Airbnb is a term that is now nearly as synonymous to the renting business. The company came into prominence because it disrupted the conventional hotel industry, and has since tried to take over other areas in the hospitality and travel industry. We will glance at Airbnb SWOT analysis to understand the SWOT analysis of Airbnb to fully know the way in which the company managed to accomplish this.
An Overview of Airbnb
Airbnb is an important player in the booking and rental sector. It has also introduced an innovative method of operation for rentals. Airbnb is recognized for its efficient branding and advertising as more than an organization that rents houses and apartments, but also gives the feeling of being at home.
With the help of strategic partnership and acquisitions, this brand has built itself to become one of the largest and most diverse players in the marketplace. It’s involved in a variety of fields, including luxury rental properties and homes listings, food tech and more.
The company has experienced rapid growth over the past couple of years, and has consolidated its status as a leading market participant with nearly a quarter of market share. Let’s examine the strings, weaknesses possibilities, and threats to this extremely successful company.
Airbnb’s Strengths
Here are a few benefits that Airbnb has over competitors. Airbnb.
Airbnb Gets First-Mover Advantage
Airbnb is certainly not the first company to bring a new business model to the hospitality sector, but Airbnb was among the first company to succeed at large scale. The benefit of being the first widely-popularly profitable business in an industry is referred to as the first-mover advantage. Like its name implies it is accompanied by a number of benefits.
First off, the first-movers benefit from a lot of brand recognition, client loyalty, as well as a positive association with the brand. This is due to the fact that, at first as the only product in the market establishes a strong connection between the customer with the business. It also gives the company the time to establish important partnership structures in the supply chain giving them a competitive advantage over their competitors in the future.
Although these advantages generally don’t last for long, by the time other major players in the field have emerged and a company that was a first-mover like Airbnb should have secured an important portion of market share, and placed its brand on the right foot.
It Benefits from the Network Effect
The network effect is yet another beneficial phenomenon in businesses. It refers to a situation in which the quality and value of a service or product improves with the increase in the amount of people use it. Airbnb is a company which profit from this trend. It is because the increasing number of renters will draw host to its site which, in turn, increases the number of listings available and draws more renters.
Additionally, if a large number of users are satisfied with their experience making use of the service, it can be considered free advertising since they will recommend the platform to other users. This in turn encourages hosts invest more time in ensuring that users have a good experience using their services and, consequently leave positive reviews. These eventually create positive feedback loops that encourages the further expansion on the part of the service.
Innovative Business Model
One of the biggest advantages that this Airbnb company is its unique business model it has introduced to the rental and hospitality sector. Airbnb is designed to be an open, community-based platform which facilitates listings as well as reservations between hosts and renters. Airbnb is not the owner or manager of all of its properties it promotes, but acts as intermediary during the renting process (while charging renters for the service).
There are a number of advantages of the business plan. First, it permits the company to promote an array of properties than traditional travel hotels and agencies. Hosts are not also charged any fee to advertise the property, but only when the space is let out. Hosts can also determine their rates, allowing them to lower their prices compared to hotels because they do not have to deal with costly costs for overheads like maintenance, wage or booking fees. They also do not have to pay hotel taxes. These lower costs are passed on to guests and encourage the customers to choose Airbnb over travel agents.
Customers who use Airbnb, however have more flexibility in renting options. Airbnb provides a variety of listings that range from luxurious high-end locations to cozy single-bedroom listings based on the preferences of the user. Airbnb lets renters experience more options instead of being confined to the standard hotel experience, thus enhancing the experience of customers.
A strong brand and effective marketing
In recent months, Airbnb has focused on advertising its new campaign for marketing headlined”Belong anyplace,” which is targeted to create a more welcoming and community-driven brand. Airbnb stated that the principal reason behind the campaign was to shift the perception of the business away from being just a rental service to one that gives an authentic, home-like experience.
This effort to rebrand included a brand new design (named”Belo,” which represents love, place and the word “Belo,” which represents people, places love, place as well as”a” of Airbnb) “a” for Airbnb) and an increased level of customer interaction via their new delivery channels. The platform also introduced an “Discover” feature that let renters explore new locations for listing with a mix of rental properties and locations.
They provide a unique travel Experience
The most significant aspect of the Airbnb branding is the fact that it can provide guests a unique travel experience. In the past, hotels have been accused of providing stereotypical and phony guests with a stale and unauthentic experience. But, with Airbnb’s services Airbnb guests are able to be immersed in local culture and choose alternatives that are more in the local community. This lets them enjoy authentic holidays as well as broaden their horizons.
Airbnb encourages this in various ways. We’ve already talked about Airbnb’s “Discover” feature that provides renters with potential locations with listings, however they also offer other important features like “Experiences” as well as “Places” webpages. “Experiences,” for instance, lets users explore the local area “Experiences” page allows visitors to discover fun local activities available in their rental location, like hiking, pottery, and camping. “Places,” on the other hand, notify the renters about iconic places like attractions, amusement parks and picturesque restaurants.
