{"id":1269,"date":"2019-04-18T09:52:46","date_gmt":"2019-04-18T09:52:46","guid":{"rendered":"https:\/\/assignmenttask.com\/answers\/?p=1269"},"modified":"2023-09-23T07:54:30","modified_gmt":"2023-09-23T07:54:30","slug":"airbnb-whats-next-prioritizing-opportunities-in-southern-europe-questions-and-answers","status":"publish","type":"post","link":"https:\/\/assignmenttask.com\/answers\/airbnb-whats-next-prioritizing-opportunities-in-southern-europe-questions-and-answers\/","title":{"rendered":"Airbnb: What’s Next? Prioritizing opportunities in Southern Europe Questions and Answers"},"content":{"rendered":"

Airbnb: What’s Next? <\/strong><\/h2>\n

Introduction<\/strong><\/h3>\n

It was a sunny Sunday morning in late November 2014 when Jeroen Merchiers, general manager of Airbnb for Northern, Eastern and Southern Europe, was jogging along the beach in the Barcelona neighbourhood of La Barceloneta and reflecting about the future of his business.<\/p>\n

Shortly before, Merchiers had been promoted from country manager of Airbnb for Spain and Portugal. He reflected on the region\u2019s tremendous growth, how Barcelona had established itself quickly as one of Airbnb\u2019s top five cities in the world based on the volume of annual who used the\u00a0 company\u00a0 (about\u00a0 900,000\u00a0 since\u00a0 2008), and on the city\u2019s bright prospects for the future.<\/p>\n

Despite all the success, Merchiers had some concerns. How could Airbnb sustain its recent success? The company had been valued most recently at $13 billion. Now the company needed to prove its potential and demonstrate its capacity to grow further. Brian Chesky, CEO of Airbnb, was considering several growth options: dedicating more resources to expansion in Asia; targeting the premium hospitality segment and focusing on creating \u201cbetter travel experiences\u201d; and possibly developing vacation rental properties. As someone whose opinion the CEO valued highly, Merchiers needed to be prepared to discuss these options in terms of what was best for Airbnb in Southern Europe as well as worldwide.<\/p>\n

Besides weighing the different strategies that would help Airbnb its growth,\u00a0 Merchiers also needed to evaluate how to mitigate some key risks that had surfaced. Uber, a ride-sharing service platform founded in 2009, had been plagued by negative press coverage recently. As an example, Uber\u2019s drivers, who by the company\u2019s design operated as individuals, had begun grouping together in some cities to petition for higher wages. Given that Airbnb and Uber were both poster children for the \u201csharing economy,\u201d Merchiers felt that it was important to think of how best to avoid or mitigate similar \u201cunionization\u201d\u00a0 problems and how best to ensure that both hosts and guests would remain happy endorsers of the platform. What would be the right measures to achieve that goal?<\/p>\n

Lastly, much like in other countries, Airbnb Spain had been accused recently of failing to comply with the state\u2019s regulatory framework, given that hosts were not officially regulated lodging providers (and hence were not paying any hospitality tax). He needed to prepare for how Airbnb Spain should position itself regarding these legal discussions and determine possible outcomes. Could he afford to ignore the pressure generated by the press or does he need to take action \u2013 and, if so, what action should he take first? The company had reached agreements to collect city taxes in Portland, Oregon, and in its hometown of San Francisco, California. Several other European cities, such as Paris, were considering similar agreements.<\/p>\n

\"Order-Your-Assignment\"

Company Background<\/strong><\/h3>\n

Airbnb had become an alternative solution for short-term home renters and providers worldwide. Since its inception in 2008, Airbnb had become the leading marketplace offering a variety of accommodation around the world (see Exhibits\u00a0 1\u00a0 and 2 for Airbnb\u2019s early user growth rates.) By the end of 2014, it had more than 25 million guests and more than 900,000 listings in 34,000 cities and 190 countries \u2013 almost every nation in the world except for the likes of North Korea, Iran, Syria, Cuba and the Vatican City State.<\/p>\n

Airbnb was a pioneer in incorporating the burgeoning trend of \u201ccollaborative consumption\u201d into its\u00a0 \u201cpeer-to-peer\u00a0\u00a0 accommodation\u00a0\u00a0 rental\u00a0\u00a0 business\u00a0\u00a0 model.\u201d\u00a0 This innovative business model, powered by Web 2.0 technologies, was disrupting the traditional hospitality business sector and economy, and it showed strong worldwide adoption and potential growth opportunity. Exhibit 3 gives insight into the economic impact of Airbnb on major cities in the world (Barcelona, Paris, Berlin, Amsterdam, New York and San Francisco). Furthermore, as an example, Exhibits 4 and 5 provide demographic data on Airbnb\u2019s hosts and travellers for Barcelona.<\/p>\n

