Analysis Of Airbnb’s Market Segmentation, Competitive Advantage & Future Trends

Market Segmentation of Airbnb

Airbnb is an international privately owned organization that is online-oriented. Its customers are people that rent lodgings on short-term durations (Guttentag 2015, p.1195). These include hotel rooms, hostels, holiday cottages and apartments which aid in improving tourists` experiences. People use its websites to book the above-mentioned places from which Airbnb receives a percentage of the paid service fees for it does not have a real estate of its own. It was founded in San Francisco California in August 2008 to serve in the lodging industry (Zervas et al. 2017, p.690).

Segmentation involves dividing potential customers of a product in the market according to different characteristics which include common interests, locations or needs. The types of segments include geographic, demographic, behavioral and psychographic segments (Guttentag et al .2017, p.0047287517696980).

The market segments of Airbnb

They include (Oskam & Boswijk 2016, p.22):

The travelers/tourists

They come to hotels to stay for a short duration. Some stay indoors hence not spending money traveling from one place to another. The travelers can pay using the company`s portal. They can also filter the properties by use of location, amenities and the rent (Oskam & Boswijk 2016, p.30).

The hosts.

These are people who rent out their places to make use of unoccupied places or just to meet people. Hosts list their places as properties where people would be interested to live in on Airbnb. Airbnb is able to deal with the two segments at a go. The two segments complement one another (Zervas et al. 2017, p. 690).

The freelance photographers.

The company has a number of photographers worldwide who take pictures of the locations and good quality photographs of the property. Those high-quality photographers with good responses are usually paid directly by Airbnb. 

Analyzing the microenvironment of a business entails its strengths, weaknesses, threats, and opportunities.

Strengths

• It has a good customer service that works 24/7 as it is an online oriented business.
• It has established itself all over the world by having its services offered almost in every country.
• Airbnb has one of the most numbers of hosts listing in 33,000 cities.

Opportunities

• Other hotels have high prices and worse accommodation conditions that of Airbnb.
• There has been a growth in mobile app market which enables its customer to book hotels online and also make payments.
• Airbnb has new and big markets to exploit in countries where hotel services are expensive as it is affordable.

Weaknesses

• Airbnb`s ideas of their operations can easily be copied.
• It acts as a mediator between the hosts and travelers hence there could be conflicts which it could be involved in.
• It is a company that relies on the quality of services offered by the hosts and if they are poor, so does it get negative reviews.

Threats

• The operating costs are still high and growing each day due to increase in employees as a result of expansion.
• There is an increase in high-quality hotels with lower prices offered and good customer service.
• The threat of misunderstanding where someone rents a home and comes back to find it rented to another party.(CayenneApps, n.d.)

Airbnb model

This model defines the major activities, resources, customer relations, customer segments of Airbnb.

How the model works.

The host advertises their property along with their amenities, prices, and location on Airbnb`s websites.

Airbnb sends one of their photographers to the location of the property to take pictures.

Travelers once in the city of their choice, they select a property in which to stay in.

Booking is done through Airbnb where the tourists pay the amounts mentioned along with any transaction fee.

The travelers settle once the hosts approve of the booking. Later Airbnb pays the mentioned amount minus the commission to the host.

Competitive Forces Shaping the Industry

Later the travelers and hosts rate each other based on their experiences.

Strategic group of Airbnb

Airbnb serves in the lodging services in the hospitality industry.

The five Porter`s forces are used by a company to determine its ability to make profits and be attractive in the industry. These include; 

The threat of new entrants

This threat is moderate for the Airbnb company. It already has a strong foundation base and there is a small chance that any other company would come up to compete with it. There are also few barriers to entry. This company has a good financial base as it operates nearly in every country in the world. So for any other company to try to come up and run against Airbnb, it would have to invest millions of money in the project. It would also mean that it has to compete with the brand equity of Airbnb.

Threat of substitutes

This threat is high if there are low switching costs and many substitutes available. So, in this case, it is high because of the non-existence of the switching costs. The customers involved can easily choose to stay in a hostel, a traditional hotel or even choose couch surfing. This shows that there is a variety of options come in the near future (Porter 2008, p.25).

