Spotlight: Airbnb Strategy Considerations

Airbnb is a peer-to-peer lodging company, dominating the sharing market with services across 191 countries. They saw high levels of success while entering the market, obtaining a first mover advantage in the industry, eventually leading to many classifying it as a unicorn.

The brand itself has become a verb, with the term “Airbnb” now being widely understood, similar to other successful brand-verbs such as Googling something or Photoshopping an image.

Today, the sharing economy is a large and active marketplace with many operators, making the market highly competitive and very saturated. Airbnb is in danger of losing its differentiation as a ‘unique’ experience as more and more companies begin to mature their brand positioning.

Let's take a look at some of the issues Airbnb may have in their strategic planning...

PESTLE Analysis for Airbnb

The peer-to-peer lodging market is characterised by a number of significant macro trends, with political, economic and environmental significantly impacting the market. In the UK, uncertainties around life post-Brexit have made consumers wary of booking holidays in advance, instead opting for package holidays.

The uncertain future could lead to a drop in the value of the pound, which could benefit Airbnb UK from foreign bookings. Equally important, consumers have increasing desires to stay in environmentally friendly accommodation, meaning pressure for Airbnb to reposition its stance and provide different services.

Political

• Political instability impacting travel
• Freedom of movement changing
• Lack of regulation in this sector

Economic

• Recession could be both opportunity and threat
• Exchange rates making international travel more appealing
• Access to debt impacts potential second homes for Airbnb

Social

• Increasing work from home
• Concern over privacy and safety
• Aging demographic
• Increasing awareness of personal carbon footprint

Technology

• More holidays being booked online
• Homes used can be smart tech enabled
• Payment methods changing with online & blockchain

Legal

• Renting limits
• Regulation different per country
• Tax laws
• Health & Safety laws

Environmental

• Environmental concerns are an issue
• Consumers want sustainable businesses
• Climate change impacting holidays

Learn more about this framework in the Ultimate Guide to PESTLE.

Five Forces for Airbnb

Porter’s Five Forces analyses the competitive environment which Airbnb functions in, assessing the differing aspects that impact the business on a strategic level.

Industry Rivalry: High

• High market growth
• UK sharing economy growing and attractive
• Low switching cost
• Competitive aggressive marketplace so low differentiation
• Low fixed costs (online platform only) replicable with funding

Threat of New Entry: Medium

• Easy to create rental website, entering market at low cost
• Hard to build an audience for web site
• Airbnb worldwide reputation: 7 million accommodations, operating in 191 countries
• High investments needed for start-ups
• Differing local zoning regulations hard to adhere to
• Threat from innovative companies popular brands (e.g. Uber moved into food delivery) leading in sharing economy
• Established reputation and high brand equity allows easy market entry

Threat from Substitutes: Medium

• Airbnb generally cheaper than regional hotels
• Hotels offer high security levels for guests
• Airbnb had many cases of last-minute cancellations/host fraud
• House swaps offer cheap, different approach to indulging in local culture
• Hostels offer a sociable community at a cheaper price
• Couchsurfing.com, operates in 200,000 cities as a free service

Threat from Suppliers: Low

• Large, diverse audience that suppliers need on Airbnb
• Suppliers interchangeable (not one source), high availability of choice
• Low switching costs
• Brand reputation relies on suppliers

Threat from Buyers: Medium

• Market saturated - variety of choice
• Strong brand name
• Customer expected base level of standards
• Switching cost inexistent
• Word-of-mouth based reputation

Learn more about this framework in the Ultimate Guide to Five Forces.

SWOT for Airbnb

Understanding the external environment using PESTLE and then working on your Five Forces to review the industry, ultimately leads you to your SWOT analysis. Let’s take a look at it for Airbnb…

Strengths

• Globally recognised brand name
• Exclusive partnerships with respected global and national brands
• Vast, diverse supplier network
• Strong, proactive IT R&D department

Weaknesses

• Possible poor customer relationships/retention
• Examples of bad customer experience
• Absence of loyalty schemes
• Online experience not innovative
• Lack of ambassadors/influencers

Opportunities

• Position Airbnb as the sustainable alternative to hotels
• Work with influencers to increase brand exposure
• Tighten security and vetting
• Offer package holidays
• Develop local hubs working with local businesses

Threats

• Alternatives moving into the space
• Reputation for safety could be impacted by just one experience
• Reliant on good range of suppliers and buyers

Learn more about this framework in the Ultimate Guide to SWOT Analysis.

Example Strategic Objectives for Airbnb

The above is a working example of Airbnb in theory. Taking it forward, what would the strategic objectives be for Airbnb? Well outside of financial ones you may also have…

• Reposition Airbnb Brand As Sustainable UK
• Develop Local Partner Network Pilot
• Engage & Delight Customers

Under these strategic objectives may sit key goals, for example rolling out the pilot to two regions in a country, or ensuring a high NPS score for their customers.

Learn more about this concept in our Strategic Objective Guide.

Summary

Airbnb are in a very strong strategic position. They are well known as a brand, they have a large userbase and a huge network of locations. While there remain risks, the current situation is positive and therefore should be used to invest and capitalise on the next phase to ensure they maintain that position as market leader.