History and Founders of Airbnb

Discuss about the Regulating Business Innovation As Policy Disruption.

Airbnb is an e-marketplace, most popular for connecting hosts and travelers across the globe. It was founded in august 2008 by only two individuals. The company is now grow to a billion dollar company and stands as a one of the mooth sidest prominent in the sharing system with competitors such as Lyft and Uber. The first service was started in the San Francisco, California and now spread through more than 191 countries. Airbnb act as a virtual matchmakers that assist traveler to find and rent desired property among many hosts. Their website also assist the hosts to market their available house.  Joe Gebbia, Brain chesky and Nathan Blecharczyk are the founder of this company. Their simple idea to rent some available space forms a multinational company in merely four years.  This approach increased the value and revenue of the company to 31 billion dollar. They provide value to both side travelers and hosts as well while gaining profit from both side. The C2C platform enables hosts to gather rental money when traveler books their space while showcasing affordable and moderate houses all over the world.

Figure 1: Number of Airbnb listings

Source: (Zervas et al., 2015)

Airbnb constantly maintain their organizational strategy while implementing new approaches to improve and expand their business even more. There are some key partners associates with the business as such investors, photographer, guests and hosts. This key partners are directly involved to the company’s wellbeing. They partnered with Facebook and linked in to identify the user identities and provide them an ease access to the website. They also partnered with the Google to enhance and publicity and marketing strategy. The search engine optimization not only helps them reach to enormous people, it also assist the user to identify the desired rental place while searching by several keywords. They were successful to develop a network of loyal customers and hosts to utilize the C2C services.

Airbnb provides a convenient alternatives to a hotel that is easy to find and navigate in several locations. They also offers different type of experience in different cost range. Currently they are expanding their business by partnering with isolated resorts and villas. Where hosts are unable to showcase their places which are available for rental and situated in minor places. Throughout the eight years of experience they faced rapid progress as it hosts more than one million listing in over 191 countries. Airbnb offers individual housings that sort from tree houses to palace and everything in between.  Airbnb also donates to native societies in myriad ways. One study found that 400,000 Airbnb guests who visited New York City between 2012 and 2013 spent $632 million, supporting 4,580 jobs.

Airbnb Business Model and Partnerships

The future of the growth of Airbnb is mainly threatened by several kind of legal problems. There are several kind of the models of business that is mainly based on the use of advanced technologies. The legal based issues faced by Airbnb are also able to outperform the relevant based legislation. They are also able to encounter several kind of issues that would mainly be in relation with the general legitimacy or issues based on tax. 

It is extremely important for the company to maintain a successful relation with the public in order to satisfy their clients. The business of the hotels is primarily dependent on the perception of the public and their level of acceptance. It is the utmost responsibility of the hotels to manage, control and thus would be able to influence the public (McNamara et al., 2015). The main challenges that are included are to recruit and retain the right kind of people within the business in order to influence the public and lack of applicable skills.   

The implication of these kind of problems is that it would affect the long term relationship with the public. The lack of proper kind of people within the hotel business would affect the relation with the public. This would affect the profits within the business.

The business of the hotels mainly face different kinds of problems such as payroll, inventory tracking and scheduling. There should be a proper system of tracking of the inventory within the hotel business. The organization should maintain a track of the account section of the hotels in order to maintain a track of the profit within the organization.

The implications of the problems based on accounting might result in loss within the organization of the business of the hotels. This would have a major impact for the organization.

There is a high competition within the business of the hotels of Airbnb. The high level of competition within the market would need a high level of management in order to address all the issues. The satisfaction of the customer is a major issue of concern. Maintaining the reputation of the brand should be the major concern. Hence, a proper level of management would be essential in order to address all the issues.

Disruptive innovation theory propose a disruptive product or service must experience initial popularity then increase the extent as it arrives the mainstream market.  Airbnb’s development somehow follows the patterns perfectly. After several years of experienced it faces rapid growth over the past few years. After foundation in 2008, it was able to get a contract of a million room nights. The number increases rapidly in following years. In 2011 they had booked a total of five million nights and in 2012 the total of five million room nights. With the rapid grow in the business they faced overgrowth in terms of economical and popularity. However, they also faced several issues in earlier years which hider their exponential growth in some cases. They were able to solve some of their problems but some of them are still considered as a vital issue.

Challenges and Legal Problems Faced by Airbnb

Disruptive business models associated with the new approach or idea often faced several consequently encounter and legal issues. Airbnb also faced this issues due to the unknown models and environment. The business process of the Airbnb is a new approach that was developed by them. Airbnb adopts a new technology to offer a premium experience for searching a rental place. They faced several issues with general legality (e.g Relayrides and PayPal) and taxes (e.g amazon and OTAs). The company faces challenges on both sides. Firstly, there are allegations that Airbnb is avoiding the full tax and most of the rental activity are often illegal. There “informal sector” are offering low entry requirements and small-scale operations. Airbnb faced several law issues associated with the short-term rentals. The illegality spread through many countries and some cities prohibited short-term renting without special permits. For instance, San Francisco prohibited unlicensed rental agreements of fewer than thirty days. Nowadays, the short-term rental is only available in some geographic areas. There are also some regulation such limit of times per year a residence can be rented out and limiting the proximity of short-term rentals to one another.

