PJ 1: Airbnb Business Model, Digital Strategy, and SWOT Analysis

This project analyzes the business model of Airbnb, a major player in the tourism sharing industry. It examines Airbnb's digital strategy, including its use of digital marketing and online platforms. The analysis includes a PEST analysis, exploring the political, economic, social, and technological factors affecting Airbnb's operations. A SWOT analysis is also performed to identify the company's strengths, weaknesses, opportunities, and threats. The project highlights Airbnb's competitive advantages, challenges, and strategies for customer acquisition and retention. The report also discusses the company's key resources, partnerships, and value propositions. The project concludes by summarizing the key findings and implications for Airbnb's future development and growth in the competitive hospitality industry.

PJ 1
GROUP PORTFOLIO PROJECT (COMPONENT 2)
BSO3017

Abstract
In the tourism sharing industry the Airbnb is one of the major players. The core elements of a
successful Airbnb hospitality experience are analysed using a grounded theory approach in this
analysis. According to an examination of extract, many interviews said that they had a positive
experience in Airbnb. Airbnb is a reputed travel industry. They give their customer the best
accommodation offer. In this research paper, we analyze the Business model of the Airbnb
Company. We also discussed the strength, weaknesses of Airbnb Company by using different
types of analysis systems. Like Booking.com there are other companies who are main
competitors of Airbnb. Airbnb also uses digital marketing to prompt their company. In this
research, we also analyze the Digital marketing of Airbnb. Customer safety, Regulatory risks are
a few of the main challenges of Airbnb.
Introduction
In today’s business world, digital strategy is the key for successful corporations. Airbnb Inc. is a
prominent example of a digital organization that applies effective digital strategy within its
operations. It is arguably one of the world’s largest online company that provides travel
information and booking services. The company, which was formerly known as Air Bed and
Breakfast, operates an online market platform that enables its customers to find lodging or
homestays with more affordable prices anytime and anywhere. However, Airbnb does not own
any of the listed properties; instead, it gains profits by receiving commissions from every
booking transactions. Airbnb was founded by Brian Chesky, Nathan Blecharczyk and Joe Gebbia
in 2008 in San Francisco, California, United States. In 2008, the company launched its first

website and got 80 bookings handled by two hosts (Airbnb, 2020). Airbnb also expanded its
services by launching its own app and Instant Book feature in 2010 and successfully started its
global expansion in 2011. Moreover, the company introduced Belo, a new logo that represents
“the universal symbol of belonging” in 2014. This new symbol has effectively enhanced the
brand image of the company. According to Airbnb (2020), the company operates in more than
100.000 cities and 220 countries with over 4 million hosts worldwide in 2020 and continues to
grow.
Airbnb’s creates competitive advantage by providing convenient access and flexibility to
its customers (Micah, 2017). The company also provides wider selection than other competitors.
There are various options with different type of properties such as villa, cabins, castles,
apartments, treehouses, etc. According to Folger (2021), another benefits offered by Airbnb is its
customizable searches where customers can search for the database by date, rating, review,
location, price and type of property. On its mobile app, the company provides five main features
which are Explore, Wish List, Trips, Inbox and Profile. These features allow users to search for
lodging in specific locations, collect the data, have direct communication with the hosts, give a
rating, write a review, and also do reservations and payment. In addition, Airbnb also offers
travel tips and vacation guides that help customers to save their time and money during travel.
Currently, the company keeps creating digital innovation in order to remain responsive and to
gain competitive advantage.

Analysis
Business Model
An American startup expert, Steve Blank stated that, “Startups don’t fail because they lack a
product; they fail because they lack customers and profitable business model.” This statement
shows that business model plays a vital role within a startup company and Aibnb seems to apply
this idea very well. From figure 1, it is shown that the company has three key resouces; the
visitors, the hosts and the medium (Airbnb). As the medium, Airbnb provides access to the hosts
and the visitors to enter the market. On the other hand, the hosts should give their profile and
certain information about the property to Airbnb. The visitors also need to provide their personal
data and requests so that the medium can find suitable property for them. On its online platform,
Airbnb also allows its hosts and visitors to have a direct communication in order to do
transactions. For the revenue, Airbnb receives commission from two sources upon every
booking. According to Business Model Toolbox (2021), the company generates 6-12% service
fee from its visitors and charges the hosts 3% fee for every successful business transaction.

