Strategic Analysis of Airbnb: International Business Strategy

This report provides a comprehensive strategic analysis of Airbnb, a leading international hospitality company. It examines Airbnb's business model, focusing on its key market segments including travelers, hosts, and freelance photographers. The report delves into Airbnb's microenvironment, highlighting its strengths, weaknesses, opportunities, and threats. It analyzes Airbnb's strategic group within the lodging services sector using Porter's Five Forces, assessing the threat of new entrants, substitutes, customer bargaining power, supplier bargaining power, and competitive rivalry. Furthermore, the report identifies Airbnb's competitive advantages, such as its effective global network, latest service offerings, and investment in Information Communication Technology. It also explores how Airbnb creates value by connecting homeowners with travelers. Finally, the report discusses potential changes and trends in the business environment that may affect Airbnb's competitive advantage, including increasing competition from traditional hotels, destination promotion, sustainability rules, and catering to millennials. This detailed analysis provides a thorough understanding of Airbnb's strategic position and challenges in the dynamic hospitality industry.

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Executive summary
This is a report that discusses the Airbnb company which is an international leader in the
hospitality industry. The company uses its strong operation model to capture the largest market
share in the hospitality industry. The leadership of Airbnb has come up with the best strategic
decisions relating to technology and development of its staff to ensure that Airbnb delivers best
quality services to its customers who are the travelers and the hosts. The strategic decisions have
also helped Airbnb gain a competitive advantage in the hospitality industry. The strengths and
opportunities of Airbnb business environment have enabled remain relevant against all its other
competitors, some who are still trying to enter the market. Three-star hotel managers have tried
to come up with their own strategies that will help them endure competition they face against
Airbnb.
Introduction
Airbnb is an international privately owned organization that is online-oriented. Its
customers are people that rent lodgings on short-term durations (Guttentag 2015, p.1195). These
include hotel rooms, hostels, holiday cottages and apartments which aid in improving tourists`
experiences. People use its websites to book the above-mentioned places from which Airbnb
receives a percentage of the paid service fees for it does not have a real estate of its own. It was
founded in San Francisco California in August 2008 to serve in the lodging industry (Zervas et
al. 2017, p.690).
Airbnb`s market segments

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Segmentation involves dividing potential customers of a product in the market according
to different characteristics which include common interests, locations or needs. The types of
segments include geographic, demographic, behavioral and psychographic segments (Guttentag
et al .2017, p.0047287517696980).
Market segmentation chart
The market segments of Airbnb
They include (Oskam & Boswijk 2016, p.22):
 The travelers/tourists
They come to hotels to stay for a short duration. Some stay indoors hence not spending
money traveling from one place to another. The travelers can pay using the company`s portal.
Market
Segmentation
Geographic
Demographic
Pyschographic
Behavioural

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They can also filter the properties by use of location, amenities and the rent (Oskam & Boswijk
2016, p.30).
 The hosts.
These are people who rent out their places to make use of unoccupied places or just to meet
people. Hosts list their places as properties where people would be interested to live in on
Airbnb. Airbnb is able to deal with the two segments at a go. The two segments complement one
another (Zervas et al. 2017, p. 690).
 The freelance photographers.
The company has a number of photographers worldwide who take pictures of the locations
and good quality photographs of the property. Those high-quality photographers with good
responses are usually paid directly by Airbnb.
Airbnb`s microenvironment
Analyzing the microenvironment of a business entails its strengths, weaknesses, threats,
and opportunities.
Strengths
 It has a good customer service that works 24/7 as it is an online oriented business.
 It has established itself all over the world by having its services offered almost in every
country.
 Airbnb has one of the most numbers of hosts listing in 33,000 cities.
Opportunities

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 Other hotels have high prices and worse accommodation conditions that of Airbnb.
 There has been a growth in mobile app market which enables its customer to book hotels
online and also make payments.
 Airbnb has new and big markets to exploit in countries where hotel services are
expensive as it is affordable.
Weaknesses
 Airbnb`s ideas of their operations can easily be copied.
 It acts as a mediator between the hosts and travelers hence there could be conflicts which
it could be involved in.
 It is a company that relies on the quality of services offered by the hosts and if they are
poor, so does it get negative reviews.
Threats
 The operating costs are still high and growing each day due to increase in employees as a
result of expansion.
 There is an increase in high-quality hotels with lower prices offered and good customer
service.
 The threat of misunderstanding where someone rents a home and comes back to find it
rented to another party. (CayenneApps, n.d.)
Airbnb model
This model defines the major activities, resources, customer relations, customer segments
of Airbnb.

