An analysis of Airbnb is conducted based on Porter 5 forces scheme. We developed a review of the forces influencing hotels and lodging industry. In a second phase we see how IT is influencing this forces and can be turn to advantages. Finally we define Airbnb business model and conduct a SWOT analysis.

1. airbnb
Lora Julien – Morand David
IMBA IEA Lyon
2016
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2. Agenda
2
 Industry under Porter’s glasses
 Airbnb business model
 Structural change due to IT
 New market... New competition
 Conclusion

3. Industry
 Lodging and accommodation
 Service industry within hospitality industry
3 http://www2.unwto.org/content/why-tourism
Tourism
Hospitality
Lodging/
Accommodatio
n

4. Industry
 Market figures
 International tourist (overnight
visitors) have reached 1 133
millions in 2014 : +4.3%
 Continuous growth over last 5
years
 “UNWTO forecasts a growth in
international tourist arrivals of
between 3% and 4% in 2015”
4 UNWTO Tourism Highlights, 2015 Edition

5. Industry
5
 Market figures
 Europe 51% - Americas 16% - APAC 23% – AMEA 10%
 53 % travel for leisure
 14 % travel for business
 27 % travel for other purpose (visit relatives, religious, health
treatment …)

6. Industry
6
 Average occupancy in Europe
http://ec.europa.eu/eurostat/web/tourism/statistics-illustrated

7. Industry
7
 Total expenses in Europe
http://ec.europa.eu/eurostat/web/tourism/statistics-illustrated

8. Industry
8
Average daily rate RevPar
RevPAR = Rooms Revenue /Rooms Available
European cities hotel forecast for 2014 & 2015.18 gateway cities,Amsterdam to Zurich, March 2014, PWC

9. Industry
 Types of companies
 Multi-national chain
 Private hotels
 Hostels
 Types of clients
 Private tourism & Leisure
 Business travellers
 Convention / Event
 Tour operator
 Monopolistic competition
 Many suppliers with differentatied products and many buyers
 One should keep in mind that supply is restricted to available rooms and
can not be increased over demand
 When demand > supply : supply becomes inelastic to price
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10. EFFECT
OF
COST
EFFECT
OF
PRICE
Industry
10
 Porter’s 5 forces
Rivalry
among
competitors
Threat of
new entrants
Bargaining
power of
buyers
Threat of
substitutes
Bargaining
power of
suppliers
Joan Magretta, 2012, Understanding Michael Porter, BHrvard Business Review Press
PRICE – COST =
PROFIT

11. Industry
11
 Porter’s 5 forces
 Threat of new entrants
 High barriers to entry due to cost of and lack suitable location
 Adaptation to local culture under worldwide scale
 Legal and local policy can prevent settling a place
 Threat of substitutes
 Substitute can be internal between international and domestic
 No real outside substitutes
 Bargaining power of suppliers
 Low as wide range of suppliers compared to industry players
 Bargaining power of buyers
 As strongly segmented buyers have low power
 Only tour operator could have in specific segment
 Economic & political situations will change buyer behaviour
 Rivalry among competitors
 Strongly segmented market will keep rivalry aside with low fight on price
 Price inelasticity of supply for high demand prevent rivalry on price when demand is high

12. Value chain
12

13. Value chain
13
Building / Real
estate
• Find a place
• Build a place
• Rent a place
Marketing and Sales
• Advertise
• Reserve a stay
• Schedule arrival of guests
Operations
• Clean place
• Prepare commodity
• Secure place
• Provide info and rules
• Receive host
After sales
• Insurance
• Service on demand
• Complementary offers

14. Business model
14
 “…Airbnb is a trusted
community marketplace for
people to list, discover, and
book unique
accommodations around
the world — online or from
a mobile phone or tablet.”
 Airbnb is offering a
market place for both
hosts and travellers
https://www.airbnb.com/about/about-us?locale=en viewed on 01/12/2015

15. Business model
15
 Registration to Airbnb
is free
 Airbnb charges
 3% to travelers
 6-12% to hosts
 Airbnb guarantees
hosts’ location up to
800 k€
https://www.airbnb.com/about/about-us?locale=en viewed on 01/12/2015

16. Business model
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 So far Airbnb...
 ...owns no rooms...
 Is widely international
 Enables hosts to adjust price vs. demand
 Enables travellers to judge and mark hosts
 Expects 150 Million lost(*)for the year but…
 …Is valuated at 24 billion $(*) ...
(*)“The Secret Math of Airbnb’s $24 BillionValuation”, http://www.wsj.com/article_email/the-secret-math-of-airbnbs-24-billion-valuation-
1434568517-lMyQjAxMTI1MTA0NDcwMzQzWj accessed on 4/12/2015

17. Business model
17 “What’s an Airbnb ListingWorth in 2015?” http://skift.com/2015/06/19/whats-an-airbnb-listing-worth-in-2015/ accessed on 3/12/2015