The Company Is Listed On The Stock Exchange
Airbnb is an openly traded company, and thus is able to benefit from the advantages associated with it. As an example when the company was first listed in 2020, its stock rose 112% on the very first day of training. The IPO let the company raise substantial amounts of capital without risk quickly, and also increase its appeal to investors. Another benefit of this is that stock options can be an great for companies to be competitive in the job market and attract the top talent.
Apart from the positive coverage in the media that comes with public offerings, consumers are also more confident in publicly traded firms. Companies that are publicly traded are monitored more frequently and thoroughly than private companies, which allows more transparency as well as credibility and confidence.
Global Expansion
Since its inception, which was a humble affair San Francisco, Airbnb has become a global brand with more than six million hosts, four million hosts, and over 150 million customers, who have booked more than one billion nights in over 100 000 cities in more than 220 countries. The global reach of Airbnb offers the company a substantial advantage over its nearest competitors and the ability to satisfy the needs of a diverse variety of clients with lower rates and a variety of options.
Dual Rating System
The hospitality and booking industry is based on customer satisfaction and reputation. This is why Airbnb has introduced a dual-rating system, allowing both hosts and renters to take an assessment of their experiences.
This is a way to encourage both hosts and renters to maintain their best conduct. The reason for this is that hosts with better ratings will see their listings used more frequently. However, tenants who have a reputation for being troublesome are rated negatively by the platform, and may even be banned from using their services.
Strategic Partnerships and Acquisitions
Airbnb is a well recognized for its strategic partnership and acquisitions. the company spending more than $700 million to build an extensive network that lets you profit from various chain of supply within the industry of hospitality. These investments cover sectors like social media platforms as well as online travel as well as food tech.
The most significant purchases by this company are HotelTonight (a service for travel and metasearch that was acquired at a cost of $450 million by the year 2019), Luxury Retreats (a rental service that specializes in luxurious rentals that the company bought in 2017 for between $200 and $300 millions), Accomable (a London-based holiday booking platform that the company purchased the year before for an unspecified amount) and so on.
A healthy balance sheet and Gross Margin
Despite its troubles and the fact that it is not profitable, Airbnb, for most of its existence has had a strong balance sheet as well as a substantial gross revenue. This is very encouraging for investors and indicates that Airbnb is a company with great prospects for growth in the future due to its financial strength. In addition the company has posted steady growth in revenues in the past few years, and has generated revenue of more than $8.4 billion in 2022. This is a 40% increase over the previous year and the company’s first profitable year that produced the company earning a net profit of $1.9 billion in the same year.
Airbnb’s weaknesses
Here are a few of the flaws of the business.
The Business initially struggled with Profitability
While Airbnb was established in the year 2008, and it has brought millions of dollars in revenue in the last few years, over a long period of time, the company struggled to make a profit and was able to turn a income of net profits in the year 2017 but then revert to net losses in the year following.
Although this could be seen as to be a standard part of a development of a business, but as many businesses are focused on growth and gaining the largest market share at the expense of profit however, it could be alarming to investors. This is especially so since the company is in an industry that is known by its volatility as well as unpredictability character, as evident by the severe downturn that afflicted the sector during the outbreak.
The ever-changing legal Regulations
Airbnb introduced a fairly innovative business model in the tourism and hospitality industry. It was expected that there would be some confusion and a lack of regulations due to the lack of knowledge of the law in the system. However, with time new regulations have come out as legislators as well as other players in the business have become more familiar with directly and indirectly effects of this type of business.
Although not all of these laws could hinder the success of Airbnb the company, uncertain regulations in the future result in a hostile business environment, which could turn away investors. For instance, a few cities have enacted legal guidelines that prohibit short-term rentals including Airbnb listings. Although they might have valid motives, this adversely affects renting Airbnb in these areas.
Their Business Model is Easy to duplicate
Although Airbnb became the initial business to bring its business model to the rental and hospitality industry however, it was not in the market for very long. Its Airbnb company’s business strategy is simple to replicate and is also more affordable for competitors to replicate an existing business model that already has been developed. So, the company is facing a larger market share challenge.
Some hosts charge exorbitant prices.
Despite their efforts to provide lower costs to the hotel industry due to the fact that Airbnb doesn’t directly affect how hosts set their prices Some hosts have been reported to have inflated prices in relation to the services they provide. This negatively impacts the experience of customers and can create a negative image of the company’s brand.
The claims of fraud
Airbnb’s rental properties are accused of being part of a variety of frauds. One of the most popular examples is referred to as the bait-and-switch scam where a specific rental property is listed at a cost. But, if the renter chooses to purchase that property tenant will be directed to a property that is more costly located elsewhere.
Other scams that the company has been implicated with include numerous listings incorrect descriptions of properties and accounts hacking, use of fake images, fake reviews of customers as well as illegal transactions made on other platforms. Additionally, authorities have stated that Airbnb’s have become popular with criminals because of the lesser surveillance that hosts could place to their visitors.
