Case Study: Airbnb – A Disruptive Innovator Analysis and Evaluation

This case study provides an in-depth analysis of Airbnb, examining its emergence as a disruptive innovator in the hospitality industry. It explores the innovative business models and revenue structures adopted by Airbnb, highlighting elements like its multi-sided marketplace connecting hosts and guests. The analysis delves into the concept of disruptive innovation, explaining how Airbnb has become a major competitor by leveraging factors like understanding market needs, adopting machine learning, and fostering a positive work environment. The study also provides recommendations for enhancing productivity, including leveraging machine learning for employee performance analysis and expanding marketing strategies. The report concludes by emphasizing Airbnb's refined policies and its potential for continued success through strategic innovation and customer-centric approaches. The case study also includes the revenue structure adopted by the organization and also focuses on the key reasons for the company's success.

Case Study:
Airbnb – A Disruptive Innovator

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Table of Contents
Introduction 3
Analysis and Evaluation 3
Innovative Business Models Elements Adopted 3
Analysis of Revenue Structure 4
Disruptive Innovation 6
Reasons for becoming one of the biggest competitors 6
Proposed Recommendations 6
Conclusion 6
References 7

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Introduction
The following report analyses the given case of Airbnb, which is a crowdsourced internet
marketplace for listing and renting local residences. It links hosts and visitors and streamlines
the rental process without owning any rooms. It also promotes the sharing economy by
allowing property owners to rent out their private apartments.
Hence, the report is going to analyze the various elements of the business models and revenue
structures that have been adopted by the organizations. This helps to understand the concept
of disruptive innovation and helps understand why it emerged to be the greatest business
securing its place in a significant position. The report also helps with the development of a
new organizational structure for experiencing boosting productivity in their service.
Analysis and Evaluation
Innovative Business Models Elements Adopted
When one looks at what makes Airbnb's business model unique, one can notice that it is
exponential in practically every regard. Especially when compared to a hotel company's
business plan, such as Marriott, which is regarded as the world's largest hotel chain. When
comparing the two, it can be clear that the major improvements the firm has made in the
hospitality business have allowed it to scale hospitality in ways Marriott can only dream of.
The simplicity of Airbnb's business model is maybe the most intriguing aspect. Airbnb's
business strategy is a multi-sided marketplace that connects passengers with hosts and
experience providers, as you can see. Booking fees from hotels and experiences are how the
company makes money (Biber et al., 2017).
For starters, the firm fulfils many dreams of people and solves a problem. When Airbnb's
business model is simply put, it can be seen that it is built for the masses, and it even
uniquely connects them. The firm has built fan groups for all of its client segments thanks to
its rating system and ability to customize the experiences provided. It can be argued that the
company uses a completely digital channel. There are no front desk receptionists or booking
agents to contact. Clients can use an app to book reservations or browse options available, as
well as maintain listings and experiences. Because being a marketplace, the company's main
value proposition must be founded on the information. In other words, Airbnb does not own
any of the properties and has no need to provide value in the form of tangible assets. Rather,
the company's business model is based on connecting people who have something to offer

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with people who need it. At its foundation, it's all about data. The firm also has numerous
revenue streams as a marketplace, all of which are related to experiences and booking stays.
On the side of the operation, Airbnb has incorporated scalability into every aspect of its
business. Whether it's negotiating with authorities or building marketing and applications,
Airbnb has established systems that allow it to quickly enter new areas in a way that brick-
and-mortar hotels can only dream of. When all of these factors are considered, the firm is a
corporation that has fully embraced the concept of an exponential business model. The firm
recognizes how all aspects of its business model are interconnected, and the company is
constantly innovating to make it more connected and exponential.
Fig. Business Model of Airbnb
(Source: Biber et al., 2017)
Analysis of Revenue Structure
When a business is set up, the main revenue is generated by the number of customers they
successfully, please. Hence, customer satisfaction is a crucial part of the revenue structure. In
this aspect, algorithms have been perceived as being used by Airbnb to churn through
millions of stays, hosts, guests and experiences, constantly connecting the appropriate value
propositions with the right individuals. This is a virtuous loop that feeds back into the firm's
client connections, which then feeds data back to the algorithm, and so on.
Finally, as evidenced by the case study, when BMI visited the firm in January, they saw two
things right away:
1. The entire office environment is meant to be open and collaborative. This was done to
ensure that it resembled some of the platform's most popular residences.
2. Employees at Airbnb have the authority to make decisions that benefit customers.

