The model of the sharing economy “Airbnb”-new thinking on travel
Once, the thought of walking into a stranger’s house may seem strange and dangerous. With the development of the sharing economy and platform business models, the emergence of Airbnb has brought revolutionary changes to the traditional hotel industry. It has shown significant influence in shaping the structure of the hotel industry. It ushered in a new era: redefining communities, changing the way we travel, and challenging government-regulated business methods (Stone, B., 2017).
When did Airbnb start operating? What is the field of operation?
Airbnb provides a contact platform for users and homeowners with vacant rentals and provides users with various accommodation information. At the same time, users can publish, search and book through the Internet or mobile apps. Airbnb’s operations have multiple sources of income, all of which are related to booking accommodation and experiences. It was established in San Francisco, USA, in 2008 and is also known as Airbed and Breakfast. (Wang, Y. et al., 2020). By mid-2017, Airbnb had 4 million listings worldwide, covering 191 countries/regions and 65,000 cities to provide travelers with accommodation options. The number of Airbnb listings exceeds “the top five major hotel brands combined. （BMI，2020）
The three air mattresses that the founder first “attracted family hotels” to Airbnb, which is now world-renowned, has achieved great success. At present, there are more than 150 million users worldwide. After many financings, Airbnb announced the submission of a listing application in 2020.
Airbnb’s business model & how to make money
According to a report by Forbes (2018), Airbnb is revolutionizing the accommodation market by controlling hotel prices and providing more rooms in the most popular tourist spots during the peak period when hotel rooms are often sold out, and prices are soaring. Airbnb’s business model is different from that of a hotel company. Simply put, Airbnb’s business model is built for the mass market, connecting the mass market in a unique way (travelers, hosts, and experience providers). The fully digital channel is to find and book and manage lists and experiences through apps and online. Airbnb does not own any real estate and provides value in the form of physical assets. On the contrary, its business model is based on connecting people who have something to offer and people who need it (Airbnb statistics and host insights. 2021)
Airbnb’s primary source of income is based on scheduled service fees. The platform usually charges 14-16% of the accommodation booking service fee, borne by the guest and the landlord jointly or entirely by the landlord.
Sharing economy and platform society
“Sharing economy” is a term used to denote the latest transformation of the Internet. The rise of digital platforms is hailed as the driving force of economic progress and technological innovation. Individuals can benefit significantly from this transformation because it enables them to establish businesses, conduct commodity transactions, and exchange information online while bypassing companies or state intermediaries (Van Dijke et al., 2018, pp. 5)
Nowadays, the sharing economy is prevalent. It makes full use of idle resources, has low transaction costs, and better establishes a personal brand. At the same time, the network platform is also the core of significant development, a comprehensive perspective that connects the world. The platform has penetrated the body of society-influencing institutions, economic transactions, social and cultural practices. “Platform society” is not only a shift of economic focus to social focus; it also refers to a serious debate about private and public interests in a society where most interactions are conducted through the Internet. This is the case with Airbnb. Airbnb is a leader in the sharing economy, and the “platform society” model has brought great success to Airbnb. The value of the Airbnb platform comes from the fact that every additional tenant can become a landlord and form a virtuous circle. As an online platform, it can rapidly expand its scale and brand influence with minimal cost.
However, while platforms promote personal interests and economic benefits, they also pressure collective means and public services. Emphasizes the inseparable relationship between the network platform and the social structure. (Van Dijke et al., 2018, pp.6) For example, Airbnb provides some people with the possibility of a room to earn some money, and it also provides relatively cheap accommodation for others. But who will pay for the collective costs? Who will enforce the fire safety regulations? Who will clean the streets after the tourists leave?
Airbnb’s success & some concerns about the company
The birth of Airbnb has fully met the needs of tenants, hotels, landlords, and other stakeholders. Through the platform benefit chain, tenants, hotels, landlords, and other stakeholders are unified for hotels, inns, and individual landlords. The Airbnb platform has effectively solved the problem of poor housing vacancy and occupancy rates. Make the house use more efficient. Landlords can respond quickly to market conditions, make houses for private use when prices are low, and only receive visitors when the demand for rooms (and the return from renting) is highest.
