Airbnb: Online Travel Resource

free essayNatural division of human interest in the information field into segments forms a plurality of virtual communities that connect people by their passions and needs. Groups of people, who may never have met in the real physical world, have a chance to receive information in these communities and, moreover, influence the behavior and decisions of other Internet users. Virtualization of social and business structures affected all spheres of human life, including one of the most popular and economically developed around the world, that is travel and tourism. In the era of innovation and technology the Internet has become a forum of travelers, where the main governing body of their marketing motivation is social media travel. These online platforms provide travelers with the conditions for interactive communication: sharing information, comments, opinions, reviews and evaluations, all of which can help make certain tourist decisions. In addition, users acquire the ability of sharing information in real time, which greatly increases the quality of tourist trips.

Through these resources many users’ trust regarding the opinions of the same disinterested in the commercial benefit travelers has prevailed over reliance on traditional tourist organizations and agents. Services and products of the tourism industry related companies, such as hotels, restaurants, and other public institutions, are directly dependent on the opinions of people. Awareness of the prospects of marketing activities in the Internet has provided access to the World Wide Web to not only consumers, but also corporations and entrepreneurs aimed at building and intensifying online businesses. New media arena of international market presented such social travel resources like Airbnb, through which travelers are able to become a kind of active creators of information being not just passive consumers. The emergence of such resources in the online tourism has become a new trend that has spread over the major social and economic aspects of the travel industry.

Airbnb Background

In the mid-2000s, economists have noticed an interesting phenomenon: the attitude to the possession of things began to change in the society after the development of web-based technology. Thanks to smartphones and social networks, one no longer needs to go to certain company in order to book apartments or rent a car. Finding a person who is ready to lend his apartment for some time became possible with the help of the Internet and social networks. Many companies have adopted this business model and inspired entrepreneurs, who began to create social P2P travel community. The technological development of the concept of joint consumption in essence gives users an ability to cooperate with each other bypassing the giant corporations and brands. According to the Altimeter Group, it can be defined as follows: “The concept of joint consumption – is an economic model where the property and access are shared between the joint-stock companies, start-ups and individuals. This affects the market performance of new products, services and business growth” (Owyang, 2013).

Peering format began to grow rapidly in the tourism industry offering participants unspoiled by commercial motives unique experience of traveling based on openness and authenticity. One of the most famous examples of social travel resource of P2P format is Airbnb, founded in 2008 in San Francisco (Bonet, 2014). The idea of this project lies in the fact that the company’s website allows travelers to choose and rent a room, apartment or house directly from tenants without the help of agents or intermediary companies. Prices are set by the users themselves; for each transaction Airbnb receives an average of 12%.

Airbnb Core Web Technology

Every year, social media offers ever more innovative ways of relationship strategies of management between people, thus, between consumers and companies. In tourism, the World Wide Web has become a major tool for achieving marketing goals back in the mid-1990s. Development of web era enabled marketers to create static online brochures (websites, business cards). Those have evolved into more dynamic, multimedia resources. Thus, one of the major advantages of the Internet is the fact that travelers are able to interact in a virtual environment and acquire products and services in the tourism sector without the need of cooperation with intermediaries (Musser & O’Reilly, 2007). This is the core of Airbnb information technology. However, with the advent of Web 2.0 and social media Airbnb consumers acquired more functionality. Moving to a virtual environment, they became active creators and participants of travel online resources.

Airbnb Information Technology

If a decade ago, the tourism industry and travel were considered secondary, today it is one of the leading types of business. A large proportion of this success is given to social travelers’ platforms. The appearance of Travel 2.0 sites in the tourist area allows users to gain access to a huge variety of information from multiple sources in all segments of the industry and potentially attracts travelers by offering such benefits as relevance of information, varied content, accessibility and convenience (Grossman, 2007; Noti, 2013). Rapid development of the online travel market allows users to learn about the destination of travelling and find the best prices. Hence, it allows planning a perfect trip, renting housing and transportation, finding like-minded fellow travelers, and getting recommendations and testimonials.

Airbnb is a part of Travel 2.0 being one of the most popular social resources for travel among housing and accommodation resources. This platform allows reserving a room or apartment while traveling directly from the owners without the help of intermediaries. Based on P2P concept the company created the site on the Internet, aimed at gathering people who want to share their property or rent anything by charging users a small fee for each transaction. Since the work platform is built entirely on the idea of joint consumption, involving free access to housing people, Airbnb has implemented a set of functions to ensure the safety of its users. One of the latest innovations is Verified ID – a multilevel system of user data verification. As a part of this service, customer data are checked for identity offline and online, for which users need to provide contact information, social media profiles (Facebook, Google+), and scan photo, identification or passport (Geron, 2013).

