As there long coveted IPO is around the corner, I felt this was the proper time to release this analysis. Airbnb is a company that I’ve been fascinated by for quite some time. Their ability to reverse engineer and push through market resistance is undeniable. Airbnb has revolutionized our viewpoint on hotel and lodging. This analysis will evaluate the company's long-standing history and the barriers of entry endured. I believe it is important to understand the pure resilience of these founders. This analysis will also dissect their current performance as they recently reported an astounding $2.6 billion in revenue, bringing home $93 million in profit. These metrics blew away all internal forecasts which landed them a $31 billion-dollar valuation in May. Additionally, Airbnb is a private company making key performance indicators difficult to determine. As a result, I exhibit the factors I believe were used in evaluating Airbnb’s valuation. This report will discuss micro-level and macro-environmental factors that help and inhibit Airbnb. All of these subsidiaries have impactful effects on Airbnb and its outlook moving forward. Lastly, I discuss the effects of an economic disaster, and the problems it will cause when it happens. I also provide solutions that I believe would be extremely effective in a state of turmoil.
1. S T R A T E G I C A N A L Y S I S
ANTHONY STAVRAKIS
PHOTOGRAPHED BY IAN CASTANEDA
An exclusive look at how these
visionaries, innovators and leaders
changed how we look in the world.
THE GAME
CHANGERS
They haven't been a part of economic
turmoil. A look at the issues to consider
for survival when the market goes bear
CAN THEY SURVIVE THE
CRASH
A deep dive into the Airbnb KPI,
current performance, valuation, and
a look fiscal projections moving
forward.
CAN THE UNICORN
STILL SOAR HIGH?
3. Stavrakis 2
Executive Summary
As there long coveted IPO is around the corner, I felt this was the proper time to release this
analysis. Airbnb is a company that I’ve been fascinated by for quite some time. Their ability to
reverse engineer and push through market resistance is undeniable. Airbnb has revolutionized
our viewpoint on hotel and lodging. This analysis will evaluate the company's long-standing
history and the barriers of entry endured. I believe it is important to understand the pure
resilience of these founders. This analysis will also dissect their current performance as they
recently reported an astounding $2.6 billion in revenue, bringing home $93 million in profit.
These metrics blew away all internal forecasts which landed them a $31 billion-dollar valuation
in May. Additionally, Airbnb is a private company making key performance indicators difficult
to determine. As a result, I exhibit the factors I believe were used in evaluating Airbnb’s
valuation. This report will discuss micro-level and macro-environmental factors that help and
inhibit Airbnb. All of these subsidiaries have impactful effects on Airbnb and its outlook moving
forward. Lastly, I discuss the effects of an economic disaster, and the problems it will cause
when it happens. I also provide solutions that I believe would be extremely effective in a state of
turmoil.
4. Stavrakis 4
Mission
Airbnb’s vision and mission is to help create a world where you can belong anywhere.
History
2007: It all started with a simple email. Yes, an email. In 2007, Joe Gebbia sent his roommate,
Brian Chesky an idea that would change the way we see hotel lodging forever. His suggestion
was to create a designers bed and breakfast where they would provide a sleeping mat, wireless
internet, and a small desk. The bed and breakfast would provide a cheap way for a visitor to
sleep, and a way for them to “make a few bucks”. During this time, the Joe and Brian were living
in San Francisco and were struggling to make ends meet. They couldn't afford to pay rent so
decided to create a simple site airbedandbreakfast.com. The duo knew there was big design
conference coming to San Francisco, making hotels extremely hard to come by. They knew this
was the perfect time and a brilliant opportunity to execute on their idea. Their first guests were a
female, and two men that paid $80 dollars. After their first guests spent the night they knew they
were onto something special. They could feel it. The duo knew a place to stay, ended up up
being more than just an airbed and messy apartment. There was a different feel to this
experience, different than a typical night at the hotel. The guests felt like they were at home. A
simple way to pay rent transformed into something more meaningful. They soon realized this
going to be a big idea and decided they were going to need some additional assistance. The duo
decided to call their old Nathan Bleacharcyk, to become part of the team (Salter 1). Nathan was a
computer science graduate, and a brilliant coder who could deal with any technical needs at
hand.
2008: After such a great experience at the design conference they decided to give this another
go, at a different location. Unfortunately, this time, no one noticed and had not one person stay
with airbedandbreakfast.com they were upset about the result, but decided that they weren't
going to throw in the towel that easy. Third time's a charm, as most like to think, however for
these boys that wasn't the case. They tried there airbedandbreakfats.com at SXSW, one the
biggest music festivals in the entire world. This time they only had two customers, and one of
them was Chesky (Salter1).
