main challenges occurs to maintain the
hosts and guests expectations and reality. There are several cases reported of damage and stolen
goods by the hosts against Airbnb. For instance, a lady found her apartment empty after
revisiting the guests. The guests were gone with all of hers furniture and other goods. Airbnb was
also not directly linked with the issue. However, they feel responsible for the loss of the lady.
Airbnb rents rooms through online matchmaking, drug addicts are often take advantage of the
matchmaking to hire some places to do drugs. They often lefts the syringes and other drug
related utilities in those places. This dynamic issues are hard to solve.
Figure 3: Business model of Airbnb
Source: (De et al., 2015)

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Organisational structure issues:
The AirBnB is one of the most valuable organization in the world which is used by
majority of the tourists of the world for the purpose of accommodation. The organization
structure issue one of the major problem that is faced by many of the shareholders of the
organization. The entire business of the organization depends on the partners or the host. A host
is one who lends the tourists to use their homes or hotels by the platform of the AirBnB. One of
the major drawback in this system is that if the host or the partner of the same is not proper then
the client or the guest of the system may face major backlogs. Other than this one of the other
structural problem is the client is not properly responsive that is the host does not know the
guest, but has to believe in him due to the partnership of the AirBnB. This is one of the major
structural drawback is the system of the organization that the entire process runs on believe and
experience feedback, hence it becomes troublesome for the new users of the system no other end
of the shareholders trust each other.

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Figure 4: Organizational Structure
Source: (Bocken & Short, 2016)
Recommendations
The management team of the company needs to make sure that it does not make the home
sharing business into a full time business. The management team of the company needs to take
steps so that a home can be rented at most 180 days in a year. That will ensure that the homes are
rented less than 50% of the total time. The company needs to implement this through a probation
period of 12 months and analyses if it works properly before implementation.
 Public Relation

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The second recommendation for the company and the public relations department would
be to communicate properly with the government and concerned officials about the obligations
related to home sharing (DaSilva et al., 2013). The laws state that the home rentals can only be
charged if the renter provides extra services like breakfast and linen services. But the income tax
is also implemented on the rental incomes which has created a lot of debacle. The accounting
team of the company needs to stay concerned about the scenario. The company needs to make
sure that a tax exemption is made to remove the tax fillings which are normally costlier than the
collected tax.
 Marketing
The third recommendation for AirBnB Company would be to that the public relations
department needs to work on their marketing programs (Aversa et al., 2015). The team needs to
make sure that a portion of the funds that are collected from the hotel room department are used
in promoting tourism. The hosts who want to join the program can be signed in and given
exclusive offers to particular destinations. For rentals of short term, exclusive offers can be
introduced.
 Rules & Regulation
AirBnB needs to enforce certain rules and regulations to avoid criticisms regarding
inappropriate bookings regardless of proper pictures on the website (Biber et al., 2017). The
company needs to take strict steps if the host cannot deliver proper access to the listing who are
booked. If the listed books are changed or compromised then the host should be immediately
disbanded. The information can range from absence of promised amenities and the total number
of rooms or bedrooms. Prior to the booking, if an animal is present in the enclosure or if the

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place of the listing is unsafe and clean, strict steps need to be taken against the provider. If the
bookings aer compromised then the management team needs to implement proper steps so that
full refund is provided back to the customer and another comparable property of AirBnB is
provided at the nearest location.
The current rules state that refunds are not applicable if the complaint is made after 24
hours. The company needs to properly address its public grievances efficiently to promote
positive press. Recently, a lady complained about a faulty pipe in the apartment that she was
renting. Instead of resolving the problem, the executive who was in charge of the problem
solving issues responded that nothing can be done and it was her fault that the pipe was leaky as
the company checks each and every property amenities carefully before making it online. The
company faced a huge backlash after this event.
 Enhance Commitments with guests and hosts
Another recommendation for the company that would be to check the hosts before they
make their apartments online on their website. The issue is highlighted mostly when the
customers have to share a room or apartment with the host. The management team of the
company needs to come up with a solution of rules and regulations where the hosts are reviewed
by their previous engagement with previous customers. A proper communication channel can be
opened up by the company through which a proper negotiation can be made which can leave a
back record for resolving future complications. Evaluation of the hosts is important to mitigate
several legal issues that the company is facing.

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Study Career and Future Study
This assignment has helped me to evaluate the real life issues of a particular organization
and has helped me to understand how to address those issues. The management of the company
really made some mistakes while preparing the basic rules and regulations of the company. A lot
of research needs to be conducted as how much survey Airbnb takes to make an apartment ready
for rental on its website. Future studies can include evaluation standards of hosts and apartments
and how the business plans on expanding itself with the growth of tourism all around the world
recently. I learnt the importance of a good public relations department in maintain the proper
image of a company which directly affects its revenue stream. The marketing team of the
company needs to be evaluated as well to analyze how the company managed to post a
concerning ad despite being a billion dollar company with huge resources dedicated towards PR
prospects. This will help to analyze why the company is facing so many lawsuits and
management problems lately.

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