Company History<\/strong><\/h3>\n

Airbnb was founded by Brian Chesky, Joe Gebbia and Nathan Blecharczyk in August 2008 in San Francisco. It was one of the first peer-to-peer platforms for accommodation. Unable to afford rent in the fall of 2007, Chesky and Gebbia offered to rent part of their lofts as accommodation for strangers to subsidize their rent. Once they saw the potential business opportunity, they got Gebbia\u2019s former housemate Blecharczyk to develop the website to be used as a platform for peer-to-peer property rental.<\/p>\n

In early 2009 they received $20,000 in funding from an angel investor, Paul Graham, the cofounder of Y Combinator, followed by a further $600,000 in seed investment from venture capitalists. In November 2010 the three cofounders raised $7.2 million in Series A and, in July 2011, the company received a further $112 million in venture funding and was reportedly valued behind the scenes at $1.3 billion.1 As of October 2014, after two more rounds of financing, the valuation was set to be $13 billion, up from its private $10 billion valuations in March of the same year (see Exhibit 6), as it discussed an employee stock sale, according to a report by the Wall Street Journal. 2 As Chesky posted on Twitter in January 2014: \u201cMarriott wants to add 30,000 rooms this year. We will add that in the next 2 weeks.\u201d<\/p>\n

Toward the end of 2014, Airbnb forecast 2015 revenues of $850 million (i.e., more than three times the 2013 reported revenues of $250 million) and operating losses of $150 million. The company forecast revenues of $10 billion by 2020. By comparison, Marriott, which managed more than 4,000 hotels, had $13.8 billion in revenue in 20143 and a gross income of $1.84 billion.<\/p>\n

Business Model<\/strong><\/h3>\n

Airbnb is a community marketplace where guests can book accommodation from a list of verified hosts. The company had traditionally identified itself as a technology platform that facilitated hospitality arrangements between hosts and guests. As such, it had been exempt from collecting tourist taxes, city taxes or personal income tax from hosts. Signing up to the website is free of charge, and it costs nothing to post a listing. This has reduced the barrier for hosts to enter the market. Upon finding the listing that they want, would-be guests need to sign up to the website, which then provides information for contacting the host directly as well as for providing payment information for an accommodation request.<\/p>\n

When the host accepts the request, and the transaction is in place, Airbnb charges the guest a transaction fee of 6\uf8ff to 12\uf8ff and the host a fee of 3\u00a0\u00a0 . As the company is unlisted, there is no precise information on its revenue, but there have been a lot of forecasts and assumptions in the industry. The investment bank Piper Jaffray estimated the overall transaction volume of Airbnb to be approximately $4 billion for the year 2014.4<\/p>\n

By offering free membership and free access to accommodation lists, Airbnb quickly gained traction. Users were free to browse as they pleased and were prompted to pay a service charge only when making a reservation, which let Airbnb maximize the number of potential transactions.<\/p>\n

Despite the free listings, sharing one\u2019s own home continued to be a daunting decision for many would-be hosts, as a home was typically a person\u2019s most cherished asset. Therefore, instilling trust in the platform was paramount for Airbnb in order to get people to share their homes and to ensure guests had pleasant travel experiences. To that end, Airbnb focused its efforts on customer service and satisfaction. Airbnb used the revenue from transaction fees to implement systems such as improved customer verification, $1 million theft\/damage insurance, authentic guest reviews and social media connections. All these efforts contributed to positive word of mouth, which played a key role in generating up to 80 of the guest traffic.<\/p>\n

All of these factors, designed with the specific purpose of building trust on both sides of the platform, helped Airbnb create a scalable business model that has led to promising financial returns. Exhibit 7 provides an overview of the average spending of an Airbnb traveller, compared with that of a hotel-staying traveller, for Barcelona and other leading global destinations.<\/p>\n

Online Hospitality Marketplace<\/strong><\/h3>\n

The recession in\u00a0 2012 growth prospects of Spain\u2019s hotel and motel industry. However, more recently the industry turned around and showed a small but steady recovery. In the first 10 months of 2014, overnight stays increased by 3.1\uf8ff compared with the same period the previous year.<\/p>\n

The daily average invoiced amount per occupied room (average daily rate, or ADR) had been stable, going up slightly in 2012 to hit \u00a470.50. The rate fell 3.6\uf8ff to \u00a467.90 in 2013 but later increased by 2.94\uf8ff to reach \u00a469.90. The daily average revenue per available room (RevPAR), which depends on the occupancy rate registered in hotel establishments, was also relatively stable until 2012 when there was a year-on-year fall of 0.8\uf8ff to \u00a438.60. However, RevPAR increased by 0.51 to reach<\/p>\n