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While Airbnb is not a holacracy, it does allow employees to collaborate to solve problems
and improve client experiences. The given case study of the firm has also made it clear that it
collects commissions from both the hosts and the guests on every booking. Airbnb charges
the visitor six to twelve percentile of the booking fee for each booking. In addition, Airbnb
charges the host three percentile of each successful transaction (Magno, Cassia & Ugolini,
2018). However, it has also been stated as a fact that though the firm has a policy of non-
refundable amounts, it has on others has kept the rates to as low as possible to avoid its
clients shifting to an offline transaction. There is also a Benefit that serves a greater deal for
the firm, i.e. the firm offers low commission rates for a greater amount of booking, which
means it is in inverse proportionality. Another policy that the organization has is that they
cannot be held liable for issues like as maintenance, repair, cleaning, or anything else linked
to host services. It operated on the basis of a business model in which corporations were paid
for doing nothing more than facilitating transactions. Evidence from the given case study also
points out to the fact that some analysts argued that Airbnb's cheaper rates made it a more
appealing option to hotels, while others were concerned about how Airbnb was influencing
societal norms. Businesses built on the sharing economy, such as the firm, rely significantly
on the hosts and guests' mutual trust.
Fig. Revenue Model of Airbnb
(Source: Biber et al., 2017)
Disruptive Innovation
A disruptive innovation, according to the case study's view, is one that establishes a new
market and value network and eventually displaces incumbent market-leading enterprises,
products, and alliances. It can also be added to the context that even if they are revolutionary,

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not all inventions are disruptive. Outsiders and entrepreneurs in startups are more likely to
create disruptive ideas than market-leading companies like, for example, in this case, the
entrepreneur business of Airbnb can be stated (Zach, Nicolau & Sharma, 2020). Market
leaders' business environments prevent them from pursuing disruptive innovations when they
first emerge, as they are not profitable enough at the outset, and their development can divert
scarce resources away from sustaining breakthroughs. Smaller groups are more likely to
come up with disruptive ideas than larger groups. This fact can be supported by using the fact
that despite being a small business, the group of people came together to form a policy that
helped them grow and develop into a bigger firm, placing them in a significant position in the
competitive market leaders. Studies by Muller (A disruptive process may take longer to
develop than a traditional approach, and the risk associated with it is higher than other more
incremental or evolutionary forms of innovation, but once deployed in the market, it achieves
much faster penetration and has a greater degree of impact on established markets. Disruptive
innovations can be considered to disrupt complex systems, encompassing economic and
business-related features, in addition to business and economics (Gyódi, 2017). After
identifying and assessing systems for possible sites of intervention, improvements centred on
disruptive interventions can be designed.
Reasons for becoming one of the biggest competitors
According to the evidence presented in the given study, despite being a late arrival, Airbnb
soon began to climb the ladder. Airbnb was valued at thirty billion dollars in the year of 2016
after only eight years, whilst HomeAway was valued at four billion dollars. In that year, the
new company welcomed hundred and forty million visitors. It was a phenomenal increase.
The reasons that add up to make it one of the biggest competitors involved the following
strategies:
- Positioning of Businesses
Being an entrepreneur of business means being responsible for the development of those
ideas that would create an amount of uniqueness that would allow them for enjoying
Competitive advantages. Again, in regards to the matter, it can be stated that realizing the
market needs is an important area that could be explored; thus the Airbnb provided just that.
Gebbia and Chesky, who are both millennials, had a good understanding of the target
customer's wants, problems, and desires. A solid understanding of the suggested consumer
group is a vital aspect of business success.
- Experiences in Selling

