Business and Innovation in Airbnb: A Comprehensive Analysis

This report provides a comprehensive analysis of Airbnb's business and innovation strategies. It begins with an introduction to Airbnb, highlighting its founding and core business of connecting people with lodging options. The report then delves into an analysis of Airbnb's business model, identifying key elements such as its value proposition, key partners (hosts and guests), important activities (market expansion and operational excellence), key resources, customer segmentation, and ownership of multiple channels. The revenue structure of Airbnb is examined, detailing how the company generates income through host service fees and guest booking fees, as well as its growth trajectory. The report also explores the concept of disruptive innovation in the context of Airbnb, explaining how the company, starting as a small entity, has become a major player in the travel and tourism industry. It outlines the impacts of disruptive innovation on Airbnb's growth, including its customer-friendly pricing strategies and expansion into numerous countries. The report concludes with a reference list of the sources that were used in its preparation.

BUSINESS AND INNOVATION IN AIRBNB

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Table of Contents
Introduction.................................................................................................................................................3
Analysis of the business models in Airbnb..................................................................................................3
Elements of innovative business models of this company.......................................................................3
Revenue structure of this organization.....................................................................................................4
Analysis of disruptive innovation in Airbnb................................................................................................5
A short note on disruptive innovation......................................................................................................5
Impact of disruptive innovation on the growth of Airbnb........................................................................6
An innovation proposal for this organization...............................................................................................6
References...................................................................................................................................................8

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Introduction
The company known as Airbnb, Inc. is a company that mainly deals with providing the common
people with websites or portals that can help the people book lodges, hotels, or other places for
staying for a temporary amount of time in any place in this world. Most people use the websites
and portals offered by this company mainly for purposes related to tourism. This company is an
American organization and has its headquarters located in San Francisco in California. The
company was founded by three men, namely Brian Chesky, Joe Gebbia, and Nathan
Blecharczyk, respectively, in the year 2008. Although the company does help people to book
hotels and lodges by using its website, a person must keep in mind that this company does not
own the majority of these places and only provides people with a way to book rooms in such
buildings. The company also owns many subsidiaries. Its net revenue is 3.378 billion dollars, and
its net income is -$4.584 billion, as seen in the year 2020. This is very short compared to the
earnings and profits made by this company in the previous years, mainly because of the Covid-
19 pandemic, which had hurt its economic progress. It also has a total number of assets that have
been estimated to be more than $10.491 billion and total equity of $2.901 billion in the year
2020. The company also has more than 5,597 employees in the current times. This report aims to
analyze the various factors that can be seen in how this company does its business. The report
takes a look at a case study regarding this company for this purpose.
Analysis of the business models in Airbnb
Elements of innovative business models of this company
This section tries to identify and understand the different elements present in the business models
of the company known as Airbnb. These elements or characteristics that make up for the
innovative business strategies for this company are described by the points listed below as
follows:-
Effective value proposition- This company has an online platform-based business model.
Hence, Uenlue (2021) stated that due to this reason, this company needs to provide itself with
compelling value propositions from both sides in such a business model. The sides, in this case,

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are the guests and the hosts. As seen in the case study Singh & Perepu (2021) stated that many
hosts for this company had offered several customers various off-site deals, which enabled them
to book hotel rooms at much lower prices, which further led to the company gaining more
customers.
Reliable key partners- Apart from having a good value proposition, this company also needs to
have many reliable partners to ensure that its business keeps on running strongly. Uenlue (2021)
stated that in the case of this company, the crucial partners that it has are the hosts and the super
hosts. Apart from these people, other key partners include the guests or customers of this
company and the tourism partners or organizations. Singh & Perepu (2021) stated that the hosts
had played an important part in ensuring the company's success by offering various deals to
customers to book rooms in hotels with minimal issues.
Important activities- Uenlue (2021) stated that the main activities that this company does to do
its business are to get more eager customers or guests, expand its market of business as much as
possible, and achieve operational excellence. Singh & Perepu (2021) stated that this company
had managed to expand its business market to more than 190 countries and has been able to
cover more than 34,000 cities in all of these locations because of the strategies that its owners
and managers took.
Several key resources and assets- The resources or assets possessed by this company play a
huge role in ensuring its success. This is because these assets constitute the huge number of
networks that this company has over all of the places it operates. Uenlue (2021) stated that these
assets also help the company create algorithms that could predict its success rate. Singh &
Perepu (2021) stated that these assets allowed the company's websites to help people select a
suitable hotel for themselves, provided that they select the place where they want to go and stay.
Proper customer segmentation- This company needs to perform operations that would enable it
to conduct the segmentation or separation of both customers and hosts simultaneously. Uenlue
(2021) stated that this is simply because this company has a multi-sided business platform. The
company does this mainly by identifying the nationality, behaviour, motivation, interests or even
the amount of fees that any customer may want to give based on the type of place where they
want to stay or not. Singh & Perepu (2021) stated that one way by which this company does its
segmentation of people is by letting the hosts charge tariffs from the guests. The company also
segments its hosts by verifying their identities.