\u00a438.80 in 2013, followed by a substantial increase of 8.0 in 2014.5 Exhibit 8 shows the evolution of occupancy, ADR and RevPAR for Spain\u2019s two most important city tourist destinations.<\/p>\n

In Spain, the number of hotels increased, with a compound annual growth rate (CAGR) of<\/p>\n

1.5 between 2009 and 2013, to reach a total of 19,550 hotels in 2013 (see Exhibit 9). The industry\u2019s volume is expected to rise to 20,400 hotels by the end of 2018, representing a CAGR of 0.9\uf8ff for the period from 2013 to 2018. Barcelona, Airbnb\u2019s fourth most important city in the world, followed a similar trend. (See Exhibits 10 and 11.)<\/p>\n

In Spain, the leisure segment was the industry\u2019s most lucrative in 2013, with total revenues of<\/p>\n

$9.9 billion, equivalent to 89.4\uf8ff of the industry\u2019s overall value. The business segment contributed revenues of $1.2 billion in 2013, equating to 10.6\uf8ff of the industry\u2019s aggregate value.<\/p>\n

Even with the recent evidence of recovery in the market, there were still concerns over the uncertainty of the industry\u2019s future growth. The Spanish hotel and motel industry had total revenues of $11.1 billion in 2013 (see Exhibit 12), representing a compound annual rate of change (CARC) of -2.6 between 2009 and 2013. In comparison, the French and German industries had a CAGR of 2.7\uf8ff and 5.4\uf8ff respectively over the same period, with respective values of $27.2 billion and $25.8 billion in 2013.6<\/p>\n

Customer Segments<\/strong><\/h3>\n

In the collaborative economy, also known as the sharing or peer economy, owners \u201cshare\u201d and rent out idle capacities they are not using, such as a house, apartment, car or bicycle, to a stranger through peer-to-peer platforms. One of the largest and fastest-growing poster child companies of the collaborative economy, Airbnb has a two-sided platform that creates value by enabling direct interaction between two primary customer groups: lodging guests and hosts.<\/p>\n

Guests \u2013 Taking Catalonia, one of Spain\u2019s most important travel destinations, as an example, 85\uf8ff of Airbnb guests visiting there had a bachelor\u2019s or master\u2019s degree7 and 61 were visiting Barcelona for the first time.8 Guests using Airbnb could be segmented in\u00a0 several ways. The most general hospitality customer segmentation splits guests by purpose of travel, such as business or leisure. With this categorization, Airbnb\u2019s stronghold lies in the upper right quadrant of Exhibit, where guests typically travel for leisure either as solo or up to the size of a family.<\/p>\n

In the case of Airbnb\u2019s minority customer group of business travellers, the company recently teamed up with Concur Technologies Inc., a leading provider of corporate travel and expense management services, toward business trips.9 Nevertheless, Airbnb\u2019s leading position was clearly in the leisure traveler category. With its commitment to providing guests with unique, local experiences (96 of guests travelling to Spain have indicated that they want to \u201clive like locals\u201d10), it was important to segment guests further by the type of experience sought. The type of trip experience could be divided by the type of destination (urban vs rural; within vs. outside main hotel districts) or by point of origin (international vs. regional vs local travelers).<\/p>\n

Hosts \u2013 Airbnb hosts are diverse in age, and many are in the middle-income bracket. Some<\/p>\n

75\u00a0\u00a0\u00a0 of the hosts in Catalonia have annual incomes at or below the regional average of<\/p>\n

\u00a426,411.11 Most Airbnb hosts rent out the home in which they live \u2013 their primary residence. For the hosts, the additional income generated from Airbnb rentals forms a modest but important source of income (on average \u00a4221 per month in Catalonia), with 53\uf8ff of hosts in Catalonia citing that the income enabled them to stay in their homes.12<\/p>\n

Interestingly, data collected for San Francisco, which is perhaps not typical of the cities where Airbnb operates, show that the top 10 hosts by the total number of listings, accounting for<\/p>\n

5.2 of all lodgings listed in the city include property managers, hostels and even hotels.13\u00a0\u00a0\u00a0 In terms of occupation, one-third of hosts in Catalonia were\u00a0 classed\u00a0 as\u00a0 self-employed,\u00a0 working as freelancers or entrepreneurs.14<\/p>\n

Additionally, personality may play a factor in how willing a person will be to list their property on Airbnb. Individuals who enjoyed meeting new people were naturally better candidates to become Airbnb hosts.<\/p>\n