18. Industry changed by IT
18
 Porter’s 5 forces
 Threat of new entrants
 High barriers to entry due to cost of and lack suitable location
 Adaptation to local culture under worldwide scale
 Legal and local policy can prevent settling a place
 Threat of substitutes
 Substitute can be internal between international and domestic
 No real outside substitutes
 Bargaining power of suppliers
 Low as wide range of suppliers compared to industry players
 Bargaining power of buyers
 As strongly segmented buyers have low power
 Only tour operator could have in specific segment
 Economic & political situations will change buyer behaviour
 Rivalry among competitors
 Strongly segmented market will keep rivalry aside with low fight on price
 Price inelasticity of supply for high demand prevent rivalry on price when demand is high
 No tangible assets as hosts owns locations
 Localization of offers using a global network community
 From BtoC to C to C : shared economy
 Community help judging service and recommendations are base of quality
 Hosts are integrated to development
 Competition is not promoted ; help from community is pushed towards hosts

19. Industry
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 Porter’s 5 forces changed
Rivalry
among
competitors
Threat of
new entrants
Bargaining
power of
buyers
Threat of
substitutes
Bargaining
power of
suppliers
EFFECT
OF
PRICE
EFFECT
OF
COST
PRICE – COST = PROFIT
Airbnb does not promote to make profit for its hosts but rather to value their assets

20. Building / Real
estate
• Find a place
• Build a place
• Rent a place
Marketing and Sales
• Advertise
• Reserve a stay
• Schedule arrival of guests
Operations
• Clean place
• Prepare commodity
• Secure place
• Provide info and rules
• Receive host
After sales
• Insurance
• Service on demand
• Complementary offers
Value chain influenced by IT
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 Airbnb has increased the perceived value of place using IT
and marketing
 Operational costs in on the side of the hosts
Building / Real
estate
• Find a place
• Build a place
• Rent a place
Marketing and Sales
• Advertise
• Reserve a stay
• Schedule arrival of guests
Operations
• Clean place
• Prepare commodity
• Secure place
• Provide info and rules
• Receive host
After sales
• Insurance
• Service on demand
• Complementary offers

21. Influence of IT
 Airbnb can be seen as a multi-sided platform
 It brings together two distinct but interdependent groups of
actors
 Here hosts & travellers are linked by Airbnb
 It facilitates interactions
 It grows on network effect (viral addition of people form each
group)
Business Model Generation:A Handbook forVisionaries, Game Changers, and Challengers,
2010, John Wiley & Sons : p 77-79
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22. Influence of IT
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 Technology
 Sophisticated algorithm for searching locations
 Build to be translated from the beginning
 Open source code to facilitate browsing
 Mobile application realeased
 Idea of sharing and community to developers
 nerds.airbnb.com
 Technical blog for developers
 airbnb.io
 Access to open source code

23. Influence of IT
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 Strong use of web tools
 Use of the network for promotion
 https://youtu.be/U3oICoTN1-M?t=635
 Google ads, Google analytics
 https://youtu.be/U3oICoTN1-M?t=728
 But also... Be present locally
 https://youtu.be/U3oICoTN1-M?t=260
Going for Global: 5 GuerrillaTacticsWhen the Slick Stuff Fails
Rebecca Rosenfelt, Growth Product Manager,Airbnb
https://www.youtube.com/watch?v=U3oICoTN1-M

24. Competitive advantage
 Brand recognition
 Notion of community is core value
 Focus on both hosts and travellers user experiences
 Wish list for travellers
 “Airbnb Neighborhoods” : guidance website
 Price setting tool (yield management) for hosts
 Photographers for hosts
 Defence of hosts (happened) vs local govt.
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25. Competitors
 Traditional hotel chain
 Direct competitors : HomeAway,Wimdu, 9flats
 Hotel Reservation sites : Expedia, Priceline
 Other market places : EBay,Amazon
 Travel site :Tripadvisor
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26. Competitors
26 “What’s an Airbnb ListingWorth in 2015?” http://skift.com/2015/06/19/whats-an-airbnb-listing-worth-in-2015/ accessed on 3/12/2015
+ market value extracted from yahoo finance on 3/12/2015 at 16pm

27. Competitors
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Airbnb
Direct
competitors
Hotels
Booking
sites
Market
Place
Travel site
Internet
Experience
Lodging
Experience
Qualitative representation of competitors vs. Lodging and internet
experience

28. •Financial situation yet not profitable
•Management may not be experienced
to sustain growth
•Volatility of hosts
•Highly dependable on economical
situation
•Law suit from local govt.
•Increase of competitors in premium
sectors
•Event at major city change business
(Paris’ attacks)
•Disinterest of guests as several
businesses are taking the host market in
big cities
•Buy by competitors
SWOT
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•Business travellers
•Trends from known people
•Increase of mobile devices use
•Extension into complementary offers
S
W
O
•Brand recognition
•Host and traveller services centric
•Lower price
•Market value attracts investors
T

29. Conclusion
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 Airbnb has created a full ecosystem based on IT
 It succeeded in breaking the trade-off of bringing a unique
stay experience at a low cost
 It would face threats from political law that can prevent
its hosts to gain advantage of renting their accomodations

30. Thank you
Lora Julien – Morand David
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