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    Case 1 Airbnb in 2020 Case Study - Group Discission

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    diveflyjump
    Airbnb's business model is more resilient than large hotel chains during the COVID-19 pandemic for a few key reasons: 1) Airbnb raised $2 billion in private funding to support operations during pandemic-related declines, while hotel chains like Marriott saw huge drops in market capitalization. 2) Airbnb was able to enter new experience-based markets like virtual tours and tastings to attract alternative sources of traffic. 3) As a platform without physical assets, Airbnb has lower fixed costs and more flexibility to adapt offerings like cancellation policies, while hotels have high operating expenses to maintain large facilities.

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    Case 1 Airbnb in 2020 Case Study - Group Discission

    Uploaded by

    diveflyjump
    2K views4 pages
    Airbnb's business model is more resilient than large hotel chains during the COVID-19 pandemic for a few key reasons: 1) Airbnb raised $2 billion in private funding to support operations during pandemic-related declines, while hotel chains like Marriott saw huge drops in market capitalization. 2) Airbnb was able to enter new experience-based markets like virtual tours and tastings to attract alternative sources of traffic. 3) As a platform without physical assets, Airbnb has lower fixed costs and more flexibility to adapt offerings like cancellation policies, while hotels have high operating expenses to maintain large facilities.

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    Case 1 Airbnb in 2020 Case study _Group discission

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    Airbnb's business model is more resilient than large hotel chains during the COVID-19 pandemic for a few key reasons: 1) Airbnb raised $2 billion in private funding to support operations during pandemic-related declines, while hotel chains like Marriott saw huge drops in market capitalization. 2) Airbnb was able to enter new experience-based markets like virtual tours and tastings to attract alternative sources of traffic. 3) As a platform without physical assets, Airbnb has lower fixed costs and more flexibility to adapt offerings like cancellation policies, while hotels have high operating expenses to maintain large facilities.

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    2K views4 pages

    Case 1 Airbnb in 2020 Case Study - Group Discission

    Uploaded by

    diveflyjump
    Airbnb's business model is more resilient than large hotel chains during the COVID-19 pandemic for a few key reasons: 1) Airbnb raised $2 billion in private funding to support operations during pandemic-related declines, while hotel chains like Marriott saw huge drops in market capitalization. 2) Airbnb was able to enter new experience-based markets like virtual tours and tastings to attract alternative sources of traffic. 3) As a platform without physical assets, Airbnb has lower fixed costs and more flexibility to adapt offerings like cancellation policies, while hotels have high operating expenses to maintain large facilities.

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    Case 1 Airbnb in 2020 Case study analysis questions: Group 1

    1. How would you illustrate and compare the business models for Airbnb, large hotel chains
    such as Marriott and Hilton, and bed & breakfast operators? Use the example chart in the
    textbook for business models as a guide (Concepts & Connections 1.1)

    - Airbnb Marriott/Hilton BnB operators

    Customer value - Technology - Well known - Tradition brick and mortar


    proposition platform (also taxi brand names. home owners
    service for)
    - Larger facilities - Cozy, homelike ambience,
    - Really does not but limited room personalized
    own anything. sized accommodation
    But offers spare
    room. - Investing in - Usually in rural
    amenities environment
    - Peer-reviewed (premise spa and
    digital fine dining) - Better connection with host
    marketplace and surrounding
    - 24hr service & communities
    - Sharing economy security
    - Smaller rooms but direct
    - Unique parking lot access
    experience
    - Amenities such as laundry
    - Group size can
    vary - Located closer to highways

    Profit formula - Transaction Fee - Higher room rates - Lower operating costs
    charged to the
    users of the - Revenue - Room rental
    platform (both the generation
    host and the opportunities
    Airbnb will make - Breakfast
    from F&B
    money) /Sharing /different revenue
    exonomy streams - Cost of wage and upkeep of
    the motels/bnbs
    - Spa and other
    amenities - Down point: accusations
    that BnB operators used
    Airbnb platform without
    - Cost of wage and meeting the regulations.
    upkeep of the Not having proper licenses.
    hotel

    Cost structure - Fixed cost on - Higher operating - Lower operating cost


    making the cost
    booking platform
    - Occupancy
    - Smaller operating should be able to
    expense & cost cover upkeep of
    (they don’t own the hotel &
    the properties) amenities and
    paying salaries
    - Legal fees /renumerations.