Moreover, each element of the booking process at Airbnb that is booking, payment, communication between the tenant and the landlord, reviews and others pass through the platform, and, thus, the service keeps track of every step of the users viewing ads and before departure. An intelligence Airbnb system considers these factors, and then assigns points of trust to each object. If the apartment gets a low score, the system automatically marks that it is necessary to conduct further research. Airbnb argues that the system works well. Having six million residents in 2013, the company paid compensation only 700 times (Tanz, 2014).

During the period of Airbnb service the number of people using its services exceeded eleven million people. The number of participating cities is more than thirty-four thousand in one hundred ninety-two countries. Nowadays, with the help of the resource, one can rent not just a room or a house, but every possible type of accommodation, for example, castle, tree house or tent. In 2011, Prince Hans-Adam II offered Airbnb to rent his principality of Liechtenstein (for $70,000 per night), equipped with individual traffic signs and temporary currency (Sinmaz, 2011). In 2012, Apple gave Airbnb award as “Best Mobile App of the Year”, and the company was awarded as “Best service of joint consumption” and “The most disruptive service in 2012” (Westaway, 2012).

For many people, resource of Airbnb is an example of a joint platform of consumption, which shakes the traditional model of hospitality. Airbnb now is the dominant player in the travel industry and is in the limelight since some large companies accuse resource in illegal activities. Representatives of the traditional hotel business accuse services like Airbnb of unfair competition claiming that their activity diagram allows evading taxes. Authorities consider safe, control and taxation issues of popular P2P-resources. Airbnb is faced by regulations prohibiting renting people’s homes through the system’s site. In New York, for example, Platform User Nigel Warren was fined for $2,400 because they offered their apartments for rent. The judge ruled that Warren had violated a law prohibiting residents of short-term lease for a term of less than 29 days. In October 2013 the Attorney General of New York, Eric Schneiderman, sent Airbnb agenda requesting information about fifteen thousand partner companies operating in the state. Airbnb challenged inquiry to the State Supreme Court, and the case is still processed at the moment (Speri, 2014).

However, the Airbnb resource CEO, Brian Chesky, said that officials are to change their position learning about the achievements and positive impact of the company’s business in the tourism industry. This tactic is to convince officials of the significant contribution of Airbnb to the local economy. Airbnb already conducted a study that showed that, thanks to the resource Airbnb Paris received an additional $ 240 million: tourists who used the service received an average of five nights more in the city than travelers staying in ordinary hotels (Tam, 2013). Other studies have shown that travelers who choose to plan and conduct their travel using social platforms like Airbnb tend to spend less money on transport and housing, but invest in the local economy: cafes, restaurants, attractions, laundries, festivals and other events. In 2013, Airbnb commissioned a study on the impact of their business in the city of San Francisco and found a stunning effect. Since the Airbnb services were cheaper than the hotels’, visitors were living in rented accommodation for longer and, therefore, spent more money, around $1,100, while the tourists staying at the hotel spent $840. Moreover, 14% of respondents said they would not come to San Francisco in case Airbnb was not operating in this urban area. The same effect of travelers’ activity was shown in the study in Portland, as in 2013 Airbnb brought to the city’s economy $61 million. Airbnb guests spent nearly 3.9 nights in Portland (compared to 2.1 nights spent by guests in traditional hotels of the city) and spent twice bigger amount of money than hotel guests ($ 815 versus $ 360).

The new generation of travelers is willing to spend their time in most authentic atmosphere, not as temporary guests, but as local ones. To do this, they use public transport, prefer local little-known places to popular tourist locations, and most importantly, try as much as possible to communicate with the citizens. On the one hand, such investments in the economy of cities inevitably cause a positive attitude towards P2P Travel community. Going back to IT Management, it is noteworthy to tell about Airbnb web homepage that looks like one has not left own native place, meaning conveniences, but moved to a new place.