Competitors<\/strong><\/h3>\n

Market competition in peer-to-peer renting services had increased significantly in the previous few years. This fact defied the logic of marketplaces such as Airbnb becoming a \u201cwinner-take-all\u201d type of market.\u00a0 similar in the different companies, each firm had its own operating policy in order to remain competitive in the market. Some of the key competitors were the following:<\/p>\n

Home Away<\/strong><\/h3>\n

HomeAway is a vacation rental marketplace with more than a million vacation rental listings in 190 countries. The United States-based company is one of the market leaders with a strong brand portfolio in the industry. Founded in February 2005 and headquartered in Austin, Texas, the company went public in 2011. Travellers can search HomeAway.com for free to find a vacation rental and homeowners can pay to advertise their property.15 The group also owns global brands such as VacationsRentals.com, VRBO (a popular vacation rental site in the United States) and smaller ones such as Toprural.es in Spain, specialising in renting country homes.<\/p>\n

Wimdu<\/strong><\/h3>\n

Wimdu is a peer-to-peer property rental platform for both vacations and short-term rentals. Founded in Germany in 2011, Wimdu had 39 different domains in its respective languages and currencies as of 2014, and it had more than 300,000 properties in more than 100 countries.16<\/p>\n

The concept of Wimdu has been depicted as a copycat of its very similar direct competitor, Airbnb. However, Wimdu has a unique approach to the market it shares with Airbnb, based on\u00a0 the\u00a0 Wimdu\u00a0 policy\u00a0 of\u00a0 treating\u00a0 \u201cdifferent\u00a0 countries,\u00a0 different\u00a0 cultures,\u00a0 in\u00a0 different\u00a0 ways.\u201d Wimdu was the fastest-growing social accommodation website in Europe in 2012. While initially heavily based in Europe, it later expanded to different markets including China, the Philippines and the United States.<\/p>\n

Booking.com<\/strong><\/h3>\n

Booking.com is a booking website that started as a small start-up in Enschede in the Netherlands in 1996. Based in Amsterdam, it has been owned and operated since 2005 by the United States- based Priceline Group Inc., a provider of online travel and travel-related reservation and search services with revenues of $8.4 billion and a market capitalisation of close to $60 billion at the end of 2014. Through its online travel agent (OTA) services, the company connects consumers wishing to make travel reservations with providers of travel services across the world. The company\u2019s brands include Booking.com, KAYAK, Agoda.com, Rentalcars.com and OpenTable.<\/p>\n

Booking.com offers consumers online accommodation reservations, including hotels, bed-and-breakfasts, hostels, apartments, vacation rentals and other properties. It has claimed to have more than 700,000 properties globally under contract, to deal with more than 900,000 room night reservations per day, to have more than 60 million verified reviews and to operate in more than 40 languages. In 2013, Booking.com accounted for more than two-thirds of Priceline\u2019s revenue.17 Booking.com does not charge customers a booking fee but charges accommodation partners a commission on bookings. Booking.com was Google\u2019s most important advertiser in the world, representing approximately $1.5 billion in revenue for the search engine in 2014.18<\/p>\n

Finally, another potential would-be competitor was Expedia, Inc., a United States-based parent company of several online travel brands including Expedia.com, Hotels.com, Hotwire.com, Trivago, Travelocity, CarRentals.com and TripAdvisor. Besides the above-listed competitors, several other smaller or niche competitors existed operating slightly different business models.<\/p>\n

Value Proposition<\/strong><\/h3>\n

Airbnb management believed that travelers chose its service, among other reasons, because it was the best-known site among peer-to-peer rental platforms and because, since its launch, it had built a reputation in the market for being trustworthy. Reviews by both guests and hosts were of the essence in building that trust, yet for hotels, it was estimated that only about 2\u00a0 of all travelers wrote reviews. Nevertheless, high-quality services based on trust (such as double evaluation systems, the elimination of anonymous reviews, professional photography and 24-7 customer services) have helped Airbnb build a strong reputation in the industry and have led the company to stand out from its competitors.<\/p>\n

Additionally, Airbnb\u2019s first-mover advantage helped to build brand awareness and reliability throughout its service and product offerings. Airbnb created market needs for hosts and international travelers and has been receiving positive feedback and reviews from users. All these actions helped Airbnb to build a reputation in the market for being very reliable, which provides assurance to travelers when it comes to booking their trips.<\/p>\n

Airbnb further facilitated the process of listing and booking a space by handling all financial transactions. Thus, payments are timely and secure. This adds extra security since a host is paid via Airbnb. A small processing fee is charged only when a place is booked. This was another major advantage of Airbnb compared with competitors such as HomeAway, one of the market leaders. That site puts guests in contact with owners or property managers. However, the transaction is not facilitated, and thus tenants and owners are responsible for processing their own payments.<\/p>\n