According to a 2017 Airbnb report: For travelers, Airbnb has accurately found the pain point of short-term rental difficulties and fewer channels. Through Airbnb, travelers can discover suitable short-term rental platforms more quickly. And it is more regular than before. And Airbnb has done it: your costs are likely to be other people’s income; your expenses are likely to be other people’s wealth. The essence of optimizing this third-party profit model is to make full use of idle resources and achieve a higher degree of resource utilization.
In addition, to continue expanding its listings and improving its rental system, Airbnb has also developed many other businesses. For example, Airbnb has its own payment company in the United States to provide users with better information security measures; it also has its restaurant reservation app to find their favorite dining places near their accommodation easily. At the same time, 75% of the listings are from popular tourist locations, which brings a lot of revenue and traffic to cities that are not traditional tourist locations and brings more than 65 to the catering industry in about 44 cities. Billion dollars in revenue.
However, behind the success of Airbnb, there are also many problems and concerns of the company. Forbes (2018) pointed out that since the landlord can respond quickly to market conditions, renting houses for private use is convenient when the price is low. Has had a significant impact on the hotel industry. The profit pressure on Airbnb properties has increased over time, and hotels will be forced to strengthen competition further. Due to fixed investment costs and changes in the tourist season, the demand for guest rooms is constantly fluctuating. Still, it is not efficient for hotels to build enough capacity to meet the peak, so they face the challenge of finding a suitable middle ground.
At the same time, due to problems with Airbnb guests or the rental property itself, not all accommodations can be completed smoothly. According to the IGMS report, these problems may cause Airbnb hosts to lose money. In some cities, short-term leases are limited or even illegal. Improper operation in these areas may result in penalties, fines, or even closure of companies. There are also problems with facilities, party guests, guests, landlords, property damage, loss of household items, bad reviews, etc. Sometimes, security issues are often difficult to protect. Because of these factors, Airbnb must fight a long-term battle to maintain the excellent side and solve external problems.
In conclusion
The success of Airbnb is not just because of the creative ideas of the founder. More importantly, it combines the changes of the times and launches the services that people most need. As Mansell（2020）mentioned, “Business requirements are the starting point of a business model.” At the same time, a good business model can make good ideas come true. In today’s sharing mode, its business model has solved the core needs of users. Although it faces many challenges, such as communication problems between landlords and tenants, it still benefits people and businesses in various cities. Subverted the most traditional rental industry and has a more different experience of travel.
Reference list：
Stone, B. (2017). The upstarts : how Uber, Airbnb, and the killer companies of the new Silicon Valley are changing the world (First edition.). Little, Brown and Company.
Wang, Y., Asaad, Y., & Filieri, R. (2020). What Makes Hosts Trust Airbnb? Antecedents of Hosts’ Trust toward Airbnb and Its Impact on Continuance Intention. Journal of Travel Research, 59(4), 686–703. https://doi.org/10.1177/0047287519855135
John, Nicholas A. (2018) Sharing Economies. In The Age of Sharing. Cambridge: Polity. pp. 69-97.
Gerdeman. D (2018) The Airbnb Effect: Cheaper Rooms for Travelers, Less Revenue for Hotels, Forbes.
https://www.forbes.com/sites/hbsworkingknowledge/2018/02/27/the-airbnb-effect-cheaper-rooms-for-travelers-less-revenue-for-hotels/?sh=5b586974d672
van Dijck, J., Poell, T., & de Waal, M. (2018). The Platform Society. Oxford University Press. https://doi.org/10.1093/oso/9780190889760.001.0001
How Airbnb’s Exponential Business Model Works. (2020). Business Models Inc. https://www.businessmodelsinc.com/exponential-business-model/airbnb/
Airbnb statistics and host insights. (2021). The Zebra. https://www.thezebra.com/resources/home/airbnb-statistics/#infographic
Airbnb (2017) Generating $6.5billion for restaurants around the world, Restaurant Spending Report 2017. https://press.airbnb.com/wp-content/uploads/sites/4/2017/09/Restaurant-Spending-Report-2017.pdf
Mansell, Robin, and Steinmueller, W. Edward (2020) ，Advanced Introduction to Platform Economics. Cheltenham, Edward Elgar.
The top 12 Airbnb problems and how to solve them. iGMS. (2021). October 18, 2021, from https://www.igms.com/airbnb-problems/#.