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Summer 2008: the founders had finished a final version of Air Bed & Breakfast and went to
finally meet investors. The boys completely designed and coded the website to impress the
investor, creating interfaces that were simple to use and agile. One of their selling points for the
new and improved platform was that it only took three clicks to book a night with Air Bed and
Breakfast. The Investors thought there were excellent adjustments, however weren’t convinced.
The idea of staying in a random person’s home threw them off. They believed that users would
think this idea is creepy and not as secure as your typical night at the hotel (Salter 1).
Additionally, Investors also saw this as a huge liability issue. They felt if a user happened to die,
or if the host happened to be a serial killer, that the blood would be on their hands. As all of these
underlying issues were brought forth, eight angels rejected them and seven people ignored them
entirely. After these meeting the boys were flat out broke, and surviving by creating new
businesses, and funding there project on credit (a typical move by startups with low capital).
Broke and in debt, the site isn't making money the boys decided to hop on the electoral
bandwagon. During the 2008 presidential election the guys transformed cereal boxes into Obama
O’s and Cap’n McCains to represent Barack Obama and John McCain. They sold them on the
streets for $40 dollars each, and generated $30,000 to put towards the company.
2009: After seeing the founder’s ability to create something from nothing, a man took notice.
Paul Graham, the co-founder of Y- Combinator (Startup program), was so impressed with their
ability to hustle that he knew no matter what happened the founders would be able to figure out a
way work through it. Graham decided to give Air Bed and Breakfast a $20,000 dollar
investment. .This company continued their hustle endorsed techniques by getting the hosts to
love Air Bed and Breakfast, by visiting every one of them in New York to personally stay with
them, write reviews, and professionally take photos inside (Carson). One month later, the
company finally scrapped the name Air Bed and Breakfast and simplified it to Airbnb. The main
logic for the name change was to remove the association with air mattresses (Carson 1). After all
of these scrappy business techniques, they put Silicon Valley on notice and received a $600,000
seed investment from Sequoia Capital.
2011: Almost four years after the first guest mattress, Airbnb was in 89 countries and had hit $1
Million nights booked on the platform. That same year, Airbnb was known for becoming the
6. Stavrakis 6
“unicorns” of Silicon Valley, as the valley’s biggest VCs put a $112 Million into the startup,
giving it over a $1 Billion dollar valuation (Carson).
2012 -2015: As soon as Airbnb was in stride and peaking at the right time they hit some
roadblocks. A host had their place completely trashed, and other complained about guests
throwing huge parties inside the houses. Due to these issues Airbnb implemented coverage
policy to cover their hosts, providing up to a million dollars in coverage (Carson 1). The
company also ran into issues with hosts getting evicted or fined, which gave their regulation
teams many headaches. With many legal battles looming and unruly guests the company decided
to change their logo in 2014. The new logo was called Belo, was a great success and led to a new
aroma at Airbnb. It has a comforting feel to it, and has helped them create brand equity.
Today: The occasional house rager and war on legislation with regards to housing policy has not
slowed down the Silicon Valley Unicorn. The company that started with three air mattresses is
now worth over $31 billion dollars
7. Stavrakis 7
Current Performance
Airbnb had a good 2017 to say the least. They reported an astounding $2.6 billion in revenue,
bringing home $93 million in profit. These metrics blew away all internal forecasts which landed
them a $31 billion dollar valuation in May (Jaaskelainen 1). With that said, Airbnb has now
became the second largest lodging company in the world, closely behind Marriott International.
After such dominate success this past year, Airbnb has been rumored to go public for quite some
time, my research makes me believe this won't happen. From 2014 to 2017, Airbnb has gone
from a company valued at $10 billion to $31 billion. During this time they only have only
received $6.4 billion in equity funding (Jaaskelainen 1). Comparing this to their evaluation
Airbnb doesn't need to raise more capital or go public, as growth rate has not become stagnant.
The number of Airbnb users in the United States is currently 38.4 million, with projections of
this number surpassing 45.6 million by 2022. In fact, Airbnb accounted for a 5% share of hotel
demand in 2017 and 2018. Morgan Stanley projects that by 2020 this number will reach 6-7%.