Airbnb Indirect Competitors

Another project in the field of housing, which quickly gained popularity, is Couchsurfing, a travel social online resource created by the American Casey Fenton in 2003 (Ellis & Knight, 2014). The idea of the platform is that travelers all over the world during the trip are free to stay in the homes of strangers. Anyone over the age of eighteen can create online profile with information about own dwelling places and host travelers or become a guest of other users. On mutual terms, residents can also spend time with their guests, arranging tours, attending events, and sharing knowledge and experience. Every guest has an opportunity to leave a positive, neutral or negative feedback on a profile page; thus, taking part in the formation of opinion and rating of the party for its future guests. In addition, Couchsurfing users unite in communities of interest, talk on the discussion forums and resource offline. Couchsurfing concept is built on the idea of human relationships and cultural diversity.

If the case of a joint Airbnb system consumption is expressed in owners’ entrepreneurial activity, then Couchsurfing P2P structure is reflected in the participants that include people of different nationalities and religions united by the common interest of cultural exchange and search for new friends. However, despite this, emotions are an important part of Airbnb as well. On the Airbnb site one can find reviews from our guests with references to friendship, love and comfort. Members in this case relate to the content of social media as a valuable source of information proving the reliability of the other members of the community. And yet, despite the cultural values of Couchsurfing, most social Travel resources with the idea of joint consumption are based on e-commerce. Airbnb success influenced the development of a huge number of P2P start-ups in various sectors of the tourism industry. Thus, besides Airbnb and Couchsurfing, there are HomeExchange, HomeAway, HouseTrip, FlipKey, InterHome social resources in apartment’s rent industry.

Airbnb Competitive Advantages

In 2011, Fred Wilson, venture capitalist, said: “Airbnb confidently moves towards becoming eBay-like resource in the segment of residential spaces. I am sure that in the future this business will cost a billion”. In April 2014 a consortium led by TPG invested more than four hundred and fifty million dollars in Airbnb, upgrading business approximately up to ten billion dollars. As a result, Travel Community rental property has become one of the most expensive start-ups, along with companies such as Dropbox and Xiaomi, and its value exceeds the capitalization of some public companies like Wyndham Worldwide and Hyatt Hotels, which are operating international hotel chains. Brian Chesky said that the number of booked nights using the services of the Airbnb Company will exceed that of Hilton Network. Hilton Network of international hotels, a global leader in hospitality, has 191 thousand rooms. To maintain the 50% of occupancy the amount of booked nights should be equal to 95.5 thousand, which on an annualized basis will be 34.8 million nights. Hence, in 2011, Airbnb sales totaled 2,000,000 nights, but throughout the year there was a rapid sales growth and by 2012 the number of nights booked exceeded 15 million. However, the well-known analyst Michael Patcher believes that Airbnb will be able to reach the figure of 100 million nights a year in the future.

Airbnb is constantly improving its performance trying to upgrade every business step. The distribution of open booking policy is one of the main challenges of Airbnb. The company suggests that open booking should be BYOD based and you should bring your own device. The gist of it is that the company allows employees to use personal laptops and smartphones. A survey conducted by Cisco in 2013 showed that employees of the company can save up to 37 minutes of working time and bring the company an additional $ 350 per week using their own technique.

Airbnb also believes in the need to globalize its operations. In 2012, the resource acquired Localmind startup, which allowed users to learn about new places through check-ins and comments of other users. In addition, the company has acquired Crashpadder, a similar resource for rental housing. Startup took quite a strong position in the UK, and by eliminating its main competitor, Airbnb automatically became a leader in the local market. Earlier Airbnb also acquired NabeWise startup with a team that developed a new feature called destination, which offers travelers to share information on nearby establishments such as shops, cafes and restaurants online at Airbnb. This increases customer loyalty; also it can serve as a basis for local advertising business, which will be able to compete with the likes of Google services and Yelp. Nevertheless, Airbnb is more focused on the extension of the number of its own services, not due to the acquisition of other startups. Community features are no longer limited to a single housing as Airbnb built its own ecosystem and cleaning service known as Handybook is already active in San Francisco, Los Angeles and New York (Lawler, 2014). There is also an open taxi service to transport people from the airport and keys transfer service (the owners are not always free to share the keys).

Conclusion

The most important change on which the success of social travel resources and Airbnb in particular is based is that online marketing has shifted the travel industry from provider technology oriented to consumer technology oriented. Availability of Internet connection and a variety of online information is increasing with each passing day, and, therefore, there are ever increasing demands of consumers. Travel does not lag behind other industries in the development of modern technological trends in order to expand existing business and give new opportunities. One of the main ways to develop social travel resources at both global and local levels is mobile technologies. Airbnb proved that the open booking service is the best opportunity to travel regardless of the provisions of the corporate traveler’s policy.