Introduction
Approximately a decade ago, expensive hotel stays and the lack of authentic experience offered to a tourist encouraged future Airbnb owners to co-found one of the largest marketplaces for lodging and activities run by local hosts. Entering the sharing economy, the Airbnb team revolutionized the private market with a new concept of collaborative consumption, an economic model where access to goods and services is valued over ownership (Gorog, 2018). However, a recent outbreak of the Coronavirus compromised the smooth operation of the sharing economy, questioning the future utility of the sharing economy. In this assignment, sharing economy is defined as an economic model which centers around P2P marketplaces where underutilized assets, services, or goods are rented for material and non-monetary gain (Gorog, 2018). On the example of Airbnb company in the sector of tourism, this paper argues that sharing economy business model will survive the financial crisis caused by the global pandemic.
Sharing Economy Model
The sharing economy has quickly become a new trend in the business world. It operates on the basis of short-term peer-to-peer transactions to share the usage of minor services, assets, or to facilitate cooperation between professionals (Curtis and Lehner, 2019). Due to the digitization of services, it is now easier for people to connect and exchange underused assets in the dynamics of the so-called, sharing economy (Frenken and Schor, 2017). The main goal of this model is to allow groups and individuals to earn money under the premise of collaborative consumption, using the value of poorly allocated or underused benefits as physical assets (Curtis and Lehner, 2019). Frequently, sharing economy involves an online platform as a connecting unit for buyers and sellers.
The sharing economy model stands on the opposite stances that remain fundamental to the traditional economy. It rejects the concept of private ownership and makes a profit using the idea of shared consumption and production of goods and services (Frenken and Schor, 2017).
Instead of being driven by incentive and competition as members of the traditional market, those participating in the sharing economy commit to sharing their space, expertise, and time for the greater good.
Despite the growing popularity of the model, some experts remain sceptical toward its future success, legality, and profitability. One of the key minuses lays in the regulatory uncertainty of the rental services (Mehmed, 2016). Platforms connecting buyers and sellers do not regulate the activity of the unlicensed individuals, raising suspicions about the reliability of their policies and the rationality of their costs. Another disadvantage is focused on a series of abusive behaviors manifested both by buyers and sellers in the sharing economy (Mehmed, 2016). Those include but are not limited to unfair treatment, discrimination, and fraudulent rentals.
Airbnb Background
By 2020, Airbnb has dominated the co-living segment, positioning itself as one of the world’s biggest marketplaces representing the sharing economy model in the tourist sector. Though hotels, hostels, and motels still remain popular in the tourist sector, the model of bed and breakfast, used by Airbnb, advocates for more authentic experiences (‘Airbnb’, 2020). As more and more people have an opportunity to travel long-distance, the tourist industry strives to win the competition by bringing foreign culture closer to the visitor.
Airbnb unites sellers (hosts) and buyers (tourists) on a simple and user-friendly platform, providing short-term lodging and unique activities for leisure time for different age groups, costs, and preferences. The company also extended its home-renting services for weddings, work trips, and family reunions, targeting a wide group of clients (Adamiak, 2019). With more than seven million accommodations available and 50 thousand authentic activities offered, it works successfully in 220 countries (Adamiak, 2019). Coronavirus pandemic, followed by strict quarantine rules, restricted traveling, and social distancing recommendations, put the future of Airbnb at risk as millions of apartments remained empty due to the lack of demand. However, the company quickly found a new way to attract clients by introducing online experiences, making adjustments to meet legal requirements, and remaining loyal to the organization’s mission.
Why Airbnb Will Survive the Sharing Model
Actions taken by the Airbnb team since the COVID-19 outbreak give enough evidence to believe that the sharing economy model will survive once the global crisis is over. Though the tourist section might take years to recover, the scope of the company’s services is not fully targeted toward traveling visitors. Weddings, work meetings, family reunions, and long-term rentals constitute a sufficient portion of the organization’s revenue, suggesting that locals might enjoy the benefits of the company if foreigners are not allowed to travel.