All in all, Airbnb from a fiscal and growth standpoint is doing exceptionally well in its current
state (Jaaskelainen 1).
8. Stavrakis 8
Understanding Airbnb KPI
As we know, Airbnb received a $31 billion-dollar valuation at the end of May 2017. However,
evaluating what makes Airbnb so valuable is very important. Being Airbnb is still a private
company, finding fiscal metrics is a very difficult. So contingent on my research I believe there
are Three Key Performance Indicators that have led to a $31 billion dollar evaluation.
● Number of Listings: Understanding how many listings were given at the end of the fiscal
year is essential when evaluating a company that's sales are contingent on availability.
Airbnb had 4.2 million at the end of 2017 and will have 5.3 million by the end of 2018
(Team 1).
● Average guest arrival per listing: This metric for Airbnb's business model is one of the most
improvident ways to understand success moving forward. If the average amount of users are
lodging with Airbnb per list than cash flow, revenue and overall bottom line should increase
substantially. In 2017 Airbnb had over 115 million users and by simple arithmetic, we can
determine that in 2016 the average guest per listing was 23 units and in 2017 was 27 units
(Team 1). Based on average growth rate in FY18 this average guest per list should be 31
units at the end of the year. Given these metrics and a forecast of 5.3 million listings by the
end of FY18 we can calculate Guest Arrivals for 2018.
○ 31 (avg. guest per list) x $5.3mil = 164 million guest Arrivals for FY18
This is a 100% increase in a four year period! This is an incredible number and this forecast
alone will continue to drive Airbnb will continue to soar new heights as we move forward.
● Average rent per guest arrival: This metric is essential as it determines the average rent
received by Airbnb’s beloved hosts, per every guest arrival. In 2016 this number was
$157 and drastically increased the following fiscal year to $174 in 2017 (Team 1). This
is important because this increased number most likely means that guests are staying for
longer durations of time. If a user is staying for longer periods of time, they most likely
9. Stavrakis 9
are enjoying their experience, resulting in an increase in bottom line for Airbnb. Due to
these metrics we expect this number to trend upwards moving forward to $185 for the
year (Team 1). With this number we can determine Gross Rental Income for FY18
○ 164 million (guest per list) x $185 (FY18 rent per list) = $30.4 billion GI FY1
PESTEL Model
Criteria Opportunities Threats
Political In areas that are in a great place politically,
could lead to more international demand, as
travel to those areas, will increase.
In areas that are in a great place politically,
could lead to more international demand, as
travel to those areas, will increase.
Economic Airbnb still has the ability to make money
in economic turmoil and in low economic
areas by providing value for guests and
hosts. Airbnb has become a source of
income for its hosts as 79% of host’s share
the home they live and 48% of host income
is used to pay for household expenditure.
Additionally, it allows Airbnb to penetrate
these areas as guests can afford to pay if the
listing is cheap.
Recession could potentially lead to a
decrease in demand especially domestic
users traveling internationally, and
domestic areas that are quite expensive in
the United States.
Social Airbnb is a special service due to the fact
that hosts understand cultural expectation
and limitations by already being from that
area or country. This offers a huge
advantage to guests as Airbnb hosts can
offer a cultural exchange to users who are
new to the area. They can make guest feel
like locals, and even provide advice on
must see destinations.
Cultural conflicts may occur if a guest and
user say or act in a way that may offend
either party.
Technological Airbnb is an internet based platform so
users can see updates in real time.
Additionally, this is essential to potentially
creating more host and user engagement for
optimal satisfaction.
Basic tech mishaps that happen for any
platform. I don’t see this a huge threat, just
one in its basic form.
Environmental Airbnb home sharing business model is
valuable for users, hosts, and our planet. By
choosing Airbnb you can reduce carbon
footprint and reduce waste and energy
NONE
10. Stavrakis 10
Legal If new laws or regulation pass that can
assist Airbnb in housing laws and
regulation than this could potentially help
aid in demand to certain areas.
Airbnb's business model conflicts with
many state and country housing laws and
regulations. Due to this they have been
sued by many states for not following laws
in their respective places.
11. Stavrakis 11
Porter's 5 Forces Model
1) Competitive Rivalry: HIGH
I believe that the competitive rivalry for Airbnb is high. Although, there are no other home-
sharing platforms that compete with Airbnb directly, they indirectly compete with all hotels and
lodging companies. The hotel and hospitality industry contributes to $208 billion (Revenue Hotel
Industry 1) in annually, which is a nice chunk of the national GDP. Airbnb’s leading competitors
are Marriott International, Hilton Worldwide, and Intercontinental Hotels group. Among the
pack, Airbnb sits number 2 on that list (leading lodging companies 1). For visual representation
of the statistics above please refer to Appendix; Table 1.