There are several tax issues currently occurring heavily in the informal sector. The guests usually avoid paying taxes that must be charged in traditional accommodation sector. The sale taxes in the USA turn around 15%. For instance guests pay 14.75% (5.875 % occupancy tax and 8.875% sales taxes) for ranting a place in New York City. They are also charged $3.50 in night fees for occupancy and tax development production.  General opposition to tourism taxes, it has often strongly supported legislation to levy lodging taxes to fund tourism promotion. Airbnb is also familiar with the obligations but the company totally relies on the local law-enforcement to avoid consequences and stipulated their terms and conditions.

Figure 2: Security & privacy concern

Source: (Gassmann, 2013)

In earlier years, Airbnb faced several management issue as they were new to the market and had lack of business to follow the footsteps. The main challenges occurs to maintain the hosts and guests expectations and reality. There are several cases reported of damage and stolen goods by the hosts against Airbnb. For instance, a lady found her apartment empty after revisiting the guests. The guests were gone with all of hers furniture and other goods. Airbnb was also not directly linked with the issue. However, they feel responsible for the loss of the lady. Airbnb rents rooms through online matchmaking, drug addicts are often take advantage of the matchmaking to hire some places to do drugs. They often lefts the syringes and other drug related utilities in those places. This dynamic issues are hard to solve.

Organizational Structure of Airbnb

Figure 3: Business model of Airbnb

Source: (De et al., 2015)

The AirBnB is one of the most valuable organization in the world which is used by majority of the tourists of the world for the purpose of accommodation. The organization structure issue one of the major problem that is faced by many of the shareholders of the organization. The entire business of the organization depends on the partners or the host. A host is one who lends the tourists to use their homes or hotels by the platform of the AirBnB. One of the major drawback in this system is that if the host or the partner of the same is not proper then the client or the guest of the system may face major backlogs. Other than this one of the other structural problem is the client is not properly responsive that is the host does not know the guest, but has to believe in him due to the partnership of the AirBnB. This is one of the major structural drawback is the system of the organization that the entire process runs on believe and experience feedback, hence it becomes troublesome for the new users of the system no other end of the shareholders trust each other.

Figure 4: Organizational Structure

Source: (Bocken & Short, 2016)

The management team of the company needs to make sure that it does not make the home sharing business into a full time business. The management team of the company needs to take steps so that a home can be rented at most 180 days in a year. That will ensure that the homes are rented less than 50% of the total time. The company needs to implement this through a probation period of 12 months and analyses if it works properly before implementation.

• Public Relation

The second recommendation for the company and the public relations department would be to communicate properly with the government and concerned officials about the obligations related to home sharing (DaSilva et al., 2013). The laws state that the home rentals can only be charged if the renter provides extra services like breakfast and linen services. But the income tax is also implemented on the rental incomes which has created a lot of debacle. The accounting team of the company needs to stay concerned about the scenario. The company needs to make sure that a tax exemption is made to remove the tax fillings which are normally costlier than the collected tax.

• Marketing

Disruptive Innovation Theory and Airbnb’s Growth

The third recommendation for AirBnB Company would be to that the public relations department needs to work on their marketing programs (Aversa et al., 2015). The team needs to make sure that a portion of the funds that are collected from the hotel room department are used in promoting tourism. The hosts who want to join the program can be signed in and given exclusive offers to particular destinations. For rentals of short term, exclusive offers can be introduced.

• Rules & Regulation

AirBnB needs to enforce certain rules and regulations to avoid criticisms regarding inappropriate bookings regardless of proper pictures on the website (Biber et al., 2017). The company needs to take strict steps if the host cannot deliver proper access to the listing who are booked. If the listed books are changed or compromised then the host should be immediately disbanded. The information can range from absence of promised amenities and the total number of rooms or bedrooms. Prior to the booking, if an animal is present in the enclosure or if the place of the listing is unsafe and clean, strict steps need to be taken against the provider. If the bookings aer compromised then the management team needs to implement proper steps so that full refund is provided back to the customer and another comparable property of AirBnB is provided at the nearest location.

The current rules state that refunds are not applicable if the complaint is made after 24 hours. The company needs to properly address its public grievances efficiently to promote positive press. Recently, a lady complained about a faulty pipe in the apartment that she was renting. Instead of resolving the problem, the executive who was in charge of the  problem solving issues responded that nothing can be done and it was her fault that the pipe was leaky as the company checks each and every property amenities carefully before making it online. The company faced a huge backlash after this event.

• Enhance Commitments with guests and hosts

Another recommendation for the company that would be to check the hosts before they make their apartments online on their website. The issue is highlighted mostly when the customers have to share a room or apartment with the host. The management team of the company needs to come up with a solution of rules and regulations where the hosts are reviewed by their previous engagement with previous customers. A proper communication channel can be opened up by the company through which a proper negotiation can be made which can leave a back record for resolving future complications. Evaluation of the hosts is important to mitigate several legal issues that the company is facing.

This assignment has helped me to evaluate the real life issues of a particular organization and has helped me to understand how to address those issues. The management of the company really made some mistakes while preparing the basic rules and regulations of the company. A lot of research needs to be conducted as how much survey Airbnb takes to make an apartment ready for rental on its website. Future studies can include evaluation standards of hosts and apartments and how the business plans on expanding itself with the growth of tourism all around the world recently. I learnt the importance of a good public relations department in maintain the proper image of a company which directly affects its revenue stream. The marketing team of the company needs to be evaluated as well to analyze how the company managed to post a concerning ad despite being a billion dollar company with huge resources dedicated towards PR prospects. This will help to analyze why the company is facing so many lawsuits and management problems lately.

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