Airbnb In China
A – Sharing Economy
Sharing economy refers to an economic model where a P2P (Peer-to-Peer) form of business activity is performed where acquiring, sharing and providing access to services and goods are made possible, facilitated through an online platform (Rinne, 2017).
In the case of Airbnb, it follows the sharing economy model through allowing its users to rent out vacant or spare homes of listed members to literally anyone who uses the service (Strong, 2014). The company expectedly served 36.8 million people in the US alone in 2017, who rented a place and used their Airbnb account at least once in the year (Enberg, 2017). With 20 million users, Airbnb had 800,000 listings in around 33,000 cities in 192 countries by 2015, which is growing steadily, as the sharing economy based service moves to China, where it currently shows 80,000 listings of property owners willing to share their vacant or spare rooms to strangers (Strong, 2014).
B – Situation Analysis
- Global presence is the one strongest point of AirBnB which allows its users to use the service anywhere they want.
- Innovative, widespread advertising is another strength of Airbnb, as branding and User Experience is a strength of Airbnb.
- Airbnb offers security features such as insurance to its customers who are staying in a new place.
- Airbnb has a vast listing of potential hiring places all around the globe (Edwards, 2013).
- Reputation of the company remains at stake all the time, as it can be made or destroyed owed to the experience customers have while staying at a rented location, which is dependent on the hosts of the rental property.
- Inability to offer complete security to customers, as several external factors are involved and the service operates using an online platform.
- AirBnB’s services are available mostly in big cities and travelers interested in visiting rural areas, cannot use the service (Edwards, 2013).
- Airbnb can explore other sharing economy sectors that compliment with the company’s current services to differentiate from competitors.
- Extending AirBnB services to wider territories globally including lesser-visited areas and rural areas as well.
- Partnering with other services in the hospitality and tourism sector to offer a more comprehensive experience to customers (Euromonitor International, 2017).
- Different tourism laws in different countries hinder the business processes of AirBnB.
- Being an online-based company, Airbnb is vulnerable to listings that can be illegal and can harm the reputation of the company.
- Airbnb’s business model makes it dependent on the suppliers or room renters, thus requiring AirBnB to rely on them (Euromonitor International, 2017).
Five Forces Analysis
Threat Of New Entrants – Weak
- Airbnb is heavily invested and new entrants require a lot of investment to match the status of Airbnb
- Airbnb enjoys a global presence, which is impossible to be challenged by any new entrant
- As Airbnb acquires an established reputation in the market, which takes years to achieve.
- Airbnb enjoys supplier listing of more than 800,000 achieving which requires lots of time and efforts and without reaching which no new entrant will be considered as competition for AirBnB (Allan, 2018).
Threats of Substitution – High
- The hotel industry is the biggest substitution threat as customers can always opt for hotels and other accommodation services in the tourism and hospitality industry
- Hostels are also a source of customer substitution
- Also, competitors in the market are also growing and offer a medium of substitution
- Couchsurfing is another platform where the hosts all over the globe offer a free of cost couch for travelers to sleep on. The concept is also0 gaining popularity and can serve as a possible substitute, especially owed to the reason that it is free (Allan, 2018).
Customer Bargaining Power – High
- Customers have a broad range of different services from which they can choose the ones that suit them, offering them high bargaining power.
- Customers can choose which style accommodation they prefer based on price and location, enjoying a high bargaining power
- Potential competition in some areas where other similar services enjoy more local popularity offers customers more bargaining power.
- Airbnb offers different accommodation based on price, area and other characteristics, offering more bargaining power to customers (Allan, 2018)
Suppliers Bargaining Power – Low
- The direct company to Customer model of Airbnb leaves little to no room for supplier negotiation with customers.
- Airbnb works in individually with suppliers and customers, so even though suppliers have the opportunity to increase rents, they cannot do so directly with the customers.
- Airbnb sets some rules for its suppliers who rent out their spaces, where no negotiation is possible.
- Since such a model is not easy to come by often, suppliers usually abide by the rules set by AirBnB (Allan, 2018).
