The Impact of Airbnb in the Lodging Industry - Research Paper

Introduction

Airbnb is a social marketplace which is based online with the purpose of connecting the people interested in renting out their homes with the ones that looks for accommodation. This hospitality service is found in 192 countries globally. The services offered include hosting a suite of rooms, moored yachts apartments, full house and even castles. In this case, Airbnb is the host. Travelers will, therefore, search the AirBnB database providing details of their preferred location and date of accommodation. The search is usually in a combination of more specific search terms (Killion, 2018).

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The following paper seeks to give out the impact of Airbnb in the hospitality industry around the world paying close attention to America’s lodging industry. Moreover, the extent of the impact of Airbnb will be discussed. The following research questions will prompt the study:

1. What are hotels doing to counter AirBnB?
2. What are the pros and cons of Airbnb in the lodging industry?

The objective of this research paper is to be able to determine the detrimental effects of Airbnb in the lodging industry around the world. Therefore, this brings us to the hypothesis that Airbnb has a detrimental impact on the global hospitality industry.

Summary of Articles

Hotels’ Revenue, Expansion, and Operations

(Killion, 2018) In his article on “Hotel Revenue, Expansion and Operations” gives out how the conventional hotel operations are affected by the introduction of AirBnB under the principle of reduced-form regression. This culminates into a crowding-effect by the Airbnb on the global hotel industry. Airbnb is a big industry as measured by the number of listings under them per year. This entirely provides excess competition to the lodging industry and hotels can do minimal or nothing about this. This in spite of the hotels seen to be doing well 2005, ever since, Airbnb is outdoing them in competition. The growth of Airbnb rose from 12 percent to 16 percent bookings in a year since its introduction. This growth has never been seen before in the lodging industry (Killion, 2018).

To counter this growth of Airbnb, hotels cut done on their rental levies. Moreover, there are arguments that AirBnB conducts unhealthy business competition by running unlicensed hotel services and appealing to a vast customer base, for instance, customers looking for authentic and local rental rooms achieved by the provision of rental homes and apartments (杨, 2016). Airbnb creates an experience that is different from the hotels in the hospitality industry, such that, hosts and guests will never personally meet. This has the impression of a hotel without a front desk.

Value Proposition

In the article “Business Model Canvas Airbnb” Dr. Uenlue describes the integration of value propositions by Airbnb into the hospitality industry in ways that traditional hotels are struggling to compete with. This addition of value propositions is felt on both sides of the hosts and the travelers. The value proposition is created on three levels except for the financial value. The first level is the individual connection, whereby, Airbnb strives to foster good relations between the guests and the travelers. Hotels may try to emulate this model of regard but end up losing their individuality. The next level is the community, whereby, Airbnb creates the connection between the users by the use of large amounts of contents which are user-generated, on the locations of destinations in addition to respective homes. Lastly, is the localization level, whereby, the number of recommendations and information on the spot is made more available.

The article goes further to describe the host’s side of value proposition, whereby, there is a clear connection between the guests and the hosts. This convenience is especially felt during joining of new members into the Airbnb platform and the process of acquisition of guests. Cashless transactions have consequently facilitated the payment process. The guests are also guaranteed insurance of their property in case damages occur. In general, there is a personalized feel between the management of Airbnb with the hosts and the guests.

Airbnb Competitiveness

Jaremen et al. in their article “AIRBNB COMPETITIVENESS ON THE HOSPITALITY MARKET SECTOR” describes the rise and competitive nature if Airbnb in the lodging industry. The article goes ahead to discuss the success which is as a result of combining the economic benefits of the hosts and tourists. Airbnb is seen to provide the tourists essential comfort which cannot be compared to the conventional hotels. The guests have the privilege of living like they are in their own homes. Moreover, there exists an element of trust which is not necessarily felt during the booking of the conventional hotel. This is made possible with the component of a trusted marketplace which is done by increasing involvement of the community. Hotels find it challenging to achieve powerful networks, whereas, Airbnb makes it possible for the formation of robust systems proving to be more competitive than the usual lodging services.

Explosive Development

杨, 宁. (2016).”A Case Study of the Explosive Development of Airbnb”, describes the massive growth of Airbnb with a flashback to the year 2008 when the hospitality industry had a difficult time to survive the global financial crisis. To add to the grievances of the hospitality industry, 2008 is the year when Airbnb was born and since then has transformed the hotel industry. The article takes a quick flash forward into the present time where Airbnb is seen to be way above the hotel industry regarding customer preference and market share. For instance, Airbnb is present in neighboring 200 countries. The extent of growth is also determined by its market listings of four million globally.