Airbnb has a balanced and authentic review system that has been changed through the years, but which allows only those who have exchanged services to review one another. HomeAway, in contrast, does not facilitate the transaction, so it cannot determine the accuracy of reviews left by travelers.<\/p>\n

Airbnb provides a variety of choices for the types of room (entire place, private or shared room) and prices (minimum to maximum). These various product offerings and the price range provide travelers with greater flexibility when planning trips, which creates value for different segments of travelers.<\/p>\n

Industry Trends<\/strong><\/h3>\n

The current landscape of the hospitality industry has been broadened with the flourishing peer-to-peer marketplaces within the sharing economy, which coexist with traditional accommodation such as hotels and hostels.<\/p>\n

The sharing economy is a relatively new socio-economic model built around the sharing of human and physical resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organizations.<\/p>\n

According to Neelie Kroes, former European commissioner for the digital agenda,<\/p>\n

\u201caround producers doesn\u2019t work anymore. They must have a voice, but if you design systems around producers, it means more rules and laws (that people say they don\u2019t want) and those laws become quickly out of date, and privilege the groups that were the best political lobbyists when the law was written. That is old-fashioned compared to a system that helps all of us as consumers and encourages entrepreneurs. We need both those elements in our economy.\u00a0 [\u2026] the disruptive force of technology is a good thing overall. It eliminates some jobs, and it changes others. But it improves most jobs, and it creates new ones as well.\u201d19<\/p>\n

The peer-to-peer marketplaces that appeared within the sharing economy have been accelerated, enabled by Web 2.0 technologies, which have allowed for the rise of a variation of the conventional peer-to-peer model. Here, individuals can interact with each other on a two-sided marketplace platform, which is maintained by a third party. The growth of these disintermediation platforms was not a phenomenon specific to the travel accommodation business. Other platforms \u2013 such as Wallapop (classified ads), BlaBlaCar (transportation), Trip4real (tours and activities), Kantox (foreign exchange) and Zoppa (lending and loans) \u2013 were also gaining considerable traction in diverse sectors of the economy.<\/p>\n

Four different drivers contributed to shaping the evolution of this industry: political, economic, social and technology drivers.20<\/p>\n

The political drivers were government operations, legal systems and taxation, as well as licensing and certification regulations. In Spain, these political drivers largely were the competence of each region separately, and there was no common political approach for dealing with emerging situations arising from the surge in the sharing economy.21,22<\/p>\n

The social drivers included population density, the sustainability mindset, lifestyle trends among youth, as well as independent lifestyles. The growing population density and, especially, urban density favor the network effect of this new model. The sustainability mindset focuses on economic conservation and long-term thinking, encouraging meaningful interaction and trust. Among youth with limited resources, the \u201csharing mindset\u201d has become common. Additionally, many Airbnb hosts find this new income source empowering to maintain their independent lifestyle.<\/p>\n

Key economic drivers included an excess of idle inventory, the inaccessibility of luxury and the influx of venture capitalist funding. The first economic driver aligned with the social drivers, mentioned above, makes use of the idle capacity of the hosts\u2019 homes, which can be shared and monetized. Access is more important than ownership, and those who could not afford a luxury home can now rent it. Regarding the third economic driver, venture capitalists had already invested more than $695 million in Airbnb by the middle of 2014 in five rounds of investment.23<\/p>\n

The technology drivers were social networking technologies, mobile technologies and the payment systems. The social networking technologies provide three key features: first, social profiles and reputation tracking; second, social graphics that enable people to connect; and, third, the transfer of information between hosts and guests. Mobile technologies provide access to the people interacting, and this new marketplace requires payment systems to complete the transactions. This leads to on-demand and cost-effective services with a lower administrative overhead cost.<\/p>\n

Airbnb\u2019s value proposition in this new environment within the sharing economy model is to offer multiple lodging options, cost savings, locations off the tourist trail, new friends in new places, easy-to-use and personal profiles, and reviews. While Airbnb was the best-known example of this phenomenon, over four years at least 100\u00a0 companies sprouted up to offer owners a tiny income stream out of dozens of types of physical assets, without needing to buy anything themselves. \u201cThe sharing economy is a real trend. I don\u2019t think this is some small blip,\u201d stated Joe Kraus, a general partner at Google Ventures.24<\/p>\n

Online Marketing Strategies<\/strong><\/h3>\n

Most of Airbnb\u2019s growth can be attributed to its heavy investment in marketing and infrastructure. In the United States, Airbnb took off by implementing a digital marketing strategy involving two digital marketing giants: Craigslist and Google. Partnering with Google was a clear no-brainer, but Airbnb was clever to leverage Craigslist, a widely used classified advertisement website in the United States. Airbnb found that Craigslist was already being used as a platform for people to offer and look for short-term housing. In order to attract customers from Craigslist to Airbnb, it reverse-engineered Airbnb\u2019s platform to fit<\/p>\n

with Craigslist and made the two platforms compatible so that anyone listing on Airbnb could create a posting on Craigslist automatically.<\/p>\n

