Airbnb as the New Travel Agency

The internet is filled with pictures of bucket-list travel places you wish to visit. When you open Instagram or Facebook, you continue to see the most beautiful places and you cannot wait to hop on the internet, book a vacation and travel. With the rise of the internet, planning and booking a trip has never been easier. Whereas back in the day people would go to a travel agency, nowadays people plan and book their vacations with just a few mouse-clicks. With the uprise of the internet changing the tourist industry, some companies of the new Silicon Valley are changing our thoughts about travelling forever. One of these companies is Airbnb.

 How it started

Airbnb all started out in San Francisco in 2007 when Brian Chesky and Joe Gebbia were looking for ways to pay their apartment’s rent. On one weekend the International Design Conference was coming to the city and all the hotels were fully booked. The two roommates decided to pull the airbeds out of the closet and rented the airbeds to those who could not afford or find a hotel anymore in order to pay Brian’s and Joe’s rent, calling it: Air Bed and Breakfast. A couple of months later Nathan Blecharczyk, a Harvard University graduate and technical engineer, joined the two.

The reason it’s grown so fast is, unlike traditional businesses, we don’t have to pour concrete. The infrastructure and the investment were already made by cities a generation ago. And so all of a sudden, all you needed was the Internet

By March 2009 the website name had shortened to Airbnb as we know it today and had expanded its content from air beds and shared spaces to a variety of properties such as entire homes, boats, castles, igloos and even private islands. Brian Chesky: ‘’The reason it’s grown so fast is, unlike traditional businesses, we don’t have to pour concrete. The infrastructure and the investment were already made by cities a generation ago. And so all of a sudden, all you needed was the Internet.’’ Nowadays the site has over 3,000,000 listings in over 191 countries, making it the biggest hotel chain without actually owning a hotel.

Business Model

Airbnb makes use of a platform business model meaning that the firm provides for both producers and consumers to exchange their resources. In Airbnb’s case, connecting travellers with local hosts. The company is able to grow at such a fast rate because there are many homes that have the potential to become a host-Airbnb and there is a growing demand for accommodation.  This business model has some benefits compared to traditional hotels chains. First of all, Airbnb does not have to invest in building hotels and facilities. Secondly, the firm does not have to hire so many employees to maintain and manage the hotels. Lastly, Airbnb’s business model is more flexible causing growth and expansion to be easier.

 Co-Creation

Every business needs customers, but all these customers have a different affinity for the firm’s brand. To shortly explain, there are four levels of customer affinity: Transactors, Supporters, Promoters, and Co-creators (Libert, Wind & Beck). Transactors are people who are not loyal to a brand and are unaware of the company. Supporters are aware of a company and brand and consciously buy a specific brand, however, they do not promote the brand to others and switch easily to other products. Promoters frequently buy products or services from the same company and are very loyal to the brand. Furthermore, they promote the brand/company to their own network. Co-creators are customers that are so engaged with a brand, that they create and offer their own knowledge, assets and relationships in exchange for a share of the value generated by the company. Something Airbnb exactly does. When able to make use of customer co-creation, a firm creates 4 advantages compared to other firms that do not do this. It causes greater revenue growth, it lowers the marginal costs, it helps the firm to get an improved customer insight, and it increases organisational flexibility. This is what makes Airbnb such a big success.

Extension Co-Creation + Business to Customer Opportunities

With the rather new features Airbnb added in 2016, such as Experience, Places, and Co-Hosting, the company even broadened the customer co-creation opportunities. These add-ons create an interesting shift in Airbnb’s future. Now it does not only provide a platform that connects hosts and travellers, functioning like a hotel chain, but provides services like tours, workshops, and gives tips about certain neighbourhoods all provided by locals. It begins to look more like a travel agency that offers tours as well as tips about the best things to do while on vacation. You are not only booking a vacation but a whole experience that old-fashioned travel agencies try to provide as well.

Now it does not only provide a platform that connects hosts and travellers, functioning like a hotel chain, but provides services like tours, workshops, and gives tips about certain neighbourhoods all provided by locals

With the big difference, it is located on the internet. But what Airbnb differentiates itself with compared to online travel agencies, is again co-creation: locals that offer all the services instead of tourist companies.

Business to Business Opportunities

While Airbnb’s competitive advantage, compared to online travel agencies, is that locals provide the whole vacation experience, they also have a lot to offer other businesses. Nowadays Airbnb already has a lot of partnerships with other tourist and travel companies. However, if Airbnb would add some other features, next to Experience and Places, like Flights and Services, Airbnb could be the next big player in the whole tourist and travel industry. When working together with other companies or launching its own services like the companies Skyscanner, Hopper and Uber do now, Airbnb can provide whole vacations: Flights, transfers, homes, tours, and activities included. While still containing the organisational flexibilities.

What started out as a solution for paying rent, grew out as an international company

Airbnb grew very quickly over its lifespan. What started out as a solution for paying rent, grew out as an international company. This partly because its business model and use of customer co-creation creating more value for the firm. With not only offering accommodation anymore, Airbnb starts to look like an all-round travel company offering a full-on experience. If the firm would add other features in the future like Flights and Services, the company has everything one needs to book a complete trip. With a big advantage for the customer being the firm’s flexibility to choose yourself which features you would like to add on and which not. However, we cannot say how Airbnb will develop in the future. But for now, we can continue to plan and book our dream vacations with just a few mouse-clicks.

 

Joyce van der Voet

16-01-2018

References 

Kirkland, R., & Chesky, B. (n.d.). The Future of Airbnb in Cities. Retrieved from McKinsey & Company: https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/the-future-of-airbnb-in-cities

Libert, B., Wind, Y. J., & Beck, M. (2015, July 3). What Apple, Lending Club, and AirBnB Know About Collaborating with Customers. Retrieved from Harvard Business Review: https://hbr.org/2015/07/what-apple-lending-club-and-airbnb-know-about-collaborating-with-customers

Qian, K. (2017, April 3). Most Disruptive Business Model – Airbnb. Retrieved from Future Travel: https://futuretravel.today/most-disruptive-business-model-airbnb-d65eed9c10df