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Ownership of many channels- As stated by the previous points, this company has many assets
worldwide. Uenlue (2021) stated that these assets range from subsidiary companies to websites
and many other similar things. Hence, by looking into these facts, a person can understand that
so many assets can provide the company with many channels that will enhance its operations.
Most of these channels include social media sites, free media coverage or the websites and
portals this company possesses. Singh & Perepu (2021) stated that many of these channels
enabled the company to operate from several areas in this world and provide its services to the
common masses, mainly through emails or over the phone. These channels had also led to this
company having many agents in different parts of the world and across several time zones who
helped the company provide its services to other people through emails, phone numbers of
customers or even through other forms of social media.
Revenue structure of this organization
This section provides some further details about the revenue that the company known as Airbnb,
Inc. possesses. Even though the company had started in the year 2008, it had made revenue of
more than US$250 million in the year 2011. The revenues of this company had continued to
increase in the following years, and it became more than US$10 billion in the year 2014, which
again had increased to an amount of US$13 billion in October of this year. The company had
started to make a revenue of US$900 million which increased to become US$10 billion in the
year 2020.however, the revenue had decreased at the end of this year due to the coronavirus
pandemic, as stated by a previous section. Singh & Perepu (2021) stated that the company
charges 3 per cent from the customers as a part of the host service fees. The guests or the
customers also had to give charges to this company which varied between 6 to 12 per cent of the
booking amounts they had to pay to the hotels where they wanted to stay. However, this amount
did not always remain constant and would depend heavily on where a person would want to stay.
The company would release the money to the place owners and the hosts only 24 hours after the
customers had checked in to their booked places. However, the company's managers would try to
keep the prices as low as possible to retain more customers, although it still depended on the kind
of place where a person would want to stay. On the other hand, the hosts were allowed to charge
the amount of money they needed depending on the type of customer or the place they were
dealing.

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Analysis of disruptive innovation in Airbnb
A short note on disruptive innovation
This section looks at the term known as disruptive innovation and how this term applies to this
company. Any individual can use this term to describe a process that can result in a company that
had initially started as a small organization that occupies the lowest position in the market
becomes one of the most major leading companies in the world that continues to experience
massive amounts of growth and profits in its business (Disruptive Innovations - Christensen
Institute. Christensen Institute. 2021). This can be attributed to the strategies that any
organization adopts to produce more innovation, which would contribute to the company's
growth shortly. This also the case for the company known as Airbnb, Inc. This is because the
company which had initially started as a small organization and that too a part-time business of
its owners in the year 2008, had grown in its size and became one of the most profitable
organizations in the United States of America as well as all across the world within a short span
of fewer than five years in the year 2014. Therefore, Guttentag (2021) stated that a person could
say that the concepts of a disruptive business model have been used to expand the business of
this company with the help of various forms of technological upgrades in its business, such as
the internet. A person can also understand that the extraordinary measures that this company
takes to set up the costs, household amenities, and the measures taken by the company to take
over the local and the international markets have also played a huge role in expanding its
business.
Impact of disruptive innovation on the growth of Airbnb
The previous section has already given the readers an idea about disruptive innovation and how
this form of innovation applies to the growth in business that this company has seen. Hence, this
section tries to conduct further analysis regarding this matter. This section tries to find out how
the disruptive business model of this company has made it a huge competitor in the field of
travel and tourism to other companies in this sector. The impacts of this form of the business
model on the growth of this company are elaborated by the points listed below as follows:-
Starting as a small-time business- The company known as Airbnb, Inc. started as a small part-
time business in 2008 by three friends who had decided to rent out their apartment to tourists or

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anyone who wants to stay here temporarily. Singh & Perepu (2021) stated that this proved to be a
successful initiative for all of them. Slowly the business had started to grow bigger, and the
company had launched its website within a few months. By the year 2010, the company started
to make more profits and expand its market to other places in the world.
Innovative ways of setting prices- After the year 2014, the company had expanded its market to
many places in the world. The organization was able to pull off this type of initiative simply
because of the customer-friendly prices that it had decided to charge from its customers for its
services. Singh & Perepu (2021) stated that the company started to charge a small percentage of
the amount that most people would have to give to different hotels or lodges for booking their
rooms. These charges were not very high and would not cause any problem to the customers.
Due to this reason, the company started gaining more eager customers who were keen on using
the website offered by this company. The company hosts had also made many deals with the
customers for booking rooms without paying any extra fees to the company, which again
resulted in a huge number of people preferring to use the company's services.
Thus, by looking into these facts, a person can understand how this company could enhance its
position in the market within a short period. Many reputed travel agencies and even many hotels
alleged that this company is taking away all of the customers they enjoyed. Singh & Perepu
(2021) stated that this includes most of the hotel industry in the United States of America.
An innovation proposal for this organization
The previous sections have given the readers information about the various aspects related to the
business models that this company follows. Therefore, this section tries to identify an alternate
model of innovation that this company can follow to enhance its business without ruining other
companies' prospects of success. A model of innovation that this company can follow in this case
is the cyclic model of innovation. The company can use this form of innovation to analyze the
technological and marketing aspects related to its business and make its strategies or design its
services following these factors. The company can also use diffusion processes to enhance their
nature of providing customer service.

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References
Disruptive Innovations - Christensen Institute. Christensen Institute. (2021). Retrieved 1 July
2021, from
https://www.christenseninstitute.org/disruptive-innovations/#:~:text=Theory-,Disruptive
%20Innovation,upmarket%2C%20eventually%20displacing%20established
%20competitors.
Guttentag, D. (2021). Airbnb: disruptive innovation and the rise of an informal tourism
accommodation sector. Taylor & Francis. Retrieved 1 July 2021, from
https://www.tandfonline.com/doi/full/10.1080/13683500.2013.827159#:~:text=Airbnb
%20can%20best%20be%20thought,its%20unique%20appeal%20to%20tourists.
Singh, G., & Perepu, I. (2021). Airbnb- A Disruptive Innovator. Icmrindia.org. Retrieved 1 July
2021, from https://www.icmrindia.org/casestudies/catalogue/IT%20and%20Systems/
Airbnb-Excerpts.htm.
Uenlue, D. (2021). Airbnb Business Model Canvas. Innovationtactics.com. Retrieved 1 July
2021, from https://innovationtactics.com/business-model-canvas-airbnb/.