Home > Free Essays > Business > Marketing > Business Model Used by Airbnb

Business Model Used by Airbnb Essay

Exclusively available on IvyPanda Available only on IvyPanda
Updated: Jun 21st, 2022

Airbnb is an online platform for renting and listing local homes connecting travelers and hosts. It supports establishing a sharing economy by enabling property owners to find clients to rent their private flats. The company has grown to become the largest community-based and accommodation, provider. Today, the platform has more than 1,500,000 listings in at least 190 countries and 34,000 cities (Chen & Chang, 2018). It has made it possible for customers to make an online payment at their convenient place and time. This paper intends to use Osterwalder’s Business Model Canvas to explain the business model used by Airbnb Company, discuss the role does innovation, and how it can be improved.

Role of Innovation in the Business Model

The company has embraced modern internet technology to improve its daily activities and meet the rising demand in the market. It has applied disruptive innovation to alter the market preferences to favor its activities while giving a disadvantage to its competitors. One of the innovations that have enabled the company to attain massive growth is the development of an effective website allowing the host to list their cottages, apartments, and homes. The website offers room for the host to communicate with travelers and learn more about the provided services (Gibbs et al., 2018). It has enhanced immediately the competitiveness of the company since most of its competitors are unable to match its innovation. Modern internet technologies help Airbnb satisfy customer needs, achieve cost-saving and improve the local experience. Innovations on the cloud-based platform have enabled property owners to collect payments efficiently.

Value Proposition and Customer

The company makes it easy for travelers to learn about the available accommodation services in a given region and identify the ones satisfying their needs. Since the company offers services in many countries, travelers can find private spaces in many places they wish to travel (Chen & Chang, 2018). Moreover, the company keeps a record of the personal profiles, including reviewing system and rating information, helping travelers understand the provided services and details about the host.

Value Formation and Core Activities

The company serves as a transaction facilitator by connected hosts and travelers interested in finding quality and comfortable accommodation at their expected prices. It has gained trust and confidence from travelers offering effective review and rating systems (Gibbs et al., 2018). Many service providers enjoy the company’s host protection insurance since it eliminates the involved risks. User reviews and profiles have earned the company gain great reputation in the market and enabling it to attract many customers.

Revenue Model

The company earns a commission from both travelers and hosts for every booking made. The host must pay 3% of the booking cost for a successful transaction, while customers pay between 6 and 12% of the charged fee. Since the company makes many transactions in a day, it is earning massive returns and likely to grow further in the future (Chen & Chang, 2018). By charging a low cost to the host, the company encourages many accommodation owners to use its platform when sourcing for clients.

Key Partners

The company distinguishes key partners who are crucial to its success and the platform. The accommodation owners are some of the key partners to the business, including the super hosts. They are considered the company suppliers who offer the services desired by the travelers. Hosts provide the value proposition that satisfies the demand or the needs of guests (Gibbs et al., 2018). They bring their services and property to offer variety and mass supply of choice that is necessary for the customer value proposition.

Tourism partners and communities form other key partners to the business since they direct their clients to the platform for easy access to accommodation. Travel companies usually partner with communities around and tourism bodies to give visitors the best experience and enhance demand. Airbnb is determined to partner with under-represented groups and communities to improve their positions (Nathan, 2020). The company understands that interacting positively with every group can play a great role in its growth.

Technology firms are other companies that Airbnb is partnering with to enhance its relevance in the market and innovation. This is enabling the company to keep on improving its services and become more competitive in its operation. These firms are supporting Airbnb through enhancing innovation and technological advancement. Some of these partners include additional/preferred software partners such as technological providers (Gibbs et al., 2018). They provide inventory, travel inventory tasks, and support the management of bookings, among other services. Partnering with these firms enables the company to use technology to understand the best pricing strategy and check the availability of accommodation spaces. Moreover, the company works together with payment and map platforms, identification, and cloud storage (Nathan, 2020). Other key partners include associates, travel partners, investors, venture capitalists, and commercial partners.

Key Activities

Airbnb is involved in three key activities, namely improving the existing value propositions as well as establishing new ones, operational consistency and excellence, and continued host expansion. The company is determined to maintain its gradual growth using the innovation adoption trajectory. Most of the company’s activities can be grouped into transaction/post transaction costs, reductions of search, and promoting network effects while lowering negative implications (Nathan, 2020). All the company activities are focused on improving its services to customers and subsequent returns on investment.