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How the model works.
The host advertises their property along with their amenities, prices, and location on
Airbnb`s websites.
Airbnb sends one of their photographers to the location of the property to take pictures.
Travelers once in the city of their choice, they select a property in which to stay in.
Booking is done through Airbnb where the tourists pay the amounts mentioned along
with any transaction fee.
The travelers settle once the hosts approve of the booking. Later Airbnb pays the
mentioned amount minus the commission to the host.
Later the travelers and hosts rate each other based on their experiences.
Strategic group of Airbnb
Airbnb serves in the lodging services in the hospitality industry.
The five Porter`s forces are used by a company to determine its ability to make profits and be
attractive in the industry. These include;
 The threat of new entrants
This threat is moderate for the Airbnb company. It already has a strong foundation base and
there is a small chance that any other company would come up to compete with it. There are also
few barriers to entry. This company has a good financial base as it operates nearly in every
country in the world. So for any other company to try to come up and run against Airbnb, it

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would have to invest millions of money in the project. It would also mean that it has to compete
with the brand equity of Airbnb.
 Threat of substitutes
This threat is high if there are low switching costs and many substitutes available. So, in this
case, it is high because of the non-existence of the switching costs. The customers involved can
easily choose to stay in a hostel, a traditional hotel or even choose couch surfing. This shows that
there is a variety of options come in the near future (Porter 2008, p.25).
 The customers` bargaining power
There no real alternatives around the world as per now. This has ensured that the bargaining
power of customers is low. There are no economies of scale for customers because there is no
way for customers of Airbnb to come together and get benefits of group buying (E. Dobbs 2014,
p.32).
 The suppliers` bargaining power
If suppliers are many, their bargaining power is high. It turns out that the bargaining power of
suppliers is also quite low. This is because the hosts who rent out their property don`t have the
alternatives of connecting with any customers. Airbnb acts as a mediator. The company has the
power to control any relations between the travelers and the hosts. The suppliers don’t have a
union where they can come together and demand their rights from the Airbnb company. This
leaves them with a low bargaining power (Kumar et al. 2015, p.469).

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 Rivalry
The rivalry between companies brings down profits to a company. In this case, there is no
rivalry or if any, it is a low-level rivalry because Airbnb is a big company that has already
established itself and it is successful. There is no other company that has come out to offer better
services than Airbnb.
The competitive advantage of Airbnb
The main competitive advantage is how its network is able to operate effectively. It
operates globally hence a large scale network of operations. The higher the number of hosts or
property owners listed by Airbnb, the higher the number of customers or travelers. The high
number of bookings done through Airbnb leads to a high number of hosts. Supplies are created
through reviews from people on the lists, people’s words and also competitors making Airbnb
unique and different from its customers. Airbnb seems to have created its market all over the
world hence it does not face competition from threats of new entrants. Any late entrants have
faced major competition from Airbnb (Zervas et al. 2015).
Airbnb keeps up with the latest trends. It provides the latest services in the travel lodging
industry. It changed from the traditional system through elimination of travel agents replacing
them with Google and Airbnb which are automated. (Primc & Čater 2016, p212).
It also has another competitive advantage through the provision of various services like
what properties to stay in, there are direct interactive channels and there is ease of access to any
information relating to Airbnb. This company has invested in Information Communication
Technology where it has gained more online customers (Mittendorf & Ostermann, 2017).

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Airbnb has reduced its transaction costs through the use of ICT hence helping its
customers. It has replaced the Business to Customer model which was traditional with Customer
to Customer model which is modern. This has made it be considered cybermediary. This means
that it obtains profits globally, it enjoys technological economies of scale and low-cost structure.
All this has resulted in large outcomes with low transaction costs (Lehr, 2015).
Airbnb has attractive offers and quality services that have enabled it to grab a large
market share. It connects parties and ever since its network has grown. It receives good reviews
from its customers who are very satisfied with its services.
How does Airbnb create value?
There is the assumption that there are homeowners whose whole or part of their property
is idle because of extra space or traveling. Airbnb comes into the picture to help them make
money through listing their property on Airbnb with photographs and best descriptions so that
willing guests can rent them. The company facilitates the connection between the two parties and
creates a forum for money transaction that is done online ensuring that the visitors pay the
homeowners in the right way. The traveler chooses where to stay depending on luxury level,
price, size and the neighborhood of the home. This is how Airbnb creates value.
Main changes/trends in the business that may affect the competitive advantage of Airbnb
 Afford anything
This is not good for Airbnb in the near future because hotels in the few years to come, they
will be competing to attract more guests. This may make them add more services relating to
conferences or wedding bookings. Hotels will also increase the quality of their services that