Figure 1: Airbnb Business Model. Source: Business Model Toolbox (2021)
In order to effectively operate its online business, Airbnb corporates with two key
partners; regulators and investors (BMI, 2017). By having a partnership with regulators, Airbnb
needs to observe and comply various federal, nation and local level of regulations. This aims to
create a collaborative relationship between regulators and Airbnb (Davis, 2020). While investors
play a major role for a company growth. Therefore, it is essential for Airbnb to maintain strong
and transparent relationship with investors. According to IG Group Limited (2020), Airbnb had
total 57 investors in 2020.
In terms of key activities, Airbnb focuses on maintaining its rules and regulations, digital
maintenance and digital marketing. Creating effective rules and regulations is crucial for the
company in order to avoid problems that may happen during its operations. The company rules

and regulation vary greatly in accordance with the local laws where the properties are located. In
addition, Airbnb has created information pages that provide preliminary guidance to customers.
Furthermore, the company focuses on maintaining its digital platforms by investing on its R&D
department to improve some features and enhance its digital platforms. Airbnb also applies
creative digital marketing strategy using website, email marketing, SEO, Google Ratings,
Google Display Ads, Google CraigList and social media (Wheeler, 2015).
Airbnb has unique value propositions; live like locals, income via your apartment and
income via events. The value benefits both parties; hosts and visitors. For the visitors, the value
provides unique experiences, more affordable prices, more value for money and convenience.
While the hosts can generate more income, reach higher demands and receive insurance that
provided by Airbnb. The company should maintain its value in order to enhance the loyalty of its
resources.
In order to stay competitive, Airbnb should build strong and positive customer
relationships. The company interacts to its customers by providing On-Time Customer Support.
This enables customers to communicate with Airbnb 24/7 in all time-zones. The company also
provides Host Community Center. This media allows hosts to connect with other hosts in
different locations as well as to share their hosting experiences and exchange ideas (Airbnb,
2020).
Currently, Airbnb utilizes two key media channels; website and app. For its official
website, the company uses interesting articles, pictures, and video in order to attract new hosts
and customers (Vital, 2019). The website is also well structured and offers complete information
about the company. While Airbnb app provides five simple main features that allow users to do
transaction faster and easier. Additionally, this app is also available for both iOS and Android.

Based on demographic segmentation, Airbnb markets its services to travelers, hosts, and
experience providers. The company also uses multi-segment positioning to target more than one
market segment. As an example, Airbnb offers different package services with different prices.
This aims to fulfil the needs of its customers in accordance with their budgets.
Figure 2: Airbnb Business Model Canvas. Source: Business Model Generation (2017)
Digital Strategy
Digital strategy is undeniably important for all business sectors. According to Reyes (2021),
digital strategy plays a vital role to drive the direction of a company by focusing on technology
resources in order to improve business performance and generate new digital competitive
advantage. As a digital organization, Airbnb is tightly oriented to digital strategy in operating its
business. The company mainly applies digital strategy to its services and promotion.

Airbnb sells its services through digital channels such as website and app. The company
implements digital strategy to its channels by doing optimization level. This method offers
numerous opportunities for unlimited optimization (Chaffey, 2020). As an example, Airbnb has
successfully optimized its app by creating new features and tools so users can have better
experience while using the app. The company has also improved its payment service by
supporting different payment method such as Apple Pay, Google Pay and PayPal. This aims to
not only provide wider options, but also safer, faster and easier transaction experience for its
customers.
In terms of promotion, Airbnb utilizes various types of digital marketing. One of them is
promoting the brand via Google Ratings. As an online travel business, rating is an important
aspect for Airbnb. The company uses the ratings system to attract more customers and enhance
brand trust and win loyal customers.
Figure 3: Airbnb ads via Google Ratings. Source: Trust Pilot (2014)
Besides Google Ratings, Airbnb also promotes its services through social media by using user-
generated content or UCG. As James McClure (General Manager of Airbnb in Northern Europe)
says, “Your community and customers are the best marketing asset you have.” This statement
reflects the strategy used by Airbnb to utilize its community and customers by posting their

