Textbook: Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. J

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Textbook: Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. J. (2017).
Crafting and executing strategy: The quest for competitive advantage: Concepts and cases.
McGraw-Hill/Irwin. [edition 21e]

Answer the question

How has the consumer changed and how does Airbnb’s customer value-proposition meet this change?

CASE 02 Airbnb in 2016: A Business Model for the Sharing Economy John D. Varlaro Johnson & Wales University John E. Gamble Texas A&M; University-Corpus Christi n the future, you will own what assets] you want responsibility for," commented CEO and founder of Airbnb, Brian Chesky, concerning " not leave and hosts needing to evict them because city regulations deemed the guests apartment leas- ees were beginning to make headlines. the sharing economy Noah on The Daily Show in March 2016.1 Airbnb United States, and in countries like Japan, debated was founded in 2008 when Chesky and a friend regulations concerning Airbnb, Brian Chesky needed decided to rent their apartment to guests for a local to manage this new business model, which had led to convention. To accommodate the guests, they used phenomenal success within a new, sharing economy air mattresses and referred to it as the "Air Bed & in an interview wi As local city and government officials across the Breakfast." It was that weekend when the idea- OVERVIEW OF and the potential viability-of a peer-to-peer room- sharing business model was born. While not yet a publicly traded company in 2016, Airbnb had seen Hotels, motels, and bed and breakfasts competed immense growth and success in its eight-year exis- within the larger, tourist accommodation market tence. The room-sharing company had expanded to over 190 countries with more than 2 million listed properties, and had an estimated valuation of $30 billion. Airbnb seemed poised to revolutionize the hotel and tourism industry through its business Motels specifically offered smaller rooms with model that allowed hosts to offer spare rooms or ACCOMMODATION MARKET All businesses operating within this sector offered lodging, but were differentiated by their amenities. Hotels and motels were defined as larger facilities accommodating guests in single or multiple rooms. Ze entire homes to potential guests, in a peer-reviewed ties such as la digital marketplace. direct parking lot access from the unit and ameni laundry facilities to travelers who were using their own transportation. Motels might also This business model's success was leveraging what had become known as the sharing economy be located closer to roadways, providing guests quicker and more convenient access to highways. Yet, with its growth and usage of a new business It was also not uncommon for motel guests to seg- ment a longer road trip as they commuted to a vacation destination, thereby potentially staying at several motels during their travel. Hotels, however invested heavily in additional amenities as they were able competed for all segments of travelers. Amenities, ties due to Par- including on-premise spa facilities and fine dining, n other were often offered by the hotel. Further, proper ties offering spectacular views, bolstering a hotel resistance, as bed asts were crying fowl. While these tradi tional brick-and-mortar establishments were subject model, Airbnb was now faced with owners and tors of hotels, motels, and to regulations and taxation, Airbnb hosts to circumvent and avoid such liabilities ticipation in Airbnb's digital marketplace. I par instances, Airbnb hosts had encountered legal issues due to city and state ordinances governing hotels and apartment leases. Stories of guests who would Copyright© 2017 by John D. Varlaro and John E. Gamble.

Explanation / Answer

The consumers have shifted their preferred accommodation from the properties like Hotel, motel, guest houses to the homes that are shared with the guests as consumers. It is the change in approach by the consumers as they have started believing in the concept of shared economy. It has given them the benefits such as home like accommodation at a relatively lower cost, a peaceful accommodation will less noise, and accommodation in rural areas, generally preferred by the consumers. These changes in approach and preferences, made the Brian Chesky to start the venture named as AirBnB. The venture tied up with those flat or home owners who could rent a room or two for the guest as and when required. These networks of homes were presented as a digital marketplace for booking by the consumers in different areas (slowly spread in 190 countries). Since, these homes were not commercial property, then they were not regulated with additional taxes. As a result, the prices were low, and liked by the consumers. It built a preferential value proposition among the consumers’ mindset and they liked the idea. Consumers liked a quitter and non-regulated place with ahome like atmosphere and AirBnB catered it to them. Therefore, the AirBnB identified the consumers' preferences and catered that to the consumers to build a strong and positive value proposition.

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