The business model of Airbnb is similar to Uber. It is specifically a tech company that provides a platform that connects real property owners and short-term renters. This model has disrupted the market for lodging while also adding further value to the hospitality industry and the greater tourism sector. This article explores and discusses the business situation of Airbnb using the SWOT framework to determine its strengths and weaknesses, opportunities for the company, and threats to its immediate and long-term business success.
Situation of Airbnb Based on the SWOT Framework: Strengths, Weaknesses, Opportunities, and Threats
Airbnb is the first business to succeed in leveraging digital technologies to enter the lodging market and the hospitality industry without owning and operating real properties. It is specifically an online marketplace that connects owners of real properties such as houses or condominium units and individuals looking for short-term and even long-term accommodations. This business model has succeeded in disrupting traditional lodging and rental businesses across the world including hotels and rental property managers.
The following are the specific strengths of Airbnb:
• First-Mover Advantage: Remember that it is the first company to succeed in operating and promoting an online-enabled marketplace for connecting property owners and renters. This first-mover advantage has given it better brand awareness and brand equity, a larger pool of hosts and guests, and a specific technological edge.
• Online-Enabled Business: Another advantage of Airbnb is that it is an online business that uses an online marketplace accessible through its website or its official mobile app. It does not own and operate real properties because it acts as a medium for connecting actual property owners with possible renters.
• Easy-To-Use Platform: Part of the appeal of the company is its user-friendly and intuitive platform that makes listing properties and searching accommodations a breeze. The platform allowed informed purchasing decisions by providing detailed descriptions, price ranges, targeted location searches, and payment options.
• Wide Global Market: The fact that it is an online marketplace makes its services available and accessible to individuals across the world. It does not need to have a physical presence in a particular geographic or regional market to offer its services to both real property owners and renters or accommodation seekers.
• Affordable Lodging: Another edge of the company is that its listings are often more affordable than traditional hotels. This is true both for short-term renters or travelers and even large groups and long-term renters. The platform gives potential guests better options because of the various price points of its listings.
• Value-Added Options: There is a strong preference to book accommodations via Airbnb because of added perks. These include accommodation options including condominium units, small apartments, entire homes, and villas. Several hosts provide localized experiences, flexible terms, and amenities such as internet access.
Renting out properties for accommodation seekers without owning the actual properties might seem an advantage but the entire business model also has some notable drawbacks. There are problems that are inherent to Airbnb. These include a lack of full control over the quality of properties, the owners of these properties or the host, and the customers or guests, as well as specific challenges in developing and implementing regulations or policies that would benefit the hosts and the guests. Airbnb has also struggled with generating profits.
The following are the specific weaknesses of Airbnb:
• Quality And Consistency: The company essentially operates a decentralized lodging business. The quality and consistency of service and customer experience can vary because not all hosts can provide the same above-and-beyond level of service. Airbnb also lacks direct and immediate control over its hosts.
• Dependence On Hosts: Another one of the weaknesses of Airbnb is that both its earnings and brand reputation are too dependent on the quality of hosts listed on its platform. It needs to attract more hosts so that its platform will become more attractive to customers but it also needs to ensure that these hosts would follow its internal policies.
• Customer Service Issues: The same decentralized nature of the entire business and its online-enabled model mean that resolving issues between guests and hosts can be challenging. Its platform indeed connects hosts and guests but it has limitations when it comes to addressing complex issues and customer concerns.
• Safety And Security Risks: Airbnb has internal policies and systems to promote and protect the safety and security of its hosts and guests. However, in the past, there are several instances of violations and misbehavior on the part of the hosts and criminal behaviors or actions, and even abuse on the part of the guests.
• Legal And Regulatory Issues: The company also has to wrestle with laws and regulations unique to a particular geographic market. The extent of its liabilities varies depending on the jurisdiction. It has also faced backlashes in other markets because of its purported negative impact on the housing market and tourism sector.
Growth prospects in the property market and the tourism sector across the world also provide growth opportunities for Airbnb and the entire lodging and rental markets. The company can also capitalize on the growth or expansion of specific tourist attractions and tourism activities in developing countries or emerging markets. Airbnb can utilize and maximize these growth opportunities and expand further its global reach through aggressive marketing strategies that target both property owners and accommodation seekers.
The following are the specific opportunities for Airbnb:
• Further Market Expansion: The company can benefit from the growth of specific property markets and tourism sectors in specific geographic markets. There are opportunities in developing countries or emerging markets in Asia and South America where lodgings for tourists are either expensive or in low supply.
• Business Travel Focus: Another opportunity for Airbnb is a dedicated focus on the business travel segment. It can build a listing of high-quality hosts in capital cities or top business destinations, target companies and professionals, and offer itself as a better and cost-effective alternative to traditional hotels.
• Long-Term Rentals Focus: It can also focus on marketing itself toward customers or guests seeking long-term lodgings or accommodations. This is an established market segment that includes expatriates or immigrant workers, digital nomads or remote workers, or individuals seeking temporary housing.
• Strategic Partnerships: The company can also partner with travel agencies and experience providers or even local government units in local markets and use different sales promotion activities. It can be part of a comprehensive travel package or help in promoting the tourism campaign of governments.
• Technological Leverage: Remember that Airbnb is also a tech company. It can leverage its technological capabilities further to improve the user experience in its platform, use artificial intelligence for recommendations and customer service, and provide data-driven personalized services to its guests.
Competition in the lodging market is intense. Airbnb competes with incumbents that include hotels of varied sizes and traditional providers of lodging services. The company also competes with other online lodging or accommodation marketplaces. Its business model is also replicable due to the low-to-moderate barrier to entry. Several companies that are similar to Airbnb have emerged. Some of these businesses have a smaller presence and reach but they have more regional focus that can appeal to local customers and local regulations.
The following are the specific threats to Airbnb:
• Substitutes And Alternatives: There are different substitutes for Airbnb. These include traditional hotels and property managers. There are also direct alternatives to its platform. Notable examples include the vacation rental marketplace Vrbo or more diverse marketplaces like Bookings.com and Expedia.com.
• Threats From New Entrants: Another threat to Airbnb comes from new entrants. Its business model is replicable because it depends on digital presence and effective brand awareness. The barriers to entry are low because of the relatively low cost associated with developing and deploying a similar online-enabled platform.
• Legal And Regulatory Risks: The company also has to wrestle with different regulatory or legal issues in markets where it operates or has an established presence. These issues include restrictions on short-term rentals, licensing requirements, restrictions in the property market, liabilities, and taxation, among others.
• Macroeconomic Factors: Airbnb is somewhat a cyclical business. This means that its full earning potential depends on the economic condition of its geographic markets. Downturns and disruptions affect its profitability. It is also exposed to other macroeconomic risks including inflation rate and currency fluctuations.
• Rising Operational Costs: The company has been upgrading its operations and services with the expansion of its global market reach. Growth comes with increasing operational costs. These costs include technological infrastructure and other tech assets, marketing, customer service, host support, and compliance expenses.
• Specific Digital Risks: Another threat to Airbnb centers on risks that are inherent to online businesses or tech-dependent organizations. These include data breaches that can affect the privacy and security of its guests and hosts, cyber attacks that it can shut down its entire operations, and shifts due to technological disruptions.