Airbnb has been growing tremendously over the past few years, with room availability reaching 1 million rooms in December 2014, exceeding rooms of the largest hotel chain by room number. The success of the company has been supported by its unique business model that minimizes its costs while positioning itself as the link between hosts and guests, and collecting fees from both sides. The business model is supplemented by the company’s culture that allows employees to continuously develop and test ideas to yield better results.
Is the current level of innovation sufficient to enable Airbnb to sustain its growth? Probably not – a lot more needs to be done.
During one of my first Airbnb experiences in the Dominican Republic, my friends and I booked a villa after contacting the host and inquiring about it, and headed on a 6-hour drive before receiving a confirmation from the host or agreeing on key pickup. The host was on a different time zone (6 hours ahead) and was already asleep. We luckily had a phone that could make international calls and managed to call him as we arrived to the neighborhood. We were even luckier that he is an early bird that wakes up at 5 A.M. and got access to the house.
I am positive that many guests had similar experiences, and in order for Airbnb to maintain a pool of loyal hosts and guests, these incidents should be minimized. Airbnb can further disrupt the industry by moving to the next stage of innovation:
- Keyless Access: in order to remove the hassle of hosts meeting up with guests to hand keys to them upon arrival, Airbnb should request hosts to invest in changing their doorknob to one that requires no key. The doorknob could either have a code that can be shared with guests upon confirmation, or could enable scanning a code using the app that gives access to guests.
- Business Traveler Acquisition: in addition to keyless access, Airbnb could create a point of contact in each community to enable companies to book multiple rooms within vicinity for business travelers. This could enable the company to increase its market share of business travelers.
- Consistent Offering: Airbnb hosts have different amenities provided by hosts across listings, which detoriarates the service when guests book a room without paying sufficient details to included amenities. This could reduce customers’ level of satisfaction. To improve this, the company should request all hosts to have a standard set of amenities that cannot be overlooked (towels, bed sheets, wifi access, etc).
- Customer Stickiness: in order for the company to enhance its customer loyalty and become the first company of choice for travelers, it should start a customer loyalty program that rewards its customers for their loyalty. To ensure that the reward system is fair, the number of points rewarded should be a function of the number of rooms per unit or dollars spent.
- Adjusting for Long Term Planners: Airbnb potentially loses customers that plan over the long term when the host of their selected room cannot decide on the availability of the room ahead of time. If a customer faces this problem multiple times, the company might lose him/ her. To avoid this, Airbnb should keep track of such incidents and force hosts to show a night as available only when they are sure that they can offer it to guests.
Airbnb has many advantages over hotels for customers, but it is expected that hotel chains will fight back legally and operationally to protect their industry and revenues. The company has been a digital winner thus far, but the future of its sustainable growth and expansion, and its winning strategy, will depend on its second level of innovation. To ensure its continued success, Airbnb should innovate to achieve further growth, create more value for itself as well as for hosts and guests, capture more of the created value, and increase customer loyalty. Despite its success so far, Airbnb needs to accelerate the introduction of these improvements, which will lead to increased revenues.