The accusation of discrimination based on race. Discrimination
Airbnb has been for a long time the focus of controversy over allegations of discrimination in the racial realm against those of color and other minorities. A study conducted in 2015 by Harvard found that people who have names that resemble they belong to minorities have a challenging time booking on Airbnb. This led to a lot of controversy within the company, and inspired them to strengthen the discrimination-free policy that applies to hosts. However, the impact of the scandal is far from being completely erased and there are more examples of hosts making discriminatory remarks against ethnic minorities and people of color.
Poor Search Engine Optimization
One issue that many customers have encountered is difficulties finding listings for Airbnb using the search engine. The top results tend to be travel or hotel reservations agencies as the relevant Airbnb listings being only displayed only if you search with the Airbnb keyword is included. This suggests that the company should spend more money on search engine optimization in order to ensure that their listings are ranked high.
Lack in Quality Control
Because Airbnb doesn’t have the property it lists it is able to make a limited effort to ensure the quality of the listings. Airbnb has put in efforts to ensure customers have the best experience. This includes identification verification for hosts as well as personally inspecting listings when feasible, their dual-rated system, which ensures precise descriptions of facilities available, and offering 24/7 customer support for travelers. But, despite all the efforts of their staff, there are numerous complaints about the quality of the listings provided by hosts.
Airbnb Opportunities
Let’s explore some great suggestions that can help further growth and expansion for Airbnb.
Expansion Into New Markets
Although Airbnb is available in more than 220 cities across the world However, its presence in these regions varies significantly. Likely, the bulk of its revenue comes through the North American market. However, this puts the brand to a number of economic downturns that affect its main market.
The brand has the potential to make huge efforts to increase its market share in emerging economies like Latin America, the Middle East and Africa. In addition, while the brand has a strong presence in Europe particularly in the main cities such as London, Paris, Rome and Madrid however, it is less popular in other areas of Europe. This is unfortunate since Airbnb listings are among the best ways to get an authentic travel experience in your own city.
Acquiring Additional strategic Partnerships and Acquisitions
While the business is known for strategic alliances and acquisitions, it is able to invest further in this field, allowing it to decrease competition and enhance its advantage in the market. This can include diversifying into other sectors related to the hospitality and rental industry in addition.
Changes in the Way People Seek To Enjoy Leisure Travel
When people used to talk about leisure travel, it mostly referred to prepackaged tours to popular destinations and staying in traditional hotels. But, a lot of travelers are now seeking an authentic experience in the local area which allows them to connect with locals and learn more about the local culture they’re visiting.
To achieve this, they’ll require accommodations that allow them right into the world of the indigenous people and makes the local sights easier to access. Engaging with local hosts is a wonderful opportunity to get to know more about the culture they’re experiencing instead of being subjected to pre-packaged tours.
A Greater Focus on Luxury Rentals
Similar to how many travelers are searching for more intimate and comfortable rental properties to have a truly authentic vacation, others prefer a more extravagant, luxurious vacation. Through increasing the number of luxurious listings that the platform has, Airbnb will be able to draw more renters from this segment and also grow their revenue.
Make an investment in the Seamless Mobile Experience
Many people book their reservations through smartphones. Thus it is important to invest in a seamless mobile experience Airbnb will improve the customer experience and increase bookings.
Airbnb Threatens
Let’s look at some possible threats to the Airbnb business model.
More Competition
Because of the success of Airbnb numerous other companies in the hospitality sector are looking to replicate their model of business. This could result in increased competition from rental companies as well as rental agencies and hotels chains. This decreases its market share for the business which reduces profits, ultimately posing a serious danger to its future achievement.
Economic Turns
The tourism industry is one that is highly dependent on the economy. The challenges faced by different areas of tourism and hospitality, including rental, aviation and entertainment, show vulnerabilities in the business. Airbnb relies on positive economic indicators to drive growth as well as major recessions like those caused by recessions, pandemics, conflict, or as a threat to the business.
The declining acceptance of home-sharing
The result from the Covid virus has created a noticeable impression on the home-sharing industry. There are some people who are now unwilling to rent their homes on Airbnb because of security and health concerns. As more people in the world are vaccinated and the stigma and fear that is associated with COVID-19 diminish the trend could diminish.
Negative Customer Experiences
The hospitality industry is based upon positive experience. Thus, negative experiences on behalf of guests and hosts pose a major danger to the viability of Airbnb. Airbnb company model. This includes disputes between renters and hosts cancellations of reservations or fraudulent listings, overpriced and so on.
Personal Data of Users Security Leaks
Airbnb has a huge database of information about users including credit card details rental information, as well as background verification data. So, any leak could ruin the image of the business and could make them vulnerable to lawsuits. Privacy of user data is among the most important issues of our time in the modern business world. There has been a lot of speculation that companies like Airbnb that maintain vast databases of personal data could utilize this data to make a profit from their clients.
Conclusion
Airbnb is much more than a rental business. They are major disruptors in the market and have revolutionized how we think about leisure travel rentals, accommodation for rent and the definition of a true holiday experience. The company is showing no sign of slowing down with positive financial indicators and efficient marketing and is set to be a major player within the field for the foreseeable future.