Through a partnership with Google, Airbnb was able to not only expand its reach but also target audiences geographically. Airbnb\u2019s strategy with Google went beyond traditional search engine marketing (SEM) as the Airbnb website was not optimized for transactions and direct conversations but rather to inspire trust, Airbnb resources to Google\u2019s display advertising network, the Google Display Network, with compelling banner ad campaigns that included images from actual housing being offered. This allowed Airbnb to introduce its services as an entirely new way to travel the world, as an attempt to inspire a change in travel habits from searching (I want to go to X) to discovering (new travel destinations are uncovered).<\/p>\n

In July 2014, Airbnb revealed a major rebranding campaign, including a brand new logo.\u00a0 According to Brian Chesky, \u201cThis new branding changes the whole identity and expression of the company.\u201d The new logo would also help the company move toward its target of making Airbnb as ubiquitous offline as it was online; in essence,\u00a0 to make it a universal symbol for sharing that would pave the way for expanding its sharing economy service offering in the future, or ridesharing.\u00a0 \u201cday you\u2019re walking down the street, and you see the Airbnb symbol in a window \u2013 you\u2019ll know that it\u2019s an Airbnb and a place that can be shared,\u201d Chesky said.<\/p>\n

As part of its rebranding, Airbnb also introduced a tool called Create, which allowed hosts and guests alike to access a basic Photoshop-style service to personalize the Airbnb logo. In the United States, Airbnb also partnered with Zazzle, an online retailer that allowed users to upload images to create their own merchandise. Hosts and guests were encouraged to create tangible items, such as mugs and apparel, with their uniquely personalized Airbnb logo, which they could subsequently share as mementos of their stay, thereby creating an experience worth remembering.<\/p>\n

\u201cAirbnb is one of the world\u2019s largest story-doing platforms,\u201d said Jonathan Mildenhall, chief marketing officer at\u00a0 Airbnb.\u00a0 was consistent with the use of content marketing, crowdsourcing user-generated content and focusing on storytelling as a key tool to connect with its users.<\/p>\n

Economic Impact of the Sharing Economy<\/strong><\/h3>\n

Various reports sponsored by peer-to-peer platforms and third parties showed that companies based on the sharing economy model have had a positive impact on and created social value for local economies. One example is Uber, a company in the transport industry based on the sharing economy model. Founded in 2009, the company provides a ride-sharing service that uses a smartphone application to arrange rides between riders and drivers. Uber has claimed that:<\/p>\n

    \n
  • Some 20,000 jobs are created on the Uber platform every month.<\/li>\n
  • The Uber platform generates $2.8 billion per year for the U.S. economy and is growing.<\/li>\n
  • Uber\u2019s presence in a city reduces impaired driving.<\/li>\n
  • \u201cIn 2013,\u00a0 the\u00a0 convenience\u00a0 and\u00a0 efficiency\u00a0 of\u00a0 Uber\u2019s\u00a0 technology\u00a0 created\u00a0 as\u00a0 many\u00a0 as 25,000 additional rides in the city of Chicago than the transportation market would have\u00a0 provided\u00a0 without\u00a0 Uber\u00a0 \u2013\u00a0 these\u00a0 are\u00a0 incremental\u00a0 rides \u2013\u00a0 that\u00a0 otherwise wouldn\u2019t have happened.\u201d25<\/li>\n<\/ul>\n

    Airbnb also showed through its own research its economic impact on the main cities where it operates. For example, its reports concluded that \u00a4135 million in economic activity was created in 2013 in Barcelona, \u00a4185 million in Paris, \u00a4100 million in Berlin, $632 million in New York, and $469 million in San Francisco.26.<\/p>\n

    Course of Action<\/strong><\/h3>\n

    Airbnb was in an enviable position with continued growth and highly profitable business \u2013 on a global basis as well as on a regional basis. However, it faced two main challenges:<\/p>\n

      \n
    • How could it maintain its high growth rates without sacrificing service levels and quality standards? In particular, with demand outstripping supply, how should the growing community (hosts and guests) be integrated into the existing model? And 2) how should Airbnb position itself with regard to regulatory concerns and the established hotel and hospitality lobby?<\/li>\n<\/ul>\n

      Further Growth<\/strong><\/h3>\n

      Having enjoyed enviable growth rates throughout the previous few years, Airbnb started looking into further opportunities for growth, as Airbnb CEO Brian Chesky explained:<\/p>\n