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Their business model and strategies adopted for review can be found to be revolutionary that
could contribute to a greater advantage and serve as the main reasons for their preference.
Alongside the matters are the points that include things like selling accommodation options at
many affordable rates when comparing to others in the business. Here again, the services
provided a great deal of advantages since they met the requirements and created a good
relationship with the clients. Thus, their customized services offered became a great measure
of bringing the firm's success.
- Adoption of machine learning and strong network
Being a small homegrown firm requires intensive support, especially since hiring and
managing a huge number of workers at the initial point would just be a great challenge. There
again, it can be stated that the adoption of machine learning help them in improving more
with each service they offered. It not only made communication with the clients more
effective and efficient, but it also helped in the development of customer loyalty (Zach,
Nicolau & Sharma, 2020).
- Good Healthy Environment around workplace
It can also be remarked that the employees working in the customer service team of Airbnb
were one of the reasons for their customers' positive remarks that uplifted their standards and
contributed to generating more revenue leading to rapid succession into the significant
position in the market.
Proposed Recommendations
The innovative proposal that could be adopted for the increased productivity could really help
tackle all challenges that the company could face in the near future. It could be seen that the
organization of Airbnb really enjoys a great deal of advantages in managing a vast network
and ensure client satisfaction by using machine learning techniques. However, these machine
learning could also use the information of all the employees in service to help in the matters
of analyzing their performance and hence, training procedures through technologies could be
adopted to help in the matter of boosting the performance of the team. There again, these
machines, though they have been seen to use the review data collected from the potential
customers it could also be adopted for decision making and to know of options that could
help in the expansion policies. Recommendations can also be stated to help in the matters of
promoting their services by the use of media platforms that helps the company more in terms
of creating effective brand awareness that could help them to a great extend in gaining more

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clients and target more estates that could stand as a great opportunity for the business.
Thereby it could give rise to a win-win negotiation. However, other than using the positivism
approach for dealing with customers, it could also feature more Millenial designers for
modern minimalistic designs that could help a great opportunity to help undertake
progressive policies that could target more enrollment, helping in better performance in
business policies. The company could also use machine learning techniques to study the
market to help develop changes that could help in the matters of devising exceptional
strategies into making the policies the tag of the best business in the years to come.
Conclusion
Thus, it can be stated that the firm of Airbnb has well-refined policies that made it possible
for the firm to explore more in the present competitive market into becoming one of the
forerunners of the business. Though it could be seen that the organizational culture has
already achieved its best reach, but the above-mentioned proposal for a better organizational
culture would help to boost productivity levels resulting in more success. This report helps its
readers to provide a great deal of inspiration through the reforms and strategies adopted by
Gebbia and Chesky's innovative business.

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References
Biber, E., Light, S. E., Ruhl, J. B., & Salzman, J. (2017). Regulating business innovation as
policy disruption: From the Model T to Airbnb. Vand. L. Rev., 70, 1561.
https://escholarship.org/content/qt12k5c7hc/qt12k5c7hc.pdf
Gyódi, K. (2017). Airbnb and the hotel industry in Warsaw: an example of the sharing
economy?. Central European Economic Journal, 2(49), 23-34.
https://www.ceeol.com/search/article-detail?id=890900
Lorde, T., & Joseph, T. S. (2019). Airbnb, technological change and disruption in Barbadian
tourism: a theoretical framework. Third World Quarterly, 40(12), 2190-2209.
https://mpra.ub.uni-muenchen.de/95488/1/MPRA_paper_95488.pdf
Magno, F., Cassia, F., & Ugolini, M. M. (2018). Accommodation prices on Airbnb: effects of
host experience and market demand. The TQM Journal.
https://www.academia.edu/download/57128238/Accommodation_prices_on_Airbnb.pdf
Muller, E. (2020). Delimiting disruption: Why Uber is disruptive, but Airbnb is not.
International Journal of Research in Marketing, 37(1), 43-55.
https://www.sciencedirect.com/science/article/pii/S0167811619300679
Zach, F. J., Nicolau, J. L., & Sharma, A. (2020). Disruptive innovation, innovation adoption
and incumbent market value: The case of Airbnb. Annals of Tourism Research, 80, 102818.
https://www.sciencedirect.com/science/article/pii/S0160738319301756