Introduction
Three business models exist in the hospitality industry: traditional and innovative. Large lodging establishments like the Hilton hotel chain, small ones represented by break-and-breakfast lodging providers, and online marketplaces like Airbnb (Thompson et al., 2019). These terms are laconic, but they must be more descriptive and explanatory.
As Thompson et al. (2019) did in one of their charts, explaining business models regarding a customer value proposition and profit formula would be more efficient. For example, traditional hotels like the Hilton provide “quality, consistency, and reliability” to “customers who value these attributes” and are willing to pay for them (The Hilton business model, 2023, para. 7). Break-and-breakfast entities offer the same but with significantly fewer services and lower cost.
The profit formula for both is to charge guests for staying. The difference is that hotels and motels make money on additional services, while those in bed-and-breakfast operators are usually free (Why stay at B&B? n.d.). The company offers guests the same as bed-and-breakfast businesses do, while landlords are offered a simple and safe way of generating income. The profit formula fundamentally distinguishes Airbnb from traditional hospitality business models; their profit comes from fees from landlords and tenants.
Airbnb and COVID-19
As a company that operates in the hospitality industry, Airbnb has been significantly affected by the COVID-19 pandemic. Like most other companies, including those outside the lodging business, Airbnb’s response to the new crisis was to adopt and implement a survival strategy. According to Yohn (2020), “Chesky and the leaders at Airbnb directed their efforts on the core business, customer emotions, and employee needs” (para. 12).
Just like many other firms during the coronavirus crisis, the company’s leaders decided to temporarily abandon the implementation of new major projects and innovations (de Leon, 2022). Instead, they have focused on core business and related offerings around it, introducing new features and guidelines that protect hosts’ and guests’ health and money (Thompson et al., 2020). Moreover, “to get through the crisis, the company laid off about 25% of its workforce — about 1,900 of its 7,500 employees” (de Leon, 2022, para. 3). It is worth noting that the laid-off workers were given financial support and rehired later (Yohn, 2020). Airbnb’s actions were no different from those of other commercial entities during the pandemic.
Airbnb has proven to be more resilient than its direct and indirect competitors. According to Adams (2020), “for global hotel brand Hilton, the COVID-19 crisis hit company profits equally hard” (para. 32). While being damaged equally in terms of revenue and prospects, Airbnb revealed to be more far-sighted, insightful, flexible, and adaptive. These qualities provided them quick recovery and further growth ahead of their competitors.
Keown (2022) states that “Airbnb’s revenue and gross booking value exceeded pre-pandemic levels in the fourth quarter and the full year” already in 2021 (para. 10). A quick comeback was possible because the company’s model at its core was an online marketplace, not a lodging establishment like its industry neighbors. It provided a competitive edge in the global social distancing and self-isolation paradigm.
Strengths and Weaknesses
In business and entrepreneurship, the strengths and weaknesses of one or several companies can be identified and assessed using analytical frameworks. One of these is SWOT analysis, which will be partially applied to Airbnb and Hilton as an example of a global hotel chain and break-and-breakfast businesses. During the pandemic, Airbnb’s relatively cheapness regarding extended stays, with its well-developed digital platform and international network of hosts, has made the company a more attractive lodging option because interest in domestic travel has increased.
In 2020, Carville (2020) notes that “Airbnb saw more nights booked for U.S. listings between May 17 and June 3 than the same period in 2019” (para. 3). The firm has already successfully competed in terms of popularity with traditional hotels and break-and-breakfast entities in pre-coronavirus times and has become even stronger during the crisis. Therefore, one of Airbnb’s strengths today is its brand.
The same can be said about the Hilton; it is a world-famous hotel chain. The brand’s position also strengthened due to how it handled the pandemic and higher travel demand when country lockdowns were lifted. According to experts, “Hilton Worldwide Holdings Inc. (HLT.N) topped analyst estimates for quarterly profit and revenue on Wednesday” as of February 16, 2022 (Reuters, 2022). However, break-and-breakfast businesses do not have the characteristics of a well-known brand, as such entities are usually represented by a single large, family-sized house that focuses on providing services to residents and local tourists. The lack of resources for regional and global expansion and advertising is a weakness of this category of lodging providers.
A large customer base is another strength that Airbnb and Hilton Hotels have, and break-and-breakfast entities do not. Airbnb has developed it through its simple and accessible online marketplace structure, and Hilton has developed it by constructing and acquiring hospitality infrastructure. The inability to expand online and the physical network due to financial limitations is a significant weakness of break-and-breakfast entities.
However, these and Airbnb have a better price-to-value proposition (Blal, 2018). They usually offer more affordable long-term lodging with relatively low loss in quality of service compared to the majority of high-end traditional hotels. Hilton counters it with numerous and varied luxury services, which is its strength, but these require a lot of staff. This factor generates significant and constant overhead costs for hospitality companies like Hilton, weakening their market position.
Changes in the Behavior of Consumers of Hospitality Services after COVID-19
It is hard to say whether COVID-19 has permanently impacted lodging consumer behavior, but the changes are significant. For example, Dong (2022) argues that people are now doing preliminary research online and are choosing to book primarily digitally. People are less likely to travel abroad, while domestic tourism to the countryside has intensified (Dong, 2022). Moreover, Dong (2022) notes that they began to stay for shorter periods and in places they had already been. Digitalized customer behavior makes it easier for a company to attract new guests with its simple online marketplace. However, other changes are making it harder for Airbnb to earn for extended stays and find new hosts.
Defining Factors
Airbnb is an actor in global tourism and lodging; therefore, many factors affect its daily performance. However, only three have a decisive influence and sufficient effect to determine its success or failure. One of them is the cost of utilities and property tax in the countries where the organization operates, as these largely determine the rent for guests.
Customer behavior and preferences are other factors that Airbnb leaders must consider when developing a strategy for the future. These provided an additional competitive advantage and a quick recovery for the company during the coronavirus disaster. Kvach et al. (2018) argue that fluctuations in the global economy can also critically impact even a highly adaptive lodging provider like Airbnb. For example, deflation can increase the number of hosts and guests alike.
Recommendations
Airbnb is a very successful company, and even COVID-19 has been unable to critically damage and remove it from the competition of the hospitality industry’s top performers. However, a more common but no less harmful economic phenomenon has been affecting the company for about a year, and this is inflation. It forces Airbnb superhosts to raise their rental prices, which results in lower bookings even during the holiday season. According to McMurry (2022), “inflation is causing a decline in business” (para. 1). Superhosts are individuals who go the extra mile to provide guests with a high-quality lodging experience. Moreover, they usually operate several properties, so their work should be recognized and appreciated.
Another reason Airbnb is an excellent online platform for finding places to stay is its review system. Both guests and hosts can share their opinions there, informing the existing customer base and new users (Reviews for stays, n.d.). The company has a team of moderators and a moderation policy that monitors the objectivity of people’s reactions (Reviews for stays, n.d.). However, her guidelines do not include responsive measures regarding review bombing. According to Tomaselli (2021), “a phenomenon consisting of a massive attack by groups of Internet users on a website that displays users’ reviews on products” (p. 1).
Conclusion
Today, consumers in the entertainment industry mainly practice this form of public disagreement with an entity’s actions or behavior. However, there is always a risk that people from other industrial sectors, such as hospitality, will adopt this practice. Airbnb will avoid losing its reputation and customers if it develops and implements such software as a temporary suspension feature in advance.
References
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Yohn, D. L. (2020). How Airbnb survived the pandemic — and how you can too. Forbes. Web.