Difference between revisions of "Airbnb"

Revision as of 21:05, 11 April 2017

Airbnb

"Airbnb Service" text Type Online Hospitality Service Launch Date 2008 Status Active Product Line Service Platform Online Website Airbnb Official Website

Airbnb is a global homestay network founded in 2008 that allows people to market their residences online and seek short term tenants including vacation rentals, apartment rentals, and homestays. The platform enables their customers to experience an authentic accommodation in over 3,000,000 million residences in over 65,000 cities and 191 countries. Based in San Francisco, California, Airbnb's mission is to provide a secure marketplace for people to list, discover, and book unique travel experiences at any price point in locations all over the world. Airbnb has grown steadily and has attracted many customers away from traditional hotels. However, this increased business has been met with regulations such as required taxes and strictly enforced zoning rules.

About Airbnb

History/Founder

Airbnb was founded by Brian Chesky and Joe Gabbia who initially conceptualized the idea at an Industrial Design Conference, where they imagined a service which provided last-minute accommodations and breakfast to travelers unable to secure a hotel booking. Using the event as an inspiration, Chesky and Gabbia focused initially on targeting locations hosting high-attendance events to ensure there would be travelers looking for last-minute accommodations. To grow the company, the founders created niche products (e.g. Obama O's and Cap'n McCains cereal) and sold them, raising $30,000 as initial capital.^[1] As a Bay Area startup, Airbnb's initial office was the founders' home in San Francisco until they were able to pitch their website and idea to investors, raise additional capital, and move to an office space. By 2010, the company had booked over 700,000 rooms, and by 2013, they were celebrating over 9 million guests.

Funding & Growth

Chesky and Gabbia wanted to launch Airbnb as soon as possible. As a way to pilot their idea, they launched during the Democratic National Convention and secured guests due to the hotel shortage in the area. After successfully realizing the potential demand of their idea, they pitched the idea to Sequoia Capital and Y Ventures and raised $600,000 in seed money.^[2]

Company expansion/Locations

Airbnb is established in over 191 countries and over 65,000 cities.^[3] To cater to growing demand and locations, Airbnb has offices all over the globe to maintain good customer service relationships. Currently, Airbnb has 19 offices spread across Amsterdam, Barcelona, Berlin, Beijing, Copenhagen, Dublin, London, Miami, Milan, Moscow, New Delhi, Paris, Portland, San Francisco, Sao Paulo, Seoul, Singapore, Sydney, Tokyo and Toronto.^[4]

Company culture

According to the founders of the company, the stronger the culture is, the less corporate process a company will need.^[5] Airbnb treats each challenge as a problem to be solved as a team, encouraging employees to look out for each other and for upper management to trust their employees. As said by founder Brian Chesky, "Culture is a thousand things, a thousand times. It is living the core values when you hire; when you write an email; when you are working on a project; when you are walking in the hall. We have the power, by living the values, to build the culture."

Products and Services

Home/Apartment Rental

Airbnb operates through their website and mobile app through which travelers can search available accommodations. Travelers enter the duration of stay, price range, and style of accommodation they are seeking--for example, if they are looking for just one room or an entire home or apartment. They are then able to look through the available listings and contact the host to formally book their stay.^[6] Airbnb does not formally own any rooms itself, and therefore building and maintaining quality relationships with their vendors is crucial for their success.

Reviews

Both Airbnb hosts and guests are able to write public reviews of their Airbnb experiences. These public reviews create reputations for both hosts and guests online and can serve as a reference for future Airbnb users. If a host receives a negative review, there is decreases likelihood that guests choose to stay with them over other Airbnb hosts. Likewise, if a guest receives a negative review, there is decreased likelihood that hosts allow them to stay in their homes.

Experiences

Recently, Airbnb has started providing experiences by select hosts to enrich a travelers experience through a specific immersion or activity. The service allows hosts to create experience such as a quick workshop or a walk through a neighborhood in their city, or longer experiences over a couple of days that give guests an in-depth view into the local culture. Hosts have to write proposals for experiences which then have to be approved by an Airbnb team, and after approval, hosts are free to alter the size of the group and price for the experience. Types of experiences include social impact, art & design, food & drink, sports experiences, and history experiences, among many more.^[7]

Revenue

Since Airbnb does not own any physical accommodations, revenue is generated through fees charged on bookings. On each booking, Airbnb charges a 6%-12% service fee for "guest services" and also charges the host a 3% service fee. To minimize liability issues, Airbnb introduced a $50,000 physical property guarantee, voice-and-video verification systems, and a 24-hour customer support hotline.^[8] They also have built a database of 3,000 professional photographers that Airbnb hosts can utilize to have their properties professionally photographed. In 2015, Airbnb generated approximately $900 million in revenue.^[9]