Pro-activeness of Airbnb

The unique ability of Airbnb in acting adequately beforehand is demonstrated in the article “The Pros and Cons of Using Airbnb” by Folger. Airbnb is showing to be a company able to predict their future as they have gone further to venture to new professional standards. Customers prefer this dynamism as their future wants are taken care of. The article describes the hotels to be doing even extra work in the quest of limiting the dominance of the hotelier industry. Consequently, Airbnb foresaw this future competition in waiting and decided to create branches which operate in the same way as the conventional hotels. With this in mind, Airbnb has since been able to retain the customers who may be seen to miss the services of the traditional hotel industry.

Discussion

Airbnb is both beneficial to the hosts and travelers looking for the accommodation services. The hosts have an experience of meeting new people from around the world, consequently, generating income from this activity. On the travelers’ side, the cost is relatively cheap as compared to booking a hotel for accommodation in addition to a unique experience from the standard hotels. As a result, a lot of travelers prefer the services of AirBnB to any other as it serves the budget minded travelers (Folger, 2018).

The location of AirBnB accommodation also plays a central role. The properties are strategically positioned centrally and near-essential infrastructure such as roads for easy access. This may not be the case with other hotels and so is advantageous on the side of Airbnb. Rental homes give the customers the privilege to have personalized pool and spa services which also may not be the case with the hotels yet the tourists need these facilities. The travelers also have that feeling of being at home.

Airbnb is seen to revolutionize the hospitality industry by the introduction of value addition propositions that primarily work on both the side of the hosts and the guests. Hotels may try to emulate this business model but often find themselves not able to keep up with the pace (Jaremen & Nawrocka, 2017). Airbnb has made it easier for the travelers to book accommodation facilities before their travel which comes with a wide range of homes and other accommodation units. In the quest of earning even more trust by the travelers, Airbnb has provided user-generated content on the expected destinations. Value proposition by the Airbnb has made the cost of lodging to be cheaper as compared to the conventional hotels which are available. There are instances where the Airbnb has proved to outdo the hotel industry in their own game, for example, Airbnb widely uses the introduction of cashless transactions offered by the hotels. Moreover, their systems are designed to provide adequate feedback from the customers, and this makes them upgrade their services to outdo the hotels.

The housing can be considered to be an underutilized asset. Moreover, given that someone may think to leave their house and rent it, this can be viewed as a substitution of the use rather than the addition of use. It is more elastic, the demand for rental holidays, than the conventional hotel acquisition leading to added preference to other lodging services. Consequently, because the rental homes stay for a short period, this has made it enter into direct competition with the present market (Jaremen & Nawrocka, 2017).

Airbnb is soaring even further in the hotel industry. The massive growth is attributed to the fact that they have been able to revolutionize the hospitality industry. This is due to marketing capability of attracting newer customers, consequently, retaining the current ones. This can be credited to the pro-activeness of Airbnb being able to study their market effectively hence being able to determine the customer wants and act accordingly to their satisfaction (Folger, 2018).

Conclusion

Airbnb is seen to effectively do away with the notion that hotels are the only place to go for accommodation when traveling. Airbnb has come up with fantastic offers which are considered to be superior to the current hotel trends by the introduction of a new and exciting way of lodging enabling the tourists to have the feeling of being at home during the trip. As a result, travelers are since moving from hotels having a preference for the hospitality services offered by Airbnb.

References

Folger, J. (2018). The Pros and Cons of Using Airbnb. https://www.investopedia.com/articles/personal-finance/032814/pros-and-cons-using-airbnb.asp

Jaremen, D., & Nawrocka, E. (2017). AIRBNB COMPETITIVENESS ON THE HOSPITALITY MARKET SECTOR. Prace Naukowe Uniwersytetu Ekonomicznego We Wrocławiu, (473), 286-296. doi: 10.15611/pn.2017.473.26

Killion, K. (2018). https://www.hospitalitynet.org/opinion/4087341.html

Uenlue, D. (2018). Business Model Canvas Airbnb. Retrieved from http://www.innovationtactics.com/business-model-canvas-airbnb/

杨, 宁. (2016). A Case Study of the Explosive Development of Airbnb—From the Perspective of Users’ Perceived Risk. Modern Marketing, 06(01), 1-10. doi: 10.12677/mom.2016.61001