Airbnb

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= using the Internet to help people rent out a room, or even a couch, to frugal travelers


Description

"How it Works: Instead of searching for a room in a hotel, travelers can book an extra room in a house or a vacant home for their trip directly from property owners.

How it Makes Money: Airbnb collects a 3 percent fee on each reservation and a 6 to 12 percent booking fee." (http://www.inc.com/ss/7-start-ups-changing-peer-peer-commerce#3)

History

"after receiving funding as well as mentoring from incubator Y Combinator in 2009, the startup exploded. Airbnb -- the name was originally Airbed and Breakfast in a reference to the use of airbeds for guests -- has listings in 16,000 cities around the world and has booked more than two million nights." (http://knowledge.wharton.upenn.edu/arabic/article.cfm?articleid=2714)


Statistics

Robin Chase:

"Robin did some research into the largest bed sharing companies in the world and realized that the industry is being dramatically disrupted. While InterContinental Hotels Group, the largest hotel chain in the world, has built 645.000 hotel rooms in 65 years, Airbnb managed to offer the same amount of rooms in its fourth year." (http://blog.sharetribe.com/2015/08/12/how-to-find-the-next-big-marketplace-idea-an-interview-with-robin-chase/)


Discussion

Business Model Issues

Tom Slee:

" while it is true that a large number of hosts rent the homes they live in, hosts with multiple listings make up almost half of Airbnb’s business. Also that, while Airbnb makes great play of its origins in renting out an airbed, such rentals are now a negligible portion of its business. Even “spare rooms” are a minority of the business: the majority of Airbnb’s business in New York comes from the rental of entire homes.

The data showed a company that was closer to orthodox models such as HomeAway and its subsidiary VRBO than the narrative would have it. There are differences—HomeAway is focused on vacation rentals, and many of its properties are run by property managers—but the similarities cast doubt on Airbnb’s claims that existing regulations are inapplicable.

Now here we are: it’s six months on, and interest in Airbnb continues. Airbnb has kicked 2,000 New York listings off its site (10% of the total for the city). It handed over host data to the Attorney General (anonymized, the company says). Meanwhile, the company is valued at $10 billion, having raised $450 million in a new round of venture capital. The New York dispute is now over, but the sharing economy poster child is still here, bigger than ever, and still a leading light in the wave of digital disruptors looking to shake things up and make a lot of money.

So during May I collected data on over 90,000 hosts and 125,000 listings—about 20% of Airbnb’s 600,000 total, according to this TechCrunch estimate—from 18 cities around the world, to sketch a portrait of Airbnb’s business.


The main questions I had in mind are the straightforward ones, starting with the same ones Skift and I asked about New York:

  • Is Airbnb’s business based on “regular people” in a way that other part of the hospitality industry are not?
  • Is Airbnb’s business based on spare rooms and airbeds?
  • I looked again at several cities I had collected (but not posted about) in November, so that I could look at how the business has changed in some of Airbnb’s key markets.
  • I hoped that looking a second time at New York might have something to say about the 2,000 listings that Airbnb removed from the site in April, during its run-in with the Attorney General. For those who don’t want to read the whole thing, here are the quick answers.
  • While a good part of Airbnb’s business is based on “regular people”, over 40% comes from hosts with multiple listings. This is different from Airbnb’s self-portrait. Airbnb’s claim that existing regulations don’t apply to it is at least exaggerated.
  • The majority of Airbnb’s revenue comes from whole-home rentals. This makes the company much more like HomeAway and other vacation rental businesses. It casts further doubt on the company’s claim to be a new class of business.

In some of its biggest markets, Airbnb may have maxed out the number of listings it can achieve. What’s more, there is a high rate of churn as individual hosts put a property on the market, have a few guests, and then take the property off again.

Airbnb does not appear to believe its own claim that customer ratings provide an assurance of good experience. Airbnb says it removed 2,000 New York listings from the site because of bad experience, but at least half of those listings had good (4.5 or 5 star) average ratings from customers." (http://tomslee.net/2014/05/the-shape-of-airbnbs-business.html)

Funding Issues

"the financial community is recognizing the power of collaborative consumption. Airbnb, after struggling to raise early seed capital, announced in June that it had raised $112 million from three venture capital firms, a deal which valued the company at more than $1 billion. And in early 2011, angel investor and entrepreneur Craig Shapiro started the Collaborative Fund, an investment vehicle for funding startups tapping into the collaborative consumption trend. "New technologies -- from advances in smartphones, GPS technology and social networks -- are enabling the sharing and exchange of all kinds of assets in ways and on a scale that was never possible before," Shapiro says.