● Control of High Competitive Rivalry: Although Airbnb rivalry is high, they have a
unique opportunity to control their risk. The ways they can do this by expanding in to
developing countries and markets that they haven’t tapped. Secondly, they need to
continue to innovate and have a niche in the market, as they currently do. They are the
only dominate home-sharing platform and this uniqueness will continue to keep them
different than the competition. Lastly, one area that I believe Airbnb lacks in is alliance
and relationships with other companies. They seem to operate solely which is good.
However, possibly teaming up with area transportation touring companies they can
enhance their attractiveness with other complementary services.
Risk of New Entry: LOW
I believe contingent on Airbnb’s unique business model and market domination, it would be very
hard for new entrants to come into this marketplace and contest them. Initial startup procedures
are very difficult and there are too many liabilities that could destruct the business before it even
gets started. These costs, being too high to get the ball rolling. For that reason, it's my belief that
this is the reason we haven't seen anyone within the United States to try an enter the home-
sharing business model.
Risk of Substitution: LOW
12. Stavrakis 12
After giving this area a lot of thought I originally believed I would say substitution is high.
However, after much more in-depth research, due to Airbnb’s staggering low prices domestically
and internationally, I don't believe there is a substitute of its nature. In 2018, the average money
saved using Airbnb compared to staying a hotel domestically or internationally (New York,
Sydney, Tokyo, London, Toronto, Paris, Moscow, and Berlin) was $68 dollars! This is a very
high number considering this was an international and domestic average. Please refer to the
appendix for a visual reference in Table 3.
The Bargaining Power of Buyers: MEDIUM
Although Airbnb has high demand due to the best prices among competitors, as well location and
experience. I believe when a buyer travels, especially internationally, they are very worried about
safety, security, and political instability. However, on the contrary, I believe price rules all. From
an economic standpoint buyers have low power.
● Control of bargain power of buyers: A way for them to control this risk is by simply
making hosts implement certain security policies. If a host does not meet these
requirements than they cannot host guests. Similar to the policies UBER has
implemented to keep riders secure through inspected and up to date vehicles.
Bargaining power of suppliers: LOW
The bargaining power suppliers is very low for Airbnb due to the fact that there is an abundance
of suppliers, who are enrolled in the home-sharing program. In fact, in 2017 27% of men said
they could imagine being an Airbnb host and 31% of females said the same (Sharing Economy 1.
Additionally, 24% of men said they already have been hosts, and 10% of woman said the same
as well (Sharing Economy 1). For a visual representation of this model please refer to the
Appendix Table 4.
13. Stavrakis 13
Core Competencies & Competitive Advantage
First to Market:
Airbnb are trailblazers. They were the first company to enter the home sharing market and
dominate it since arrival. For that reason this is a core competency because no other company
has been able to master this business model like they have.
Price Point:
As discussed earlier price in this business is everything and Airbnb domestically and
internationally has the cheapest prices. Compared to hotels, users using the application saved and
average of $68 dollars per night. This price point will keep them ahead of competitors, if this
advantage stays stagnant
Host Incentive:
Compared to your typical hotel and lodging experience individuals who are nice enough to stay
in their homes reap the rewards. It's not only advantageous for the guest, but for the hosts as
well. This dual headed horse creates a rewarding experience for all parties involved.
Easy to use:
Unlike your traditional hotel you don't have to call to make a reservation or deal with flat rates
on rooms. Airbnb offers a platform that is simple and easy to use by allowing the guest to find
the perfect place contingent on price, location. With Airbnb, you can book any listing in the
world in three clicks. An agile interface built for simplicity, is one of the key advantages to many
companies in 2018. If two companies have the same product, but one has the simplistic platform,
most of the time that company will obtain more users and traction
Brand Equity:
Airbnb has built a brand that everyone admire and loves. They have created a culture and a
belong anywhere approach to everything that they do. Airbnb from 2015-2018 has increased
users substantially. In 2017, there were 29 million users in U.S and Europe (Number of Airbnb
Users 1). In 2018, there were 33 million users, and Morgan Stanley projects by 2020 Airbnb will
have over 40 million users (Number of Airbnb Users 1). Their brand equity has helped them
14. Stavrakis 14
create a competitive advantage over all its affiliates. For visual representation refer to Appendix
Table 5.