The customers` bargaining power

There no real alternatives around the world as per now. This has ensured that the bargaining power of customers is low. There are no economies of scale for customers because there is no way for customers of Airbnb to come together and get benefits of group buying (E. Dobbs 2014, p.32).

The suppliers` bargaining power

If suppliers are many, their bargaining power is high. It turns out that the bargaining power of suppliers is also quite low. This is because the hosts who rent out their property don`t have the alternatives of connecting with any customers. Airbnb acts as a mediator. The company has the power to control any relations between the travelers and the hosts. The suppliers don’t have a union where they can come together and demand their rights from the Airbnb company. This leaves them with a low bargaining power (Kumar et al. 2015, p.469).

Rivalry

The rivalry between companies brings down profits to a company. In this case, there is no rivalry or if any, it is a low-level rivalry because Airbnb is a big company that has already established itself and it is successful. There is no other company that has come out to offer better services than Airbnb.

Airbnb’s Competitive Advantage

The competitive advantage of Airbnb

The main competitive advantage is how its network is able to operate effectively. It operates globally hence a large scale network of operations. The higher the number of hosts or property owners listed by Airbnb, the higher the number of customers or travelers. The high number of bookings done through Airbnb leads to a high number of hosts. Supplies are created through reviews from people on the lists, people’s words and also competitors making Airbnb unique and different from its customers. Airbnb seems to have created its market all over the world hence it does not face competition from threats of new entrants. Any late entrants have faced major competition from Airbnb (Zervas et al. 2015).

Airbnb keeps up with the latest trends. It provides the latest services in the travel lodging industry. It changed from the traditional system through elimination of travel agents replacing them with Google and Airbnb which are automated. (Primc & ?ater 2016, p212).

It also has another competitive advantage through the provision of various services like what properties to stay in, there are direct interactive channels and there is ease of access to any information relating to Airbnb. This company has invested in Information Communication Technology where it has gained more online customers (Mittendorf & Ostermann, 2017).

Airbnb has reduced its transaction costs through the use of ICT hence helping its customers. It has replaced the Business to Customer model which was traditional with Customer to Customer model which is modern. This has made it be considered cybermediary. This means that it obtains profits globally, it enjoys technological economies of scale and low-cost structure. All this has resulted in large outcomes with low transaction costs (Lehr, 2015). 

Airbnb has attractive offers and quality services that have enabled it to grab a large market share. It connects parties and ever since its network has grown. It receives good reviews from its customers who are very satisfied with its services.

There is the assumption that there are homeowners whose whole or part of their property is idle because of extra space or traveling. Airbnb comes into the picture to help them make money through listing their property on Airbnb with photographs and best descriptions so that willing guests can rent them. The company facilitates the connection between the two parties and creates a forum for money transaction that is done online ensuring that the visitors pay the homeowners in the right way. The traveler chooses where to stay depending on luxury level, price, size and the neighborhood of the home. This is how Airbnb creates value.

Potential Changes in the Industry

Main changes/trends in the business that may affect the competitive advantage of Airbnb

Afford anything

This is not good for Airbnb in the near future because hotels in the few years to come, they will be competing to attract more guests. This may make them add more services relating to conferences or wedding bookings. Hotels will also increase the quality of their services that include daily housekeeping. Guests will have more choices and way better values. If the listing of property goes on, there may be an inadequate quality control for guests which may affect Airbnb performance once reviews are posted online.

Destination promotion

The world is becoming one global village. Although, Airbnb is located all over the world, there are cities where it has not yet established its services. In the near future, it should move to more new destinations to offer its services by creating a magical experience through customized services and offers. So this gap of being everywhere will require that Airbnb expands its market so that it prevents entrants of new companies in those regions.

Sustainability rules

Airbnb has a bright future. In the hospitality industry, many fear the regulations but it’s better to embrace them for clarity in operations. This will not bring about a stunt company growth. However, the clarification in the regulations will help expand the market and also bring in new participants in the industry. The fact the many people will be embracing the new regulations it’s not good for the Airbnb`s market share. It will start to face fierce competition from the new entrants (Jefferson-Jones 2014, p.557).

