|San Francisco, CA, U.S.A
|USD 4.8 billion (2019)
|Booking.com, Expedia, Vrbo
Airbnb is a digital platform hosting vacation rentals. The company offers a website and mobile app that allow travelers to search and book short-term vacation homes and travel experiences for solo trips, family gatherings, and business trips. Hosts can share their extra rooms in the house, a whole unit, or an experience, such as a walking tour, cooking, and many more. The platform gives travelers the ability to search for accommodation or experience, save in wish list, and message hosts prior to booking to clarify the details. Apart from listing their homes, hosts can use the platform to analyze their income earned, update availability, prepare host guidebooks, and message guests. Airbnb has received USD 5.8 billion in funding from investors since founded, including USD1 billion during its latest round in 2020. Its latest valuation is reported to be USD35 billion. Let’s now go over a detailed SWOT Analysis of the company.
Table of Contents
Airbnb Strengths 2021:
- Strong market shares for being the pioneer of the housing “sharing economy”.
Founded in 2008, Airbnb is not the first website that acts as a broker between guests and hosts, however, the selection was limited to professional hosts (hotels, resorts) and vacation homeowners looking to rent out the whole house (Vrbo). Airbnb, the staple of the new “sharing economy” concept, allows people to share spare rooms in the house for extra income or just offsetting the rent. Airbnb is usually the first choice for solo travelers seeking to save some money from renting a proper hotel room or large groups that prefer staying in the same house with amenities that are not available with a regular hotel room. Options on Airbnb are not limited to rooms and apartments but could be RVs, treehouses, or cabins as well.
- Impressive year-over-year revenue growth rate.
In 2010, its revenue increased by a whopping 740% percent over that of 2009. Since then, this rate has never dropped below 40% as the company expands to many other international markets and distinguish itself from competitors by offering beyond accommodation.
- Strong financial back-up by private equity and investment banks.
Airbnb’s investor list includes big names like Morgan Stanley, Fidelity, JP Morgan Chase, and Citigroup, therefore raising additional capital should not be a problem with Airbnb, as long as the company keeps investors happy with its performance.
Airbnb Weaknesses 2021:
- The company has little control over the hosts’ actions during the trip, nor there is any oversight to prevent illegal activities happen on the property.
There have been many reported cases of hosts attempt to spy on guests with cameras in nooks and crannies around the property, providing them live feeds of whatever guests are doing. Some Airbnb properties, intentionally or accidentally, open their doors to human trafficking and drug dealers. Airbnb hosts are not trained hotel owners or tourism specialists; therefore, they might overlook the indicators of crime. Those scandals would affect the reputation of Airbnb.
- Hosts who rent out complete apartments or houses have an option to list on other competitors’ websites, such as Vibro or Booking.com.
Booking.com tries to compete with Airbnb by allowing non-professional hosts to list their properties on the platform that used to be exclusive for hotels and resorts. Hosts have little incentive to stay loyal to Airbnb, and by cross-listing on different platforms, they increase the chance of their properties being booked.
- The company is taking higher service fees from guests to maintain the platform and provide customer service.
The add-on fee pushes the final price that guests have to pay up, discourage them from booking on Airbnb, and search for alternatives on competitors’ website.
Airbnb Opportunities 2021:
- Sell vacation packages (accommodation, activities, transportation) so guests can plan an entire trip on Airbnb.
Popular OTA websites, like Expedia, offer car rental and flight booking along with accommodation so that they can earn more revenue on the guest’s trip. Airbnb could allow hosts to share their vehicles, with an additional fee, to guests as a part of a package or list them individually for people who only need rental vehicles. The company could partner up with airlines to offer seats on flights that are not usually fully booked at a discount for guests flying to booking destinations.
- The company should get further into the market of luxury rental properties (places that cost a few thousand dollars per night) to attract wealthy guests.
Traditional wealthy guests don’t book their rentals online but they have contacts that can find super-exclusive properties. However, the younger generation enjoys the convenience of the internet more than their parents, hence they may prefer an online booking for their USD20,000 vacation. Owners of those properties may as well increasing their income by renting them out more regularly with Airbnb, rather than keeping them exclusive for the super-wealthy.
- Collaboration with celebrities to have their properties listed on Airbnb for a limited period of time.
In the past, Elizabeth Taylor, Andre Iniesta, and Ronaldinho listed their houses or vineyard on Airbnb for lucky fans to experience. Airbnb will not only collect good revenue (some listings could run for USD15,000 per night) but also receive positive publicity and hypes.
Airbnb Threats 2021:
- Airbnb must expect more litigations and scandals in the future.
In many large cities, people buy or rent (long-term) apartments strictly just for Airbnb, pushing the rental price higher for local residents. Guests renting apartments in residential buildings also receive complaints about the noise and other disturbance they cause during stays. City officials are issuing new regulations on Airbnb activities to protect residents and the hospitality industry, such as hosts have to be full-time residents of the property.
- Competitions among the incumbents and with new entrants are fierce.
Since the business model is easy to imitate, incumbent booking websites are including apartments from regular owners to appeal to Airbnb guests, and they can take lower service fees from guests to undercut Airbnb. Owners have more options to list their properties, so they will gain higher bargaining power toward Airbnb.
- Recent scandals on guest privacy will discourage high-profile guests from booking with the platform.
Airbnb is attempting to attract wealthy guests with properties that cost thousands of dollars per night to rent, however, they have the strictest security and privacy standards.
Airbnb SWOT Analysis Conclusion:
Airbnb is a young company in a decades-old industry, however, it thrives above other competitors and has become the number one choice for many travelers, both business and leisure, around the world. Airbnb has an impressive growth since founded, and there are plenty of opportunities for the company to expand into. Despite the bright future, Airbnb has to address its weaknesses and threats in order to survive and thrive.
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Airbnb. (n.d.). Airbnb. Retrieved from https://www.airbnb.com/d/howairbnbworks
craft.co. (2020). Airbnb. Retrieved from Craft