The subject of Airbnb as a business model is divisive. On the one hand you have it’s vehement supporters who see the sharing-economy giant as a template for how to develop the seed of an idea into a billion-dollar business success story, while on the other you have it’s ardent opponents who view the gentrification of neighbourhoods and rental property price rises as a direct result of the tourism sector disruptor.
However, the pandemic might be a game changer. With some questionable decisions made by the company early in 2020 alienating hosts, and possible consumer skepticism about home stays extending in 2021 and beyond, the company might need to again adjust its message to convenience its customers of the value of its services.
Airbnb has never been a company to follow procedures and rules. It is a company that focuses on immediate problem solving and fast response, which it does not always get right. So as the company has gone public (as of December 10th, 2020), it is questionable if this same approach will continue to work while competitor companies are working hard to establish long term solutions to business dives as the pandemic continues to wreak havoc on the tourism industry.
How it Started
In 2008, Brian Chesky and Joe Gebbia, who were iconically struggling to pay their rent in San Francisco, thew a few air mattresses on the floor of their living room and pitched to conference attendees a deal to occupy one of the said airbeds at a cost of US$80 with breakfast and WiFi thrown in to sweeten the deal. A simple website and desperate conference goers saw the idea to cover rent become a billion dollar business in a few short years.
While the journey from air mattress to global domination is far more complex than this short story tells, the founders had some creative ideas and a lot of fast reactions that, in many cases, were lucky. The model changed the way people view travel and tapped into an idea of ‘authentic’ experience. Social media has played a role in promoting the idea of a ‘real’ travel experience, which many people perceive as ‘living’ in a destination, not just visiting.
Welcome Changes, Dire Consequences
Ultimately the company decentralized the hotel industry. Homeowners and property investors found themselves with an easy source of revenue at a small cost. According to ‘Business Insider’, the home-sharing platform operating in 191 countries has more offerings than Marriott International, Hilton Worldwide, Intercontinental Hotel Group, Wyndham Worldwide and Accor Hotel Group, which have 3.9 million listings combined.
However, Airbnb is also a direct factor in the gentrification of many cities, which has contributed to rising rent and evictions. Communities have found themselves priced out of their neighbourhoods as investors move in and buy properties for exclusive rental on the platform, leaving few options for regular long-term rentals. This often affects the most vulnerable neighbourhoods which struggle for representation and resources. Many people are unable to find affordable housing and are forced to live in cramped conditions because they are unable to contend with rising living costs. While this is something that some city governments have pushed back against, such as Los Angeles, New York, Santa Monica,
Las Vegas, San Francisco, Paris and Barcelona, which have various rules and regulations regarding short term rentals, the platform does not enter into any discussion about the negative effects it might be having on the most vulnerable.
Airbnb has implemented policies aimed at addressing user concerns, such as comprehensive insurance policies to cover hosts in case of damage, and practices which attempt to reduce racial bias. In some cities they have begun to pay hotel tax, and have also shared portions of their data with local governments. These few gestures fall far short of the promise that the sharing economy makes, and the giant now operates much more like a private global enterprise than a community of people helping each other to travel achieve goals and experience the world in a different way.
Airbnb said that in 2017, it incurred net losses of US$70 million, in 2018, US$16.9 million, in 2019, US$674.3 million and last year about US$696.9 million. The company had an accumulated deficit of US$2.1 billion as of Sept. 30, 2020. In May last year, the company axed 1,800 employees. The company made some unilateral decisions about refunds for guest stays in 2020 that placed property owners in a difficult position. This short-sighted move could be the final nail in the coffin for many platform users who are finally seeing the negative value of the business, which still claims their vision is for a host to rent out private or shared rooms in a property they live in, and does little to help property owners to understand the rules of ownership and advertising, but accepts their fees.
The Competition: Fairbnb
Fairbnb’s mission is to create a platform that serves a similar purpose as Airbnb, while investing profits back into the community. The company would be cooperatively owned by the users, and allow its members to vote on how the profits are used. It’s vision is more closely aligned with socially responsible sharing economy practices that empower communities and benefit the people living in the desirable locations travellers flock to for an ‘authentic’ holiday experience. While the Fairbnb platform is unlikely to pose any real threat to the power of Airbnb due to a lack of funding and brand power, it is at least a reminder of what the intentions of the sharinging economy really were – communities working together to make best use of the resources available.
Airbnb, as a brand and an example of the sharing economy, needs to addressing the following major issues if it is to continue to thrive post-pandemic:
- Racial bias on platform
- Housing management
- Community investment
- Choose between being a social economy or market exchange
- Brand and image alignment
Post Pandemic Marketing Opportunities
Airbnb was successful because it cost people money. The nature of people is that ‘nothing comes for free’, and so by asking people to pay to sleep on an air mattress, the platform developed a credibility that Couchsurfing.com has not. When there is an exchange of funds, people consider an agreement has been made that should be respected by both parties.
The platform founders worked hard to develop their website from a basic drop down menu to an extensive site with filters and personalization that is world class. They changed how people saw their interiors by posting inviting, professionally-shot images of hosts’ homes and they connected with a millennial voice that screamed for affordable travel experiences that were unique and social-media enviable.
The website today is:
- Visually appealing
- User friendly
The company’s marketing strategy has focused on ‘experiences’ and their product extensions, such as higher quality properties and cultural activities in some cities, answered the desires of millennial travellers seeking a travel experience that they feel is unique or ‘off the beaten track’. However, as the pandemic forced most countries into lockdowns and people into stay-at-home orders, the brand needed to fast change its message. The company is adept at making fast changes and redirecting their efforts, so when they were forced to reconsider how their product would work in a post pandemic environment it came naturally.
‘Go Near’ is the current tag underpinning the company message to travel, but do it in a way that appears to be socially responsible. Below the fold, ‘Live Anywhere’ is evidence of the push that many analysts predict is coming – people embracing remote working opportunities and choosing to live in locations short term while travelling. And finally, online experiences, such as making pasta with an Italian nonna.
The market is split about how people will adapt to tourism after the pressures of the pandemic ease and vaccinations become effective. Those who are travelling on short term vacations or business trips are predicted to choose luxury or chain hotels for their cleanliness and reputation, while those who will want to ‘hit the road’ and spend 3 months ‘living’ in a city while they work online are likely to seek out the Airbnb platform.
Hotel companies were fast to introduce new cleaning standards inspired by guidelines set by the Centers for Disease Control and Prevention. The Marriott’s cleanliness standards includes electrostatic spraying technology to spread disinfectants that broadly kill germs in rooms, while Hilton hotels launched a room seal in June that indicates no one has entered the room since it was serviced and cleaned. It is this level of attention to detail and acceptance of the CDCs guidelines that private rentals cannot offer. Airbnb guests are taking greater risks than hotel stays in some regards as there is no guarantee that a home has been properly cleaned prior to the guest’s arrival.
However, the expected boom in global nomads with steady paychecks means that homestay options are likely to bolster the platform, and its marketing message is inline with the developments that are unfolding. It provides some basic health guidelines for hosts and guests, but again is taking no active responsibility for the potential for harm that the platform could pose to its users. This mixed message – we are a community platform but as a business we absolve ourselves of any social responsibility – manages to be washed away in the glossy pictures, the allure of the dream, the beckoning of the call to travel and experience a life that is worthy of Instagram. It is the magic of marketing and power of the brand voice that has leveraged the visual to create an escape from the confines of lockdowns and life in a pandemic.
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