VRIO Framework
First To Market
Value Being the first to market is essential. You have an opportunity to be a trailblazer and
accomplish something most have not. If you are the first to enter that market, you’ve made
it very difficult for competitors to penetrate.
Rarity Being the first to market is very rare. It is unusual for you to create something that
someone hasn't already done. If your idea is bulletproof and well developed, you have the
ability to a unicorn in whatever industry you are attempting to disrupt.
Imitation Cost Due to Airbnb’s unique business model, other companies would have a hard time
imitating. Additionally, it's impossible to be the first to market if someone was there before
you.
Price Point
Value Having the lowest prices compared to all competitors is the most valuable asset a company
can have. As long as quality is not compensated, you will dominate any sector. Airbnb has
developed a way to do so.
Rarity It is very rare for a company to have the lowest prices in the world. If they do a lot of times
they are compensating with lower quality. However, in Airbnb’s case, they are not. That
facet is very rare.
Imitation Cost To imitate the price point Airbnb gives to their guests is almost impossible. It's a volume
business, and the amount of hosts they've been able to obtain allows them to keep prices
very low. This business model makes it impossible to imitate.
Host Incentive
Value To create a platform that not only provides value for all parties involved is valuable. By
allowing guests to stay anywhere in the world for a cheap rate, and provide host a way to
create passive income is unheard of.
15. Stavrakis 15
Rarity There is no other platform that allows people to stay at their homes and make money while
doing so. That makes this rare, and unlike anything we've ever seen before.
Imitation Cost It would be costly to imitate due to the fact Airbnb has too much volume. No other
company would be able to pay them the percentage that they are currently paying hosts.
Easy to Use
Value If a platform allows you to make a purchase, get a desired residence in 3 clicks, than you
have created something that will gain traction. Simplicity and usability can make any
platform sink or swim. No matter how valuable the product is if it’s too hard to use, no one
will adapt.
Rarity A platform that is easy to use is hard to come by. Platforms that operate in real-time and
allow you to make impulsive decisions at a fast rate are rare.
Imitation Cost Creating a platform involves very well thought out UX/UI design. It isn't impossible to
replicate, however would be very pricey as there are many variables involved.
Brand Equity
Value Brand equity is a prerequisite to creating a sustainable competitive advantage. If you can
create valuable brand, then you're likely to get more customers consistently
Rarity Airbnb has created brand equity that is impossible to replicate. They have loyal customers
that will stand by them until the end.
Imitation Cost Due to the culture that Airbnb has created, imitation cost would be difficult. No company
in the near future will be able to imitate. Long term, that would be difficult to predict at
this current moment.
16. Stavrakis 16
Short & Long Run Issues
At this point we can all agree. Airbnb has been a company that hasn’t had the chance to fail yet.
Yes, they’ve had some issues with people not believing in them, and speculated that they would
fall flat on their face. However, a failure is when you make a mistake and tend not to recover.
Every mishap that Airbnb has had, they’ve always willed their way back to the top. This has a lot
to do with the founder’s ability to reverse engineer and push through problems. However, most
of their turnarounds are all very timely. Airbnb was a company that was founded in 2008,
directly after one of the worst economic turmoil’s in American history. Since the company’s
inception, economic climate has been more then favorable. The economy has been on a 10-year
run without a crash, which historically is unheard of. To my point, Airbnb hasn’t been hit with a
haymaker just yet. As the economy goes bear, there will be short term and long-term issues that
need to be solved if they want to keep their status as a strong #2 in the hotel lodging industry.
Short-Run Issues:
1. Cancellations: One of the biggest issues right now with Airbnb is their cancellation policies.
21% of people who used Airbnb and had a bad experience was due to a last minute
cancellation (Fergusson 1). If the hosts plans to cancel, the user could be left scrambling last
minute in a place that isn’t too familiar. When this happens, Airbnb makes you apply online
for a new place to stay or a refund. According to the Airbnb site, you must log in from a
computer not a mobile device. This is a short run issue that can be fixed very easily with
some code adjustments and a tweak in policy.
2. Safety and Security: Aside from cancellations and possibly leaving the users out to dry, the
second biggest short term concern are scams and fake listings/reviews. Among causes of
Airbnb issues or horror stories, 19.2% of users claimed they walked into a scam, fake listing,
or bot oriented reviews (Fergusson 1). Scams are issues that can be solved quickly with real
time team actively monitoring hosts, and there communication with the guests within the
app. Some of the common scams Airbnb have been dealing with are: demands in extra cash
from users, listing price arbitrage, falsifying damages, and fake emails and websites. This can
be solved with an audit team short term.
