Airbnb In China | An Academic Study

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Airbnb In China | An Academic Study

An Academic Study on 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

SWOT Analysis

Strengths

• Global presence is the strongest point of AirBnB, allowing 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).

Weaknesses

• The 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).

Opportunities

• Airbnb can explore other sharing economy sectors that complement with the company’s current services to differentiate from competitors.
• Extending AirBnB services to wider territories globally, including lesser-visited and rural areas.
• Partnering with other services in the hospitality and tourism sector to offer a more comprehensive experience to customers (Euromonitor International, 2017).

Threats

• 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 harm the company’s reputation.
• Airbnb’s business model makes it dependent on 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 acquired 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 effort and without reaching this, 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 hosts all over the globe offer a free of cost couch for travelers to sleep on. The concept is also gaining popularity and can serve as a possible substitute, especially because 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 of 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 accommodations 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 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 as Airbnb, however, they are smaller in size, thus offering more advantages 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’s revenues.
• Airbnb enjoys a far better global presence than many other competitors, offering it an advantage over them, however, the company requires keeping an eye out for competitors.
• Airbnb offers expensive and affordable renting options, 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 by working more on safety-related issues and 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 offers luxury and affordable renting options. Most noteworthy, it is a global name and has experience. First, they offer customers exactly what they want in different parts of the world, making 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, they 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 by offering better technology use in services (Lee & Amin, 2017).

Pricing Strategies

Most noteworthy, Airbnb follows a mixed pricing strategy as it aims to offer services to both luxury-seeking and affordable rental options (Lee & Amin, 2017). Certainly, quality is the main strength of all services of Airbnb.

Promotional Strategies

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 promoting the essence of love (Zheng, 2017).

Distribution Channel

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 the 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 monitor the effectiveness of marketing strategies implied in China (Smith, 2017).

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Sources:

Details

Allan. (2018) Airbnb Porter’s Five Forces Analysis. [online] Retrieved from http://www.expertwritinghelp.com/blog/2018/01/12/airbnb-porter-five-forces-analysis/

BDO New Zealand. (2018) Support For Maori Business In Aotearoa. [online] Retrieved from https://www.bdo.nz/en-nz/industries/maori-business

De Amicis, C. (2015) It’s Avoiding The Wrath Of the Government … For Now. [online] Retrieved from https://www.recode.net/2015/8/19/11617848/airbnbs-clever-strategy-in-china-may-outshine-uber

Enberg, J. (2017) Uber, AirBnB Lead The Way As Sharing Economy Expands. [online] Retrieved from https://www.emarketer.com/Article/Uber-Airbnb-Lead-Way-Sharing-Economy-Expands/1016109

Edwards, J. (2013) Check Out The Extreme Lengths AirBnB Will Go To In Order To Please Customers. [online] http://www.businessinsider.com/insane-lengths-airbnb-will-go-to-in-order-to-please-customers-2013-8

Euromonitor, International. (2017) AirBnB Inc In Travel. [online] Retrieved from http://www.euromonitor.com/airbnb-inc-in-travel/report

Laurence. (2016) Airbnb Officially Enters China: Lessons In MarketStrategies for Chinese Consumers. [online] Retrieved from http://daxueconsulting.com/airbnb-officially-enters-china/

Lee, Y, & Amin, H. (2017) Airbnb Will Quadruple Its China Tech Team To Target Millennials. [online] Retrieved from https://www.bloomberg.com/news/articles/2017-08-15/airbnb-will-quadruple-its-china-tech-team-to-target-millennials

Strong, C. (2014) Airbnb and Hotels: What To Do About The Sharing Economy? [onpine] Retrieved from https://www.wired.com/insights/2014/11/hotels-sharing-economy/

Ting, D. (2017) AirBnb’s New China Include A Focus On Quality – And Quantity. [online] Retrieved from https://skift.com/2017/11/10/airbnbs-new-china-strategy-includes-a-focus-on-quality-and-quantity/

Wheeler, D. (2014) $ Digital Marketing Strategies: An AirBnB Case Study. [online] Retrieved from https://www.searchenginejournal.com/4-digital-marketing-strategies-airbnb-case-study/95007/

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