Developing new and improving the existing value propositions has enabled the company to remain competitive in the market. It has engaged in many activities to achieve its dreams, such as adding new offering tiers with Luxe and Airbnb Plus. The eruption of the COVID-19 saw the company develop a product that aligned with the emerging demand. It grew and introduced an online experience for an incredible 14 days, and the feedback is positive (Gibbs et al., 2018). Moreover, the company is working with owners and property developers to include multi-home complexes in their system to extend its business to another level. Airbnb is determined to embrace innovation to improve its capabilities and offer better services in the future.

Customer Segment

The company applies innovative strategies to segment both sides: the host and guests. It uses micro and market segmentation based on the purpose such as business growth, development of a new product, and marketing. Airbnb may consider segmenting its guests depending on behavioral, geo-demographic, interest, and motivation. Behavioral segmentation considers the rental type, including the private room, shared space, and entire apartment/home (Gibbs et al., 2018). Trip type considers factors such as backpacking, visiting friends, and leisure travel. The behavioral segment may also cover accompanying guests such as kids, spouses, and parents. The interest of the guests and their activities helps the company determine the nature of services and spaces that customers would like to rent out.

Finding Customers

Customers enable the company to earn revenue and remain in business by either paying the accommodation service or providing spaces. The company uses innovative strategies to find both travelers and hosts, including word of mouth, social media, affiliate models, promotional offers, and digital marketing. It is determined to use emerging technology to reach out to as many customers as possible. Airbnb uses diverse social media platforms such as Facebook and Twitter to attract customers and offer as much information as possible (Gibbs et al., 2018). Marketing its services through social media has enabled the company to maintain and develop steady growth. The company uses innovative strategies to improve its image, reputation, and popularity around the globe to remain the most preferred by travelers.

Improving Innovation

Airbnb should make more effort to improve its innovation to offer better services and meet the rising demand. This should focus on eliminating issues affecting customers or hindering them from using the platform. The company should consider developing keyless access to the paid spaces to eliminate the hassle of handing over the keys to the travelers when they arrive and collecting when leaving. This implies that the company should invest in scanning technology or the use of codes to enable the guest convenient access. Moreover, the company should invest in the improvement of customer stickiness and business traveler acquisition.

In conclusion, innovation has enabled the business to maintain a steady flow of customers and achieve consistent growth. Its effective systems create room for owners to list their spaces and gain returns from renting their spaces and travelers to find a comfortable, affordable, and convenient space away from home. Its effective strategies in the marketing process and provision of quality services have seen the company grow to become the largest community-based platform. To achieve its objectives, the company has adopted innovative business models that encourage customers to keep on coming. Understanding the market and applying an effective business model has enabled the company to invest in more than 190 countries. It is determined to boost its daily transactions and attract more customers to remain ahead of its competitors. Creating convenience for both the travelers and host has won the company customer’s trust and confidence.

References

Chen, C. C., & Chang, Y. C. (2018). What drives purchase intention on Airbnb? Perspectives of consumer reviews, information quality, and media richness. Telematics and Informatics, 35(5), 1512-1523. Web.

Gibbs, C., Guttentag, D., Gretzel, U., Morton, J., & Goodwill, A. (2018). Pricing in the sharing economy: A hedonic pricing model applied to Airbnb listings. Journal of Travel & Tourism Marketing, 35(1), 46-56. Web.

Nathan, R. J., Victor, V., Tan, M., & Fekete-Farkas, M. (2020). Tourists’ use of Airbnb app for visiting a historical city. Information Technology & Tourism, 22(2), 217-242. Web.

This essay on Business Model Used by Airbnb was written and submitted by your fellow student. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.
Removal Request
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda.
Request the removal

Need a custom Essay sample written from scratch by
professional specifically for you?

801 certified writers online

Cite This paper
Select a referencing style:

Reference

IvyPanda. (2022, June 21). Business Model Used by Airbnb. https://ivypanda.com/essays/business-model-used-by-airbnb/

Reference

IvyPanda. (2022, June 21). Business Model Used by Airbnb. Retrieved from https://ivypanda.com/essays/business-model-used-by-airbnb/

Work Cited

"Business Model Used by Airbnb." IvyPanda, 21 June 2022, ivypanda.com/essays/business-model-used-by-airbnb/.

1. IvyPanda. "Business Model Used by Airbnb." June 21, 2022. https://ivypanda.com/essays/business-model-used-by-airbnb/.


Bibliography


IvyPanda. "Business Model Used by Airbnb." June 21, 2022. https://ivypanda.com/essays/business-model-used-by-airbnb/.

References

IvyPanda. 2022. "Business Model Used by Airbnb." June 21, 2022. https://ivypanda.com/essays/business-model-used-by-airbnb/.

References

IvyPanda. (2022) 'Business Model Used by Airbnb'. 21 June.

Powered by CiteTotal, easy citation maker
More related papers