Competitive Rivalry – Moderate
- There are a number of rivals that follow the same model of business like Airbnb, however, they are smaller in size, thus offering more advantage to AirBnB.
- Airbnb has more listings than many of its competitors, making it less likely for them to come up as major competitors that hurt the company revenues.
- Airbnb enjoys far better global presence than many other competitors, offering it an advantage o0ver them, however, the company requires keeping an eye out for competitors.
- The Airbnb offers expensive and affordable renting option, while other services mainly offer either high-end rentals or all affordable options (Allan, 2018)
C – Marketing Objectives
The four marketing objectives of AirBnB include
- To reach out to more customers through partnering with other companies that certainly complement AirBnB services in the hospitality sector, like airlines, other travel and accommodation sites online, etc.
- Market AirBnB’s services based on the individual need of every country AirBnB operates in to attract more suppliers and customers.
- Moreover, to offer better services to customers through working more on safety-related issues and consequently extending them out to customers worldwide.
- Above all, they work as a community with suppliers to enhance the customer experience with the company.
D – Positioning of AirBnB
Airbnb caters to customers belonging to all social levels and accordingly offers luxury and affordable renting options to choose from. Most noteworthy, it is a global name and having the experience. First of all, they are offering customers exactly what they want in different parts of the world, makes AirBnB what it is today. Therefore, the main differential advantage of Airbnb is its online-based network, through which suppliers and customers both can check the level of service being ordered. The more the suppliers, the more trust customers have, and vice versa.
A – AirBnB’s Target Market In China
Airbnb is targeting Millennials (Born between 1982 to 2002) in the Chinese markets as they use technology more than others and are more likely to use Airbnb services. Demographics of targeted customers in China include
- Because, they are tech-savvy, educated youngsters aged between 16 to 35
- Have just entered or are maintaining their professional lives and are fond of traveling locally and internationally
- Above all, belong to the middle-income range and prefer affordable services.
B – Current Marketing Mix
Levels of Service
Airbnb offers Chinese customers both local and international-based services sighting the rise in Chinese tourists traveling around the world. Airbnb has managed to have 80,000 listings within the country. Serving it as a good option to be used even when traveling within China. Initially, to establish in China, Airbnb is looking to serve Chinese travelers that travel abroad specifically, so that they can determine a relationship with the company, after which more focus will be placed on expanding local travel to Chinese customers (Laurence, 2016). Also, Airbnb is focusing on offering quality to its Chinese customers while targeting them through offering better technology use in services (Lee & Amin, 2017).
Most noteworthy, Airbnb follows a mixed pricing strategy as it aims to offer service to both luxury-seeking and affordable rental options (Lee & Amin, 2017). Certainly, quality is the main strength of all services of Airbnb.
Airbnb is known for its advertising and promotional efforts (Ting, 2017), and following the same footstep, China has introduced its first brand campaign titled “Love makes Travel incredible”. Airbnb has changed its name to “Aibiying which means ‘make your love reach each other” in Chinese. Hence, this is done through sharing stories of travelers that used AirBnB services and promote the essence of love (Zheng, 2017).
AirBnB’s distribution channel of service is through its online platform, to strengthen which AirBnB employed almost 1000 engineers that take care of how User Experience (UX) can be made better (de Amicis, 2015).
C – Monitoring Mechanisms Of AirBnB’s Marketing Activities Effectiveness
- Since Airbnb uses an online platform it can monitor the success of its marketing strategies through online results received in form of visits, accounts, listings and website ranking offered by Google and other major search engine sites (Wheeler, 2014).
- Customer comments on AirBnB’s site on their experiences are also an effective way to monitor marketing strategies being applied.
- Revenues earned in China will also act as a source of monitoring the effectiveness of marketing strategies implied in China (Smith, 2017).
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Zheng, Z. (2017) Hoe Does AirBnB Increase Brand Awareness In China in 2017? [online] Retrieved from https://medium.com/@zoeyzheng/how-does-airbnb-increase-brand-awareness-in-china-in-2017-e06e70ca3e76