17. Stavrakis 17
3. Amenity Conditions: The third major issues with Airbnb in the. This to me is among the
most important on the short term list because the users aren’t getting what they paid for.
Among the most common causes of Airbnb issues or horror stories, 13.4% of users said the
conditions of the place were not the same as the pictures had stated issues were a result of
that. Some of the problems include; bug infestations, unsafe and broken amenities that could
have left guests almost injured (Fergusson 1).
Long-Run Issues:
1. Digital Strategy: Airbnb has been very successful when it comes to digital marketing and
attacking a young audience. Airbnb resonates with the younger generations due to the fact
it’s very tech savvy and easy to use while traveling as a younger human being. New ideas
spread faster to younger generations, causing Airbnb to take flight quickly. In doing so, they
have abandoned a huge target audience that leads to most dollars spend when it comes to
hotel and lodging. As this all unfolds, Airbnb will need to allocate focus to these money
spending groups. Creating awareness among the older generations will make them the leader
in this market.
2. Customer Service: After deep diving into some of the long term issues that need to be
solved, one that really stood out was customer service as a whole. 82% of people who had a
problem with Airbnb relate it to a customer service issue that wasn’t taken care of
accordingly (Fergusson 1). 52% of the people who had a problem with customer service, said
it was their primary complaint (Fergusson 1). The issues that were mentioned included; no
support during emergencies, unreachable service staff, denial of refunds, policies favoring
hosts, providing false answers, and mainly promises made and never delivered. This is a long
term issue that needs to be solved but will take time.
3. Economic Environment: As I mentioned earlier, Airbnb has never been punched in the
mouth. They have dominated over the last 10 years, staying one of the biggest contenders in
18. Stavrakis 18
the lodging industry. However, very soon, we are due for an economic crisis. When this
happens, buying power will be low, and unless you have money saved you won’t be able to
travel like you once did. When this happens leisure stays will decrease in half and business
or cooperate stays will stay stagnant. This means, the younger generations they were once
targeting won’t have the money to travel. This is why the older audiences have never been so
important. Additionally, most travel stays are of older ages which will directly be the most
money spent as a whole. Normally ages 40 and older. This makes Airbnb very vulnerable.
Safety and Security
Among the short-term issues at hand I believe that security, safety, and scam prevention are the
most important. Although all of these issues are liabilities, security and scam prevention will
keep users from trusting the service more frequently if necessary precautions are made
accordingly. My three solutions to this problem are the following:
1) Require sufficient vetting of all hosts: Right now Airbnb does very basic background
checks, if they have suspicion that a host may have had a criminal record, however this isn’t
enough. My solution would be to determine if a host is a US resident, has had any c criminal
convictions, or if the host is on the OFAC list (Airbnb Perform Background Checks 1). This
needs to be mandatory. They do this if suspicious, however how could they be suspicious
without vetting every single guest? I don’t believe that is possible. All of these databases are
public records for the most part, so doing these checks isn’t difficult. Additionally, creating
software to automatically vet them is something that should be considered.
2) Trust Score: Additionally, my solution also includes a trust score for every host. Airbnb
should provide this on a 1-10 scale to ensure the guests this isn’t a fake location or a scam.
My ideal algorithm would be based on the following factors, taking the average of all
variables at hand, given against a benchmark set by Airbnb.
19. Stavrakis 19
• TRUST SCORE = Pass Vetting Process + Pass all legal building requirements + number of
cancellations every Quarter + number of price variation every quarter + volume of stays
every quarter + 3-month average rating + 3-month picture score (hosts will have to send in
pictures of residence every 3 months)
This score could lead to a solution to many of the fraudulent activity occurring. Creating
a better security network for consumers allows trust, which is king when it comes to
staying in a random residence. This will aid that. My logic on quarterly average is that we
have more data on each host. Travel and stay is very seasonal so certain months can be
slow or very fast for hosts. This three month grace period, to add on to their current trust
score, would be a viable option for the company based on the current issues that
occurring.