      \u201cWe want travelers to be able to book homes anywhere. Anywhere includes Asia. Asia\u2019s a nascent market for us. Number two, we\u2019re also looking at other use cases. Airbnb started as a way for travelers to find a budget way to vacation in a city. But now we\u2019re starting to see people who aren\u2019t on a budget. They want a much more high-end experience. And the third is that end of the\u00a0 day, travelling to\u00a0 Tokyo, travelling to Tokyo to stay in a home or a hotel. You\u2019re traveling to Tokyo \u2013 if you\u2019re on vacation \u2013 because you want to have an experience. And we\u2019d love to do more to make that experience special and memorable.\u201d27<\/p>\n

      Looking into these options, Jeroen Merchiers wondered whether Airbnb in Spain would be able to attract the right hosts to enter the high-end segment or to offer, in addition to a room, experiences such as city tours. Was Airbnb equipped with the right people and capabilities to expand into any of those new segments and, if so, how should it prioritize them? Integration of the Community<\/p>\n

      The sharing economy was the darling of the moment when Airbnb was launched, and several other business models based on the idea of sharing private assets or services with other people emerged at around the same time.<\/p>\n

      Uber and Airbnb, in particular, generated a lot of public attention due to their rapid growth rates, extremely high valuations, the disruptive character of their business models and the which they operated.\u00a0 But there was two companies\u2019 approach to gaining community acceptance. Uber was increasingly seen as untrustworthy due to its cutthroat handling of pricing, drivers (fees, phone commissions and platform deactivation), passengers, etc. 28, 29 For example, Uber experienced a strong unionization movement among its drivers, with calls for action directly against Uber, including a protest at the company\u2019s headquarters in Santa Monica, Los Angeles (see Exhibit 14).<\/p>\n

      Airbnb aspired to become an unparalleled branded service experience. Looking to avoid a similar fate, Merchiers often thought about what measures Airbnb should take and what role it should play in the community, especially as more service providers (check-in services, cleaning services, hotel rooms, etc.) were being incorporated into the platform. Could similar problems affect Airbnb as well? What might the right mitigation strategies be? Or could these problems be solved before they emerged? For example, could Airbnb guide the behavior of would-be suppliers of services appropriately? Could it define and shape the culture on its platform?<\/p>\n

      Legal Concerns<\/strong><\/h3>\n

      According to the latest press coverage, there were contradictory opinions about the need to regulate the business models in peer-to-peer marketplaces, such as Airbnb and Uber. Airbnb\u2019s internal market research on the hospitality industry in Spain suggested that the industry had grown since Airbnb\u2019s inception, indicating a net positive impact. However, Juan Molas, the president of the Spanish Confederation of Hotels and Tourist Accommodation (CEHAT), argued\u00a0 that,\u00a0 \u201calong\u00a0 with\u00a0 driving\u00a0 down\u00a0 rates,\u00a0 proliferating\u00a0 private\u00a0 tourist\u00a0 accommodations deprive the government of taxes, increase illegal employment, violate consumer rights concerning\u00a0 security\u00a0 and\u00a0 quality,\u00a0 and\u00a0 can\u00a0 harm\u00a0 the\u00a0 image\u00a0 and\u00a0 reputation\u00a0 of\u00a0 Spain\u2019s\u00a0 tourist destinations.\u201d\u00a0 30\u00a0\u00a0\u00a0 Hotel lobbyists,\u00a0\u00a0 furthermore, on the amount of unregistered accommodation, which basically led to tax and health and safety issues, both mandatory requirements for hotels. These issues have been acknowledged publicly in some countries and, as a result, some countries have considered banning Airbnb in their markets.31<\/p>\n

      The main question concerning most Airbnb country managers was how Airbnb should react to this situation. Should Airbnb react at all? Or should it make attack the best defence and lobby against the traditional hospitality industry? The efforts of the hotel lobby had borne fruit in certain communities such as Madrid, where a city decree laid out restrictions on\u00a0 Airbnb operations although the decree had not yet been enforced. However, Spain\u2019s National Markets and Competition Commission (CNMC) objected to that ruling in July 2014 on the basis that it would restrict competition and adversely affect consumers.<\/p>\n

      Finally, tax issues key concern for Airbnb because a of government officials in cities believed that hosts regularly cheated on tax declarations. Both New York State and New York City imposed a number of taxes that might apply to Airbnb hosts, such as New\u00a0 York City\u2019s hotel room occupancy tax of 5.875\uf8ff. And yet, because hosts were not officially operating as hotels, they were not paying such taxes.32\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 To address such appease regulators, about behaving more like hotels by to city authorities.\u00a0 cities across the United States and Europe, the company made it easier for host and guests to pay tourist and other administrative city taxes. For example, in Paris, Airbnb\u2019s premier world destination with more than 50,000 listings, those charges would amount to<\/p>\n