Competition/Regulation

Competition

Airbnb developed an attractive and easy to use business model for homesharing, but they are not the only ones on the market. Airbnb's main competitors - Homeaway, Tripping.com, and Flipkey also serve as an online marketplace for travelers to connect with hosts renting out their space for short term and long term stay. Within the accommodation industry, Airbnb also faces competition from hotels. With convenient home sharing options such as Airbnb, hotels are losing customers to cheaper options. In 2015, a third of leisure travelers used private accommodations rather than hotels, up from 10% in 2011.^[10]

Regulation

When deciding to become an Airbnb host, a person must be aware of the regulations that apply to their town, city, country, and/or state. Airbnb commits to working with local officials to make sure their business lawfully benefits the community. Below are a few important regulations that may apply to hosts, depending on where they live:

• Business licenses: many cities require that operators of certain businesses obtain a license before business can be operated. Most applications can be submitted through the local government, provided they receive the proper forms and information^[11].
• Building and housing standards: Many states and local governments have regulations pertaining to the minimum construction, design, and maintenance standards for buildings. These include, but are not limited to, rules on health and safety. For Airbnb hosts in particular, residential and non-residential use regulations may be relevant to their listings. Additionally, some cities/states may require that properties undergo regular inspection to make sure it meets minimum habitability standards ^[11]
• Zoning rules: these days, most cities and counties set out laws to define the way a person can use their home. These particular rules can most often be found in zoning codes or city ordinances. Consulting with these regulations is critical for hosts to make sure their listing(s) is consistent with the use definitions in place ^[11]
• Special permit: Some cities and counties require that hosts obtain a special permit in order to rent our their home. If applicable, this can be done through one's city or county government ^[11]
• Taxes: many cities, counties, and states require that hosts collect a tax for each of their overnight stays. That tax must then be paid to their city or county. Airbnb hosts are required to pay a local tax and Value Added Tax (VAT)^[12]. Residents of countries in the European Union and China may need to asses the VAT on the services they provide.
• Other: Airbnb encourages hosts to look deep into the other rules and contracts in their city/county. These may include homeowner association (HOA) rules, co-op rules, timeshare ownership rules, and other rules established by tenant organizations ^[11]

As of February 2017, some regulators of Airbnb are not enthusiastic about the future of the sharing economy concept that the company is based off of. There have been several recent instances where cities and regions around the world have placed heavy restrictions on Airbnb rentals. Places like Berlin and San Fransisco are just a few of these places, arguing that Airbnb's are in violation of zoning codes and other local regulations. Airbnb has responded to these actions by reaching out and attempting negotiations. They have offered to collect and share tax revenue, despite the fact that they would significantly decrease their revenue generation and earning power in doing so. Airbnb is not the only peer-to-peer service provider dealing with this sort of issue^[13].

Ethical Considerations

Privacy Issues

One concern about Airbnb is privacy both for the homeowner and the guest. For the homeowner, there are issues regarding stolen or damaged property caused by the guests. These incidents may not be common, but does happen as exemplified when Airbnb received "negative press when a few consumers went public with stories of their homes being robbed or damaged by renters found through the site."^[14] The premise of Airbnb's existence can be partially based on the moral good in people, allowing homeowners to trust strangers to enter their homes. However, there are people that will break that social norm, causing incidents revolving property damage and loss. While Airbnb has responded to such reports by covering loss or damage from guests up to $50,000, it ultimately depends on the fundamental good nature of their users. Thus, one issue with the sharing economy is that it frequently bypasses most security checks in place of blind faith in people's goodness.

Another incident regarding privacy, but for guests, happened when a woman alleged that the apartment she rented from was equipped with a remote-controlled spy camera.^[15] It is suspected that the camera had taken explicit pictures of the woman and her partner. Even though Airbnb takes its privacy issues very seriously, it can't stop the person in possession of the pictures from uploading them on the Internet. As a result, homeowners and guests must take their own precautions to ensure privacy because Airbnb can only ensure it up to some point.

Consequences of the Sharing Economy

From the start, the promise of the sharing economy was that through digital technology and social media, markets for certain goods and services could be made more efficient. In theory, this would benefit investors, and more importantly, society. In more recent times, this "golden" future is looking a bit tarnished to some. The sharing economy business model, which includes companies like Airbnb, Uber, and Lyft, connects providers and consumers to share resources and services through online application-based platforms or business transactions. Because of Airbnb's sharing economy business model, the service competes against the hotel industry, which has seen revenues fall since Airbnb's introduction to the market. Airbnb's success has resulted in increased city regulations regarding sharing economies.^[16]

One argument of the sharing economy is whether it is bringing in more opportunities and creating salaried workers, or whether the net effect of displacing the workers involved in the traditional economic model is forcing them to move to lower salary part-time jobs.^[17]

NYU business professor Arun Sundararajan came out with a book in May 2016 titled “The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism.” In the book, Sundararajan explores how peer-to-peer commercial exchange has begun to blur the lines between personal and professional life and how it may affect the social fabric of every day life. He believes that the term "crowd-based capitalism" is more appropriate than "sharing economy", mostly because of the noncommerical connotation of the word "sharing". All in all, he finds the key downside of the the sharing economy to be its potential to lose the social safety net, meaning insurance, stable income and employment, and other benefits that are critical to the well-being of workers ^[18].

