The Origin of Airbnb
On 1st December 2008, the National Bureau of Economic Research officially declared that the country plunged into recession in December 2007. The tremors of this economic nightmare were already being witnessed, not just in the United States, but by countries worldwide. Over 6 billion jobs were lost, and several billion-dollar companies filed for bankruptcy and it cost the global economy, more than $2 trillion. This was known to be the biggest economic meltdown in the US since the great depression Most economists call it the worst time for businesses. However, Airbnb was one such company which was not just built during this time of recession but also became a $1 billion company because of the paradigm shift brought along by the recession itself.
What was so special about the success of Airbnb?
Airbnb is a world-renowned online marketplace for short-term rentals that was founded in 2008. Over the years, Airbnb has grown rapidly and has changed the way people travel and think about accommodation. From its humble beginnings, the company has expanded to over 220 countries and territories, with over 7 million listings and hundreds of millions of users worldwide.
The most ironic attribute of Airbnb is that the idea of this business goes against the lessons which were deep-rooted in American culture. Since childhood, children in America and even in India for that matter are taught not to mingle with strangers. Most people have an inherent reluctance of breaking ice with complete strangers, let alone allow a complete stranger to live in their house. However, Airbnb saw a golden opportunity when it started during the recession. Every time there is a crisis of any kind, be it a political crisis, economic crisis or even the pandemic, there occurs a paradigm sight in social behaviour.
In this case, when the recession hit America millions of people were left jobless and with no money for basic survival. In fact, the idea of Airbnb was itself born when the founders, Brian Chesky, Joe Gebbia, and Nathan Blecharczyk, couldn’t pay their rent and started hosting strangers in exchange for rent. At the same time people who were travelling also needed an affordable place to live. Initially called the “Air Bed and Breakfast” the concept of Airbnb swooped people off their feet and changed the way the hospitable industry was seen.
One of the keys to Airbnb’s success has been its innovative business model. By connecting people who need a place to stay with people who have extra space, Airbnb has created a new and lucrative market for short-term rentals. The company’s online platform makes it easy for travellers to find and book accommodations that fit their budget and preferences, and for hosts to rent out their homes or apartments.
This business model has been incredibly successful, allowing Airbnb to become one of the most successful online businesses in the world. Airbnb operates on a simple concept: it allows people to list their properties online, and then guests can book them. Airbnb then takes a commission of the fees generated from the booking. This commission is usually a percentage of the total cost of the booking. Airbnb also offers additional services such as insurance and customer support. These services are also part of the commission taken from the host. The company also provides a platform for hosts to communicate with guests and manage bookings. Airbnb also allows hosts to offer additional services, such as airport transfers and city tours, to guests. Airbnb has also partnered with companies such as Uber and Lyft to offer car rental services. Airbnb has been immensely successful due to its low-cost business model. It has allowed it to expand its customer base exponentially, without the need for huge investments in marketing or infrastructure. Airbnb is now used in over 190 countries and has over 4 million listings.
In recent years, Airbnb has also diversified its offerings, launching new services such as experiences, restaurant reservations, and luxury travel. The company has also invested in technology and data science to improve the user experience and make it easier for hosts and guests to connect.
One of the most impotant factors which drives the success of airbnb is the trust established between the guess and the hosts. For this, the founders conducted several studies to find that people establish trust more quickly with people they connect to, aka with people who have the same origin, personal experience etc. To incorporate this, airbnb used artificial intelligence to match hosts with guests who are similar. Moreover, it also took reviews from the guests after their stay, so as to establish a particular host as a “verified one”.
The meteoric rise of Airbnb has been nothing short of extraordinary, with the home rental business becoming a billion-dollar company in just eight years. However, this journey has not been without its challenges. One of the chief difficulties Airbnb has faced has been acceptance of its business model. Despite being a hugely successful website, many countries and cities have been uncomfortable with the idea of individuals renting out their homes on a short-term basis. This has led to Airbnb being banned in some cities, particularly in Europe, where laws have been created to limit the growth of the company. In addition, Airbnb has been challenged by the need to remain competitive in a crowded market. They have faced stiff competition from traditional hotels, as well as other online rental services such as HomeAway and FlipKey. Airbnb has had to continually strive to differentiate itself from these other services to remain attractive to users. Finally, Airbnb has faced opposition from landlords who are unhappy about their tenants renting out their properties to short-term guests. This has caused problems for Airbnb, as landlords have sought legal action in some cases. Despite these challenges, Airbnb has continued to grow and has become a major player in the hospitality industry. In recent years, the company has diversified its offerings and has invested in technology and data science to improve the user experience and make it easier for hosts and guests to connect.
Impact of Covid-19 and the way forward:
The COVID-19 pandemic has had a major impact on Airbnb’s business. With travel restrictions in place, the demand for short-term rentals has plummeted, causing the company to lose significant revenue. In response, Airbnb has taken measures to reduce its costs, including laying off 25% of its workforce and cutting back on its non-core businesses.
Although airbnb has regained some of its momentum, the future of Airbnb still remains uncertain. Chesky and the leadership team rapidly concluded that significant business adjustments were required. “Travel as we know it has ended,” Chesky noted early on. “That doesn’t mean travel is over; it just means the travel we know is over and will never return.”
As a result, they refocused rapidly on Airbnb’s core business — home rentals — and streamlined supplementary offerings such as “Experiences” and regular hotel and luxury property listings. They also reduced previously aggressive wagers on areas such as transportation and media. Some of these were Chesky’s pet projects, and they appeared to have a better chance of realising the company’s lofty goals. But, the company’s founders realised that focusing solely on the core business was critical to the company’s future.
Consumer Concern
Airbnb examined its clients’ emotions and went to considerable efforts to address them. Given the uncertainties of travel limitations and potential epidemic surges, Chesky and his executives anticipated that consumers would be hesitant to make new reservations. As a result, they decided to implement a blanket return policy that allowed for last-minute cancellations and full refunds. Initially, the change was not well communicated, which generated confusion and anger among some customers and hosts, but the company worked hard to resolve issues and reassure consumers that it had their backs. As a result, it alleviated consumers’ concerns and persuaded others who were hesitant to book. Airbnb’s executives also understood customers’ fears about health and safety, so they introduced “Enhanced Cleaning” procedures and recommended hosts increase the time between guest stays. The changes were not mandatory, but hosts who adopted them were given a badge to display on their listings, thus conveying transparency and reassuring concerned customers.
Moving forward, Airbnb should continue to focus on its core strengths, while also exploring new and innovative ways to expand its offerings and reach new customers. This can include leveraging technology and data science to improve the user experience, expanding into new and untapped markets, and investing in sustainable practices to appeal to eco-conscious consumers. Additionally, the company should continue to focus on building strong relationships with both guests and hosts, by providing support and resources that help them get the most out of the Airbnb platform. To maintain its competitive edge, Airbnb should also stay attuned to the changing needs and preferences of its customers, and be quick to adapt to new trends and technologies as they emerge. By staying ahead of the curve and continually evolving, Airbnb can remain a leader in the short-term rental space for years to come.
Ashwath Garg
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