    - Supporting their
    loyal hosts ($17m
    paid)

    2. What was Airbnb’s response to the COVID-19 pandemic? Does it appear that the
    company’s business model is more resilient than that of its hotel chain rivals?

    - Instead of preparing for IPO, they had to raise $2 billion in private equity funding and debt to support
    operations during the pandemic.

    - Job cuts (1900 or a quarter of its workforce)

    - Adjusting their cancellation policies to offer refunds for certain reservations

    - Safety and cleaning guidelines for hosts (to prevent COVID-19 spead and also to protect the reputation
    of the brand)

    - Raised $2 billion in private equity funding and debt to support operations.


    - Cut one quarter of the workforce
    - Adjust business operations – flexibility on cancellation policy and refunds for reservations
    made during certain periods.
    - Offered safety and cleaning guidelines for its hosts
    - Established $17 million fund to help support hosts with long-term status
    - Expanded its sharing-economy model by creating virtual experiences such as cigar
    tastings and virtual guided tours of cities to guests 

    Business model

    Market capitalization comparison: Marriot had a huge drop. Not really for Hilton. High operating costs
    for hotels. Hotel: provision of accommodation.

    Airbnb is not more resilient. They dropped 16% as well. Not limited to accommodation so they can
    venture into “experiences”. Look at additional streams of traffic. More agile: Entered the “Online
    Experience” market. VR (guided tours and cigar tastings).

    3. What are the general strengths and weaknesses of a) large, hotel chains such as Marriott
    and Hilton, b) bed & breakfasts, and c) Airbnb? Explain how you would compare and
    contrast those businesses.

    Airbnb Marriott/Hilton BnB operators

    Strengths - Revolutionary - Facilities, - Lower costs


    idea / for tech amenities, service
    savvy people - Cheaper rooms
    - Diversified
    - No fixed costs as revenue - Accessibility
    they don’t own generation (maybe?) Tends
    property opportunities to be in rural
    (spa, amnities) etc areas
    - Very strong
    property - Larger and wider
    portfolio. 190 room types / - Personal
    countries, 4 guest experience /homelike
    million listed experience
    properties. Now - A wholistic
    over 7 million experience (eg: - More tax
    listed properties. dining, laundry, advantages (self
    Concierge service business). But
    - Room sharing etc) are still subject
    model so allows to state/city tax.
    faster expansion. - Security (fire Maybe they can
    safety/occupation, get around this
    - Human discrimination) by using Airbnb
    interactions like platform
    face to face - Reputation + the
    services standards

    - Avoidance of - Hotel loyalty


    strict regulations (Bonvoy/Hilton
    and taxation. Honors) miles

    - Sharing concept
    allows
    flexibility. Ppl
    don’t want to
    own. They want
    to share.

    - Covers a large
    client base
    (single rooms to
    even whole
    house)

    - 140m guest
    arrivals

    - Tagline: Belong
    Anywhere
    (internal slogan
    become
    external)

    Weakness - Legal Issues Limited control on the


    (tax, people not community issues
    leaving)

    - Safety issues

    - Racism

    - Lack of
    accountability

    - Security issues:
    It allowed
    anyone to stay
    next to a
    neighbor
    4. In what ways has the lodging consumer changed, and how does Airbnb’s customer value-
    proposition meet this change?

    - Yes. The age group.

    - Airbnb also offers flexible prices / peer-to-peer lodging / sharing economy

    - Booking anytime, anywhere at the tip of your fingers / ease of technology

    - Availability in locations where there may not be a hotel/bnb lodging, remote parts of
    the world

    - Variety of rooms/ houses to suit individual wants/desires/experiences

    5. What key factors may determine the success or failure of Airbnb?

    - Diversifying their business model. Not just the physical accommodations but also the
    online/virtual experiences.

    - Financing. Instead of releasing IPO worth 31Bn, had to raise $2 billion in private
    equity funding and debt to support operations during the pandemic

    - Keeping up with the mobile/tablet technology trends / ease of use / keeping up with
    the pace. Perhaps cyber security as well.

    - Legal /safety issue (taxation)

    - It’s also about being in line with the enhanced hygiene emphasis during Covid-19.
    Cleaning guidelines etc. Remodeling their structure with the current pandemic.

    - Local regulations / rules change.

    6. What recommendations would you make to Airbnb to improve its competitiveness in the
    accommodation market while mitigating any current and future risks?

    - Keep improving on technology

    - Expand customer base

    - Stay ahead of the legal curve

    - Sell more of the unique experiences / destination where the hotels are not located
    (VR experience during Covid)

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