References

1. ↑ Crook, J. & Escher, A. A Brief History of Airbnb. Retrieved 6 April 2017, from https://techcrunch.com/gallery/a-brief-history-of-airbnb/
2. ↑ Carson, B. (2016). How 3 guys turned renting an air mattress in their apartment into a $25 billion company. Business Insider. Retrieved 8 April 2017, from http://www.businessinsider.com/how-airbnb-was-founded-a-visual-history-2016-2/#by-summer-2008-the-founders-had-finished-a-final-version-of-air-bed-and-breakfast-and-went-to-meet-investors-the-whole-experience-had-been-redesigned-around-taking-only-three-clicks-to-book-a-stay-otherwise-it-was-too-hard-investors-werent-convinced-introductions-to-15-angel-investors-left-them-with-eight-rejections-and-seven-people-ignoring-them-entirely-7
3. ↑ About Us - Airbnb. (2017). Airbnb.com. Retrieved 8 April 2017, from https://www.airbnb.com/about/about-us
4. ↑ Locations | Careers at Airbnb. (2017). Airbnb.com. Retrieved 8 April 2017, from https://www.airbnb.com/careers/locations
5. ↑ R, H.. (2015). The Importance of Company Culture at Airbnb. The 6Q Blog. Retrieved 8 April 2017, from https://inside.6q.io/the-importance-of-company-culture-at-airbnb/
6. ↑ Airbnb Business Model - Business Model Toolbox. (2017). Business Model Toolbox. Retrieved 8 April 2017, from http://bmtoolbox.net/stories/airbnb/
7. ↑ Become an Experience Host. (2017). Airbnb.com. Retrieved 8 April 2017, from https://www.airbnb.com/host/experiences
8. ↑ Hempel, J. (2012). Airbnb: More than a place to crash. Fortune.com. Retrieved 8 April 2017, from http://fortune.com/2012/05/03/airbnb-more-than-a-place-to-crash/
9. ↑ Kokalitcheva, K. (2015). Airbnb sees $900 million in revenue to justify $24 billion valuation. Fortune.com. Retrieved 8 April 2017, from http://fortune.com/2015/06/17/airbnb-valuation-revenue/
10. ↑ Glusac, E. (2017). Hotels vs. Airbnb: Let the Battle Begin. The New York Times. Retrieved 8 April 2017, from https://www.nytimes.com/2016/07/24/travel/airbnb-hotels.html
11. ↑ ^{11.0 11.1 11.2 11.3 11.4} What regulations apply to my city? Airbnb Help Center https://www.airbnb.com/help/article/961/what-regulations-apply-to-my-city, Retrieved 9 April 2017
12. ↑ How do taxes work for hosts? Airbnb Help Center https://www.airbnb.com/help/article/481/how-do-taxes-work-for-hosts?topic=247, Retrieved 9 April 2017
13. ↑ Ingram, Matthew. The Regulators Are Finally Coming for Airbnb and Uber Fortune http://fortune.com/2017/02/20/airbnb-uber-tech-regulations/ 2017, Retrieved 9 April 2017
14. ↑ Want to Rent out That Spare Room? The Growing Popularity of 'Collaborative Consumption' - Knowledge@Wharton. (2011). Knowledge@Wharton. Retrieved 8 April 2017, from http://knowledge.wharton.upenn.edu/article/want-to-rent-out-that-spare-room-the-growing-popularity-of-collaborative-consumption/
15. ↑ Cooper, D. (2015). The thing you'd worry about happening in an Airbnb happened. Engadget. Retrieved 8 April 2017, from https://www.engadget.com/2015/12/17/airbnb-privacy-camera-snooping/
16. ↑ Hirschon, L., Jones, M., Levin, D., McCarthy, K., Morano, B., Simon, S., & Rainwater, B. (2015). Cities, the Sharing Economy, and What's Next. National League of Cities - Center for City Solutions and Applied Research. Retrieved from http://web.archive.org/web/20161108222555/http://www.nlc.org/Documents/Find%20City%20Solutions/City-Solutions-and-Applied-Research/Report%20-%20%20Cities%20the%20Sharing%20Economy%20and%20Whats%20Next%20final.pdf
17. ↑ Penn, J. & Wihbey, J. (2016). Uber, Airbnb and consequences of the sharing economy: Research roundup. Journalistsresource.org. Retrieved 8 April 2017, from https://journalistsresource.org/studies/economics/business/airbnb-lyft-uber-bike-share-sharing-economy-research-roundup
18. ↑ Anderson, Monica and Aaron Smith. Q&A: The impact and evolution of the sharing economy Pew Research Center http://www.pewresearch.org/fact-tank/2016/05/23/qa-the-impact-and-evolution-of-the-sharing-economy/ 2016, Retrieved 9 April 2017.