This case presents the business analysis of Airbnb. Airbnb is an online marketplace where home owners and would-be bed-and-breakfast owners can turn vacant rooms into nightly rentals, transforming any house into a possible hotel. With the online interfacing, potential guests can log on and search for available rooms. Airbnb was founded in 2007 and quickly grew to a $1 billion company by July 2011. The company created an online reservation system that included a reputation system to build trust and reliability between hosts and guests. The main issue in
Airbnb’s company came with their online reputation system. This allowed for both hosts and guests to view reviews of one another before interacting in anyway. Airbnb also supplied their customers with a means of communication between the host and potential guest and developed an algorithm to block messages that contained phone number or e-mail addresses to ensure that all communication prior to reservation occurred on their site. Only once the host accepted the reservation was the guests email address and phone numbers given. Airbnb charged a fee to both their hosts and guests and customers could pay by check, direct deposit, or PayPal.
Airbnb sits within the hotel industry. Competition within this industry is high since there are a large number of businesses in this industry. This rivalry can lead to aggressive pricing and promotional battles to attract more customers. The threat of new entrants is low since a large amount of capital is needed to build or acquire a traditional hotel. But with the introduction of companies like Airbnb this model is changing and essentially anyone can make their own home into a small hotel. The power of the buyers is high since there is no switching cost between hotels and there are a wide spread of options. The threat of substitutes is moderate since there are other options