      \u00a40.83 per person per night but, in Amsterdam, they would be 5 of the listing fees plus cleaning fees.<\/p>\n

      Vacation Rental Market in the Pyrenees<\/strong><\/h3>\n

      Since its inception in Spain, Airbnb\u2019s focus had clearly been the development of stays in the that concentrated a tourism industry.\u00a0 To expand Airbnb\u2019s footprint in Spain, Merchiers had been considering the viability of a business plan to exploit the vacation rental property market outside cities. One of the most prominent vacation rental destinations for Spaniards was the Pyrenees. Specifically, Andorra and the five Catalan regions of Vall d\u2019Aran, Cerdanya, Bergued\u00e0, Ripoll\u00e8s and Garrotxa made up the lion\u2019s share of all the vacation rental properties in the Pyrenees. Those geographical areas had 115,000 residences available for rent, 70 of which were primary residences and the rest secondary residences (see Exhibit 15). A significant percentage of the primary residents, between 10\uf8ff and 15, were vacant.<\/p>\n

      It was estimated that a significant percentage of vacation rental properties, and especially secondary residences, were not directly rented by owners but by professional or semiprofessional real estate businesses that managed multiple properties.<\/p>\n

      Andorra, with a population of fewer than 80,000 people, had steady demand for roughly seven million individual visitor nights a year, with roughly five million of those concentrated in hotels and the rest in apartment hotels, apartments, campsites, etc. Spanish citizens accounted for half of the visitors to Andorra, and French tourists made up another 40. The aforementioned Catalan areas had demand for an additional 1.5 million individual visitor nights per year with 700,000 in hotels and another 600,000 in campsites. Spanish tourists constituted roughly 80\uf8ff of the highly seasonal demand (see Exhibit 16). Roughly 50 of the demand for Andorra was concentrated in the winter months, and approximately\u00a0 50\uf8ff\u00a0 of the demand for the Spanish Pyrenees was concentrated in the summer months.<\/p>\n

      A further consideration for Merchiers was the company\u2019s would-be competitors since Airbnb would clearly not be the first one exploiting this market. For example, Booking.com had a list of more than 600 hotels in the Catalan Pyrenees and more than 150 in Andorra. Similarly, it had listings for nearly 200 other properties (campsites, apartments, houses and bungalows) at each of those locations. Villas.com (a vacation rental site owned by Booking.com) had over 500 listings in the Catalan Pyrenees and Andorra. Niumba, a Spanish site owned by TripAdvisor, had over 600 listings in the Spanish Pyrenees and approximately 100 in Andorra. Finally, HomeAway had a list of close to 800 in the Spanish\u00a0 Pyrenees and 200\u00a0 in Andorra. There were at least 10 other rental sites with properties listed in the Pyrenees, but with a significantly smaller presence.<\/p>\n

      The Way Forward<\/strong><\/h3>\n

      After Merchiers returned from his run on the beach and the sun was high in the sky, he knew it was time to make some decisions. He had a video conference with Airbnb headquarters coming up in a couple of days, and as the recently promoted general manager for Northern, Eastern and Southern Europe, he wanted to decide on a clear before handing over the Iberian peninsula to a new general manager. There is a saying that \u201cyou cannot kill an idea whose time has come.\u201d And he felt that Airbnb\u2019s time had come.<\/p>\n

      He took a pen and a piece of paper and started reviewing his options.<\/p>\n","protected":false},"excerpt":{"rendered":"

      Airbnb: What’s Next? Introduction It was a sunny Sunday morning in late November 2014 when Jeroen Merchiers, general manager of Airbnb for Northern, Eastern and Southern Europe, was jogging along the beach in the Barcelona neighbourhood of La Barceloneta and reflecting about the future of his business. Shortly before, Merchiers had been promoted from country manager of Airbnb for Spain and Portugal. He reflected on the region\u2019s tremendous growth, how Barcelona had established itself quickly as one of Airbnb\u2019s top five cities in the world based on the volume of annual who used the\u00a0 company\u00a0 (about\u00a0 900,000\u00a0 since\u00a0 2008), and Read More …<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[812],"tags":[813,819,817,816,815,818],"_links":{"self":[{"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/posts\/1269"}],"collection":[{"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/comments?post=1269"}],"version-history":[{"count":1,"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/posts\/1269\/revisions"}],"predecessor-version":[{"id":1271,"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/posts\/1269\/revisions\/1271"}],"wp:attachment":[{"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/media?parent=1269"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/categories?post=1269"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttask.com\/answers\/wp-json\/wp\/v2\/tags?post=1269"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}