Airbnb could have implemented a better protection against such incident like “EJ”. They could, (1). Require more complete profiles about the hosts and renters, (2). Prescreen hosts and guests, (3). Provide insurance for hosts and renters, (4). Be less restrictive on hosts when they reject unsuitable renters, (5). Differentiate price charged based on guest’s ratings, (6). Present more sophisticated consumer reviews, (7). Use incentives to encourage reporting of problems.
Instead of being reluctant to comment on the “EJ” incident, Airbnb should have responded much more quickly to the public after the “EJ” incident; apologize via the media to the host “EJ”, announce proper solution to such problems and publish improvements over such safety issues.
-Assume that you were creating a financial model to determine the value of Airbnb (either for a PE firm or if Airbnb was public). What would be the key variables in your model? How would you model incidents like the one with “EJ“. Should you bother? Why or why not? Would the “EJ incident” be a Black Swan?
We would interweave following variables into our financial model regarding the value of Airbnb for a PE firm: (1). General economic condition (GDP): higher revenue stream for Airbnb when economy is sturdy since more percentage of rooms booked are of high quality, as opposed to larger portion of rooms reserved for saving money when economy is weak. (2). Average rent received by Airbnb hosts and current average vacancy rate of residential property, higher vacancy rate lowers the average rents charged by the hosts and therefore less fees collected by Airbnb. (3). Insurance costs, this would change according to previous incidents and corresponding compensations. (4). Operating expenses, including costs of customer service and marketing etc. (5) Proportion of the website traffic that transfers into actual deals.