Those investors are eyeing a market that is expanding rapidly. Car sharing revenues alone are projected to hit $3.3 billion by 2016, according to business research and consulting firm Frost & Sullivan. Rachel Botsman, author of the book, What's Mine Is Yours: The Rise of Collaborative Consumption, expects the consumer peer-to-peer rental market to become a $26 billion industry." (http://knowledge.wharton.upenn.edu/arabic/article.cfm?articleid=2714)


Security Issues

"Airbnb recently received negative press when a few consumers went public with stories of their homes being robbed or damaged by renters found through the site. Airbnb responded with a new policy where it will cover loss or damage from guests up to $50,000. In an apology note posted to the company's blog on August 1, CEO Chesky also announced plans to start a 24-hour customer hotline to provide safety tips for guests and hosts and to let hosts set parameters for bookings that include verified phone numbers and location information." (http://knowledge.wharton.upenn.edu/arabic/article.cfm?articleid=2714)


Educational Model for Upskilling

Simone Cicero:

"I will continue using Airbnb as a reference example (as we did on framework launch), because I definitely think it’s one of the most well designed platforms around, and it sports an excellent learning path that participants can experience.


Phase 1 — Onboarding the Platform

The first phase of interaction with a Platform is, with no doubt, onboarding. Despite every platform is different, there are recurring onboarding issues such as understanding how the platform works, assessing your own gaps for participation and solving them, start transacting. When you enter the platform as a guest in Airbnb you experience the key onboarding challenge of making the first booking. Airbnb’s neighborhood guides, coupled with an impressively crafted soft coaching that the platform provides to newbies (embedded in the platform UX) usually helps Airbnb travelers off the ground. Later on, the platform holds for you the possibility to both: grow as a traveler (learning how to book faster and better) or evolve into a host. People also can signup directly as a host: onboarding as a host means basically make the first guest booking happen. The far-famed free professional photographer service that the company provides to eligible hosts helps them get started in style and is definitely to be considered part of an “onboarding service” targeted to hosts.


Phase 2 — Getting Better on the Platform

If you know Airbnb well enough, you’ll know that the company has an impressive set of support initiatives to ensure its hosts grow, get better and provide better experiences over time. City level meetups and even a worldwide festival called Airbnb Open aim at connecting hosts and encouraging learning and peer to peer knowledge and experience sharing.

Helping participants getting better and — therefore — help the best among them emerge from the crowd is a key feature of platform businesses. According to Tim O’Reilly analysis of platforms:

“when you open the market to an unlimited number of suppliers, you must invest in reputation systems, search algorithms, and other mechanisms that help bring the best to the top.”

In this frame, Airbnb Super Host badge, a badge that only the best performing hosts achieve, is definitely a way for participants to stand out of the crowd and leverage on their capabilities, performance and reputation.

How to become a Superhost: performance, experience, commitment.

Getting better, for platform participants generally means to “grow their knowledge, accelerate performance improvement, and hone their capabilities” according to Hagel. It’s a phase which is definitely focused on two major outcomes: learn how to make the best of the platform (beat the competition and accumulate trust and reputation), and develop new capabilities that can give you access to new opportunities inside or outside the platform.


Phase 3 — Catching New Opportunities

But what happens when participants get better and develop new capabilities? The third phase is mostly about making the most of the acquired capabilities, learn how to generate more value out of them and, eventually, align more with specific (and personal) interests and drivers. The most successful platforms provide participants with paths for the exploitation of the new potential they develop inside the platforms itself. Airbnb again gives us a clear example of this: the just introduced City Hosts feature.

City Hosts is a way for hosts to develop “immersive experiences”: thanks to this feature hosts can use several of the skills they acquired thanks to the platform (such as providing customer excellence, care, curation, timeliness, precision…) and combine them with their own passions and competences, creating compelling experiences in the context of food, craft, entertainment, exploration…moving from the hospitality layer towards unforgettable travel experiences, evidently climbing the value chain ladder and catching new opportunities of professionalization." (https://stories.platformdesigntoolkit.com/platforms-are-engines-of-learning-4f7b70249177#.hop6azwth)