3) Photo Recognition System, Virtual Spot Checks: My third solution for this problem goes
hand in hand in hand with the host trust score. Every 3 months hosts are to be required to
submit pictures of their residence. This will ensure it is in proper condition and that the
location is in fact real, and not a scam. This is a bit outside the box and may take some time
to install, but for the longevity of Airbnb making users submit constant pictures may be
necessary. My other suggestion is for Airbnb to conduct random virtual spot checks. Every
so often, every host has to Skype Airbnb and show them around the house. This may take
some time, but will ensure that the most critical issues are solved. This will also eliminate the
issue of duplicate listings. If the security issues at hand are solved, bottom line will increase
substantially.
20. Stavrakis 20
How Airbnb will excel when the economy doesn’t | Economic Environment
First things first, aside from my fiscal determinates earlier in this paper, I believe this will likely
be my favorite part to analyze. I truly believe that if these factors are solved accordingly, Airbnb
will thrive during the recession, and make many hotels obsolete. When asked the long-run
problems Airbnb will face, I stated that digital strategy, customer service, and economic
environment are among the most prevalent. Although this may be Meta, what if I told you that
the solution to an economic downturn (environment) were enhancements of the other two
outlying problems (digital strategy and customer service)? I believe these two problems are
simultaneously solutions.
1) Digital Strategy: When assessing issues that Airbnb has long term, we need to evaluate who
is currently using the platform. Right now, Airbnb’s dominate audience is under the age of 34
years old. In turn, over 51% of their audience are essentially young adults (Stanley 1).
As we continue to look into the metrics, we have to ask ourselves; why the younger generation
are dominating the audience at scale? As I began doing more research the reasons became very
evident. As there was a shift in user’s age, the familiarity of the app was distinctly different.
People who were of ages 35-55 were only 22% familiar with the application. Based on metrics
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we can assume they are a warm audience (have used the application before) (Ispos 1). However,
the other 77% of users were either somewhat or not familiar at all with the application. Not only
is that a huge problem, but 92% of users of ages 55 and older were barely familiar with the
application (Ispos 1). The graph below demonstrates the lack of awareness around older
generations.
Here is where things get interesting. 78% of leisure hotel stays came from people ages 35-54,
and over 50% of business stays came from people 35-54 years old. These statistics are not
including Airbnb stays. The graph below that demonstrates this.
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This is a huge problem because most of the money being generated by the hotel and lodging
industry are coming from audiences Airbnb is clearly not targeting. Most people who are
traveling worldwide are of ages 35+. This means they aren’t attacking their target audience
properly. The people of these ages have more money, and are willing to spend more as well.
When the economy takes a downturn, these will be the only people who will be able to afford to
travel!
Ultimate Digital Solution: You may think I’m crazy, yet, I believe almost 90% of marketing
budget needs to be invested into SEO, Instagram, Facebook and Twitter. Whether that is
placement on instreams, stories, on all of these native platforms, I believe this strategy will win.
Especially for older audiences, as Facebook is for older people in 2018. Teens and young adults
are ditching Zuck’s social platform as popularity among the over-55s surges, according to a
report (Sweney 1). Organic engagement among these audiences has increase substantially as
well, as older folks take the time to read all posts, where millennials just scroll without reading.
There has not been a better time to invest all your digital budget into Facebook and Instagram.
When we consider ROI in advertising today these social platforms provide the most underpriced
attention on the planet. A surge in older user’s means people over the age 55 will become the
second-biggest demographic of Facebook users this year. 35-54 will be the highest based on
engagement and traffic (Sweney 1). Making Airbnb vulnerable, which is why I believe more
money needs to be invested into this powerful platform. Allocating a more of the digital budget
to these audience to create awareness for older generations, should create a higher CVR in the
long-run, when we will shortly see leisure stay dissipate in the near future.
2) Customer Service: To avoid long turn problems and outlast the economic downturn that is
evadible, customer service for Airbnb as it contributed to 82% of the problems consumers
had. 82% is an astronomical number in the scheme of things. However, I believe there are
solutions to solve this. First, by enhancing digital strategy on all channels, customer service
in return will get better. Having Facebook, Instagram, and Twitter, customer service 24/7
would eliminate a lot of problems.
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Additionally, having chat now automated service throughout the app would be very useful. By
having a chat bot that can answer a lot of common question in real team would take some
pressure off customer support team. Although this will cost money, it will pay dividends long
term.
One of the biggest customer service complaints has been that there is no support in case of
emergency. I believe an SOS feature in the application would be very effective. If a customer has
an emergency at any time, someone on the team has to answer the user. These services can even
be outsourced but would be very beneficial to all parties.