Catering to millennials

People between the age of 18 to 34 are expected to be traveling a lot. Whatever decisions the hospitality industry make should be to cater for this demographic group. This includes their traits and habits. For example, the adopt technology in their early ages and they like to interact at a personal level. In the future, hotels will need to please these millennials with easy checks in and the very best dining experiences. If this is done to them, they will advertise the businesses on the social media platforms. So, Airbnb has to pull together hosts with such quality services in order to keep being the international leader in hospitality. This means that it also has to invest in best photographers so that the pictures taken attract the millennials ( Green & Lomanno 2012).

Conclusion

Tech explosion

Many guests today comfortably use mobile applications and websites sufficiently. Hotels should have up to date offers and user-friendly programs. When hotels are used for conferences, there should be equipment of high quality and the staff should have known about it. Therefore, Airbnb should ensure that wherever it will have its future locations for the business, there is a good internet connection and only list hosts with the high tech so that it maintains its customers in the near future (CG et al. 2011,p.499).

Many international visitors

Leisure travels have been on the rise. Hotels should have services with many languages and tailored experiences for everyone. These include their culture and the diversity of needs by the visitors from all over the world. Photographers that enhance the experience of visitors by Airbnb should be able to communicate in many diverse languages. Airbnb`s staff should have the ability to meet every client’s expectations in terms of culture. The hotels Airbnb lists should have employees with such qualities (Gobble 2015, p.65).

Emphasis on health as well as the well-being

Many guests in hotels are interested in their health. Due to this, hotel managers are making the decisions to have pools, fitness centers and spas that are well equipped. Also, good decisions on foods, yoga spaces and purified air are considered. In accordance with this, Airbnb has to list hosts whose properties lie on a place with clean and purified water. It should also list majority hosts with these special services that include yoga spaces or even a gym for exercising (Line & Runyan 2012, p.477).

Damage control

Many unsatisfied guests quickly and easily complain through the Twitter, Facebook and Yelp applications. Those in-charge should easily be available to respond to such cases. If a company engages with its customers, it is able to create good relations with its customers. From this, it is advisable that Airbnb employees staff with good customer skills and have skills in the use of technology. This will enable Airbnb deal with cases that would maybe lead to its downfall in the future.

Airbnb is already an established company and the leading in hospitality globally.

In order to sustain revenues and profits of my company, he should:

Have a data platform

In the face of competition from Airbnb, hotels should have communication with the visitors all throughout their experience during their stay. For example, Airbnb has been able to keep up with the change in technology. It no longer relies on the traditional ways of communication. It ensures that once guests book, take them through the discovery stage and eventually welcome the review of their stay. A manager should ensure that guests understand their total journey. The staff should also comprehend everything done by the guests from the time they book and to the day the check. This ensures customers are satisfied with services provided hence improved profits. 

Have a platform for rating experiences

Airbnb`s platform helps rate their hosts so that it does not have to invest in trying to find out what hosts offer quality services. This helps improve self-governance. A manager of the hotel should have the platform so that it motivates the staff to work best and ensure visitors are satisfied with their stay hence attracting more guests due to the good reviews.

Be authentic

The hotel manager should come up with unique ways of offering services to its customers. Ensure that the staff understands the surrounding area. What is the culture emphasized in such places? This will attract people interested in the culture of such places. The more unique a hotel is, the more the guests and hence the more the revenues and profits ( (Shashou, 2016)

Conclusion

The hospitality industry globally is very competitive in terms of quality of services delivered to its customers. Airbnb has been able to remain a top company in this industry due to its services both to the hosts and travelers. Its technologic strategy has enabled it to have a thorough interaction between its hosts and travelers which has resulted to hosts coming up unique ways to ensure the travelers have a wonderful experience while they stay in the properties.

Every party involved in the hospitality industry should study the current trends in the market that would help ensure that the needs of the customers in this industry are met. For example, employees should be trained on customer service and the hosts should have the property that is built to attract the attention of the customers and ensure their stay is memorable. The intermediary companies like Airbnb should invest heavily in technology to ensure easy flow of communication between the hosts and the travelers.          

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