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include daily housekeeping. Guests will have more choices and way better values. If the listing
of property goes on, there may be an inadequate quality control for guests which may affect
Airbnb performance once reviews are posted online.
 Destination promotion
The world is becoming one global village. Although, Airbnb is located all over the world,
there are cities where it has not yet established its services. In the near future, it should move to
more new destinations to offer its services by creating a magical experience through customized
services and offers. So this gap of being everywhere will require that Airbnb expands its market
so that it prevents entrants of new companies in those regions.
 Sustainability rules
Airbnb has a bright future. In the hospitality industry, many fear the regulations but it’s better
to embrace them for clarity in operations. This will not bring about a stunt company growth.
However, the clarification in the regulations will help expand the market and also bring in new
participants in the industry. The fact the many people will be embracing the new regulations it’s
not good for the Airbnb`s market share. It will start to face fierce competition from the new
entrants (Jefferson-Jones 2014, p.557).
 Catering to millennials
People between the age of 18 to 34 are expected to be traveling a lot. Whatever decisions the
hospitality industry make should be to cater for this demographic group. This includes their traits
and habits. For example, the adopt technology in their early ages and they like to interact at a
personal level. In the future, hotels will need to please these millennials with easy checks in and

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the very best dining experiences. If this is done to them, they will advertise the businesses on the
social media platforms. So, Airbnb has to pull together hosts with such quality services in order
to keep being the international leader in hospitality. This means that it also has to invest in best
photographers so that the pictures taken attract the millennials ( Green & Lomanno 2012).
 Tech explosion
Many guests today comfortably use mobile applications and websites sufficiently. Hotels
should have up to date offers and user-friendly programs. When hotels are used for conferences,
there should be equipment of high quality and the staff should have known about it. Therefore,
Airbnb should ensure that wherever it will have its future locations for the business, there is a
good internet connection and only list hosts with the high tech so that it maintains its customers
in the near future (CG et al. 2011,p.499).
 Many international visitors
Leisure travels have been on the rise. Hotels should have services with many languages and
tailored experiences for everyone. These include their culture and the diversity of needs by the
visitors from all over the world. Photographers that enhance the experience of visitors by Airbnb
should be able to communicate in many diverse languages. Airbnb`s staff should have the ability
to meet every client’s expectations in terms of culture. The hotels Airbnb lists should have
employees with such qualities (Gobble 2015, p.65).
 Emphasis on health as well as the well-being

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Many guests in hotels are interested in their health. Due to this, hotel managers are making
the decisions to have pools, fitness centers and spas that are well equipped. Also, good decisions
on foods, yoga spaces and purified air are considered. In accordance with this, Airbnb has to list
hosts whose properties lie on a place with clean and purified water. It should also list majority
hosts with these special services that include yoga spaces or even a gym for exercising (Line &
Runyan 2012, p.477).
 Damage control
Many unsatisfied guests quickly and easily complain through the Twitter, Facebook and Yelp
applications. Those in-charge should easily be available to respond to such cases. If a company
engages with its customers, it is able to create good relations with its customers. From this, it is
advisable that Airbnb employees staff with good customer skills and have skills in the use of
technology. This will enable Airbnb deal with cases that would maybe lead to its downfall in the
future.
How should a manager respond to Airbnb?
Airbnb is already an established company and the leading in hospitality globally.
In order to sustain revenues and profits of my company, he should:
 Have a data platform
In the face of competition from Airbnb, hotels should have communication with the visitors
all throughout their experience during their stay. For example, Airbnb has been able to keep up
with the change in technology. It no longer relies on the traditional ways of communication. It

STRATEGIC ANALYSIS OF AIRBNB 13
ensures that once guests book, take them through the discovery stage and eventually welcome
the review of their stay. A manager should ensure that guests understand their total journey. The
staff should also comprehend everything done by the guests from the time they book and to the
day the check. This ensures customers are satisfied with services provided hence improved
profits.
 Have a platform for rating experiences
Airbnb`s platform helps rate their hosts so that it does not have to invest in trying to find out
what hosts offer quality services. This helps improve self-governance. A manager of the hotel
should have the platform so that it motivates the staff to work best and ensure visitors are
satisfied with their stay hence attracting more guests due to the good reviews.
 Be authentic
The hotel manager should come up with unique ways of offering services to its customers.
Ensure that the staff understands the surrounding area. What is the culture emphasized in such
places? This will attract people interested in the culture of such places. The more unique a hotel
is, the more the guests and hence the more the revenues and profits ( (Shashou, 2016)
Conclusion
The hospitality industry globally is very competitive in terms of quality of services
delivered to its customers. Airbnb has been able to remain a top company in this industry due to
its services both to the hosts and travelers. Its technologic strategy has enabled it to have a

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thorough interaction between its hosts and travelers which has resulted to hosts coming up
unique ways to ensure the travelers have a wonderful experience while they stay in the
properties.
Recommendation
Every party involved in the hospitality industry should study the current trends in the
market that would help ensure that the needs of the customers in this industry are met. For
example, employees should be trained on customer service and the hosts should have the
property that is built to attract the attention of the customers and ensure their stay is memorable.
The intermediary companies like Airbnb should invest heavily in technology to ensure easy flow
of communication between the hosts and the travelers.

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