interactions with Airbnb services in social media and using a hashtag. In 2018, there are 1.8
million photos using #airbnb on Instagram. This strategy has effectively increased the popularity
of the brand. From figure 4, it clearly shows that Airbnb reviews has gradually increased
throughout the years.
Figure 4: number of Airbnb reviews across the years. Source: Gupta (2019)
PEST Analysis
According to Ho (2014, p. 6485), PEST Analysis involves the evaluation of macro-environmental
factors affecting an organisation in the competitive market. The PEST Analysis of Airbnb would
consider four factors affecting the entity, political factors, economic factors, social factors and
technological factors.
Political Factors- The main political factors affecting the entity is the unregulated housing laws
in various regions of the globe. Moreover, taxation laws in several regions also affect the
revenue accumulation ability of the firm. For example, owners legally renting their apartments

in Airbnb also need to pay additional tourist taxes to the government. Therefore, the owners
intend on bargaining for the commission margin with Airbnb to gain additional revenues (Aznar
et al. 2017, p. 150).
Economic Factors- The rise in global GDP has led to increasing travelling interests among
people. Airbnb provides cheap renting alternatives to the travellers and attracts them towards
the organisation. Also, the company provides employment opportunities to the workers in the
hospitality sector and further incentives based on their customer services (Griffith 2019). The
growing emphasis of the hospitality sector and a large number of employees graduating every
year from the industry leads to increased opportunities for Airbnb to expand its business.
Social Factors- The growing disposable income among households leads to increasing demand
for leisure travel among the people (Mohsin, Lengler&Chaiya 2017, p. 40). Airbnb attracts the
customers by providing them with a new experience of accommodating in rented apartments
rather than usual hotels. Moreover, many price-sensitive customers are attracted to the low
range of accommodations offered by the organisation leading to growing opportunities for the
company.
Technological Factors-The advancements of technologies all over the globe provide an
opportunity for Airbnb to enhance its services and increase its product portfolio. Airbnb uses
automation technology to respond to guest’s messages and provide them with adequate
services. Moreover, the company relies heavily on social media to drive customer demands by
identifying their preferences and interests. However, bad reviews by the customers on digital
platforms affect the reputation and growth prospects of the company in the competitive
hospitality industry (Abrosymova 2015).

SWOT Analysis
The SWOT analysis is essential for businesses to conduct every four years for their business.
This is to make sure that the business is setting factors in place to stay competitive in the
market. To see where the business may go wrong potentially and what opportunities they may
have to grow the business. The breakdown of SWOT is ‘(strengths, weaknesses, opportunities,
and threats)’ (Grant, 2021).
Strength this section is to focus on what the business is doing when and what separates them
from other businesses in the market. The strengths of the business indicates what is helping the
business excel in the market.
Airbnb has turned into a very successful business over the years, as in 2019 it became the third
most valuable private company in the world being valued at $31 billion. One of the factors that
has helped Airbnb with their success is that pricing strategy the business adopted for its
business. Hotels is Airbnb’s biggest competitors, so due to this one of the ways in which Airbnb
used to gain more customers than hotels is through making their prices cheaper. ‘That trend of
Airbnb beating the hotel repeats itself in most cities around the world ’(McCarthy, 2021). This
can also be seen in figure 1 in the price comparison between hotels and Airbnb prices in
different cities. If Airbnb continue to charge less than hotels, customers that are on low budget
or a budget that is value for money will rather purchase through Airbnb instead of a hotel.

One of the unique features of Airbnb is that customers can find a stay with a price budget. As
listings range in price range. Through this Airbnb can target customers who are looking to
spend a high budget and also customers that are looking to spend a lower budget. Creating a
mass audience for their business, whereas hotels have their fixed prices on different locations.
This only does cater to customers that have the money to pay that price as they do not offer
hotel rooms with different price ranges. Airbnb is seen as an experience as not all places listed
are the same as all listings are different. This serves as an advantage for Airbnb, as their
Figure 1
https://www.busbud.com/blog/airbnb-vs-hotel-rates/#:~:text=In%20eight%20of%20the%20nine,are
%20lower%20than%20hotel%20costs.&text=In%20Barcelona%20and%20Austin%2C%20the,cheaper
%20than%20a%20hotel%20stay.