3) Innovation: Innovation is something that I am very passionate about and is something I
believe Airbnb can capitalize on, especially as there brand is so well respected. Voice is
going to dominate the next century of commerce. The same buzz apps had when the iPhone
came out, will happen with voice. If I had to guess, every Alexa by 2020 will have a screen,
with that Apps will be built on top of it. If Airbnb can build Alexa skills around guest rentals
their conversions moving forward will be significantly higher. Being the consumer can see
the location, price, and features, all friction between the consumer will be eliminated. No
credit cards, no account log in, just tell Alexa/Portal “Book Now”. Retargeting budgets and
abandoned carts will be reduced substantially. In turn, this will increase CVR and what the
way we see E-Commerce for generations to come. This is how I see the future unfolding.
Speed kills, and if they can create skills around the Alexa/Portal, they’re going to dominate
lodging for years to come.
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Evaluation Solution Criteria
I decided to use the REEIS evaluation criteria to judge the decisions and solutions made for the
current long term and short-term problems of Airbnb (“Guidelines for Project and Programmed
Evaluations 1). The REEIS is measures as follows:
Relevance:
Answers the basic question; are we doing the right thing, and how important or significant is
this?
Measures of Relevance:
• Will the customer’s problems be solved by the solution or product?
• How Important or significant is the product to the consumers?
• Are any needs or wants being met completely by the product?
Effectiveness:
Answers the basic question; are we meeting are objectives, and how big of an impact will this
have in correspondence to others of the past?
Measures of Effectiveness:
• Are our objectives unrealistic?
• Are our objectives to basic and not defined properly?
• Is there a lack of targets that will measure success?
Efficiency:
Answers the basic question; are the objectives being achieved economically, and how is the
efficiency of resources being used?
Measures of Effectiveness:
• Is overhead as low as we can get it to be?
• Were all objectives achieved according to schedule?
• Were the resources acquired appropriate to the current economic climate?
Impact:
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Answers the basic question; does the development contribute to the overall objective in some
way shape or form?
Measures of Impact:
• How many people at scale will be affected?
• What has happened as a result of your development?
• Was there a real difference made to the consumer experience?
Sustainability:
Answers the basic question; are the effects positive and are they here to stay?
Measures of Sustainability:
• Was our project done at a time where it will be here to last?
• Can this project or development continue to have the impact it’s had?
• Was there anything we could have done better to keep it around for a longer
duration of time?
Evaluation of Short-Run and Long-Run Solutions
Safety and Security
Vetting Hosts Trust Score Photo Recognition – Virtual spot
check
Relevance High Moderate High
Effectiveness High Moderate Moderate
Efficiency Moderate High High
Impact High Moderate High
Sustainability High Moderate Moderate
26. Stavrakis 26
Economic Downturn
Digital Strategy Customer Service Innovation
Relevance High High Moderate
Effectiveness High Moderate High
Efficiency High low Moderate
Impact High High Moderate
Sustainability High Moderate Low
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Final Suggestions and Future Predictions
Short term, it is my belief that Airbnb needs to immediately implement a more efficient vetting
process to ensure a safer experience. In correspondence, I believe that that virtual spot checks
could be a valuable asset in addition to the background checks and vetting. Lastly, the
implantation of photo recognition and a trust score based on the variables I provided would
really set them apart from a safety and security stand point. In addition, as these issues are solved
brand equity is being built.
Long Term, I believe that the most important task at hand is really gearing part of their digital
strategy with a focus on an older audience. Investing most of their digital budget in social media
where all the underpriced attention is, will keep them afloat when others will not. The money
being left on the table surrounding this audience is incomprehensible. This target audience is
just waiting for them on silver platter, it’s time to execute. I believe simultaneously, customer
service issues need to be taken care of and the digital presence and social listening will assist
this. Lastly, the innovation is what will set them apart from the pack. If they can create strategy
around voice, I believe they will make most of these travel institutions vulnerable. Digital
strategy and customer service will make them less recession proof, however voice will change
the way we see hotel booking and reservations.
My prediction for Airbnb is very simple. If they can get older populations to adapt to their
platform they will be able to dominate like never before. The lack of use among these
generations isn’t dislike of the platform, it’s lack of awareness. This creates an opportunity like
no other. Additionally, if they can even minimally assist safety, security and customer service
they will be just fine. Lastly, if they do what 99% of players in the industry aren’t doing, they’re
going to change the world, yet again!
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