The logic behind the sharing economy will most likely not be exactly the same as it used to be before the pandemic. As a result of the pandemic, Airbnb emphasized the long-term rentals as strict social distancing rules made a rapid, sharp shift from short-term to monthly stays. Private space will no longer be a luxurious asset offered by Airbnb but a legal requirement for lodging (Oskam and Boswijk, 2015). Despite the aforementioned changes, Airbnb will continue operating with a consideration of community and authenticity. Hosts will continue providing cultural experiences to tourists, even though some of them might switch to digital format to prevent the spread of the virus once the lock-down is over.
One of the initiatives the Airbnb team decided to launch to encourage trust, as the main component of the model, was the “Enhanced Cleaning Initiative” (‘Airbnb’, 2020). The project aimed to restore confidence in hosts who appear to be hesitant to rent their apartments in fear of getting sick with the Coronavirus. It was also meant to encourage open relationships between the buyers and sellers, balancing between the opportunity to share the unused assets and staying healthy during the worldwide pandemic. Trust would be the central aspect marketing specialists attempt to convey in their campaigns after the COVID-19 pandemic (Oskam and Boswijk, 2015). With close media attention and overt criticism of the shared spaces, Airbnb will have to promote not only the authenticity of its services but also their safety and security (Oskam and Boswijk, 2015). Another effective marketing strategy would be to stress the significance of community, communicating the message of unity in face of crisis. After the pandemic is over, the company should prioritize accessibility and affordability of the experiences offered on the platform, showing compassion to those affected financially.
Despite the successful efforts of Airbnb to move their services online, it is not safe to claim that the sharing economy model would prove to be successful in all 220 countries where the company operates. The success of the organization in the upcoming years will depend largely on the rate at which people will recover from the financial crisis. Traveling restrictions, capita per person, as well as unemployment rates should be taken into consideration as the company prepares a plan on retaining their customers. Some of the strategies that Airbnb might implement are the following: 1) digitalizing experiences; 2) providing dedicated remote customer service quickly and more efficiently; 3) limiting the option of renting a private room. The organization can also offer discounts for the most active users (both buyers and sellers) and the most innovative online experiences.
Conclusion
In conclusion, Airbnb represents a sharing economy model in the tourist sector, providing inexpensive short-term and long-term rentals, as well as authentic tourist experiences performed by local hosts. The company utilizes physical assets such as empty rooms, apartments, and beds as services to assist people of different age categories and social statuses. With the mission to unite the community in a genuine experience, the organization connects buyers and sellers on a simple, user-friendly tourist. Though sharing space is central to the way the company works, strict social distancing policies have not been able to stop the operation of Airbnb completely. During the quarantine, the team shifted focus to long-term stays and introduced online remote experiences to remain loyal to its mission, serving both hosts and visitors. In its marketing campaigns, the company emphasized trust to restore confidence in the sharing model in buyers and sellers.
It is yet early to judge the future success of the Airbnb sharing model due to the uncertainty around unemployment rates and traveling restrictions after the quarantine ends. However, the flexibility and openness demonstrated by the team give enough evidence to predict that the company will survive the crisis caused by the Coronavirus. By implementing strategies promoting safe and affordable tourist experiences, Airbnb can remain the leader in the bed and breakfast market. Despite the initial expectations and interpretations of the data collected, only time will show whether the sharing model survives the pressure of the global pandemic.
Reference List
Adamiak, C. (2019) ‘Current state and development of Airbnb accommodation offer in 167 countries’, Current Issues in Tourism, pp. 1-20.
Airbnb (2020).
Curtis, K. and Lehner, M. (2019) ‘Defining the sharing economy for sustainability’, Sustainability, 11(567), pp. 1-25.
Frenken, K. and Schor, J. (2017) ‘Putting the sharing economy into perspective’, Environmental Innovation and Societal Transitions, 23, pp. 3-10.
Görög, G. (2018) ‘The definitions of sharing economy: a systematic literature review’, Management, 13(2), pp. 175-189.
Mehmed, N. R. (2016) ‘Airbnb and the sharing economy: policy implications for local governments’, SPNHA Review, 12(1), pp. 1-26.
Oskam, J. and Boswijk, A. (2015) ‘Airbnb: the future of networked hospitality businesses’, Journal of Tourism Futures, 2, pp. 22-42.