The digital movement has recently disrupted many industries, to the detriment of many incumbents in such industries but to the benefit of consumers and society. Digital disruptions have happened with such speed that it has taken industries completely by surprise, requiring governments to play a part in helping industries adjust to such disruptions. The sharing economy is one of these disruptions, acquiring scale in recent years with high prospects of growth in the future: McKinsey projects the sector’s revenues to reach $335 billion globally by 2025.  Airbnb is a company that capitalized the sharing economy to disrupt the travel industry big time, building a business and operating model leveraging digital capabilities.
The hotel/lodging industry has experienced disruption in the past; for example, in America the industry moved from only luxury hotels for the wealthy, to mainstream chain hotels once the development of Interstate highway drove more family travel in the country, to the offering of timeshares, and then the birth of boutique hotels.  And now it is at the inflection point, with the likes of Airbnb challenging the status quo with their sharing platform.
Characteristic of the sharing economy, Airbnb found a way of “sharing excess capacity and improving productivity” of residential real estate assets.  Their business model consists of a digital platform that serves as a marketplace for anyone with as little as a room to “run their own B&B” by renting it out and market it themselves.  People looking for lodging can access this platform and find accommodations to their liking. Airbnb captures the value of enabling a match of a host and a guest via the platform by charging a commission to both of the parties: “3% cut of each booking, along with a 6% to 12% service fee from guests.”  
To make this a reality, Airbnb’s operating model hinges on the value of its digital platform. Airbnb owns no real estate, as it relies on hosts to join the platform and list their own property. Airbnb verifies hosts, in addition to providing a rating system for customers to rate their hosts based on their experience. . Moreover, hosts also get a chance to rate customers. Additionally, Airbnb provides a $1 million host protection guarantee to hosts in cases where there might be damage to their homes as a result of renting out their property, and it also provides host protection insurance.  The element of trust that this builds is essential in the sharing economy, to ensure that the platform enters into the virtuous cycle of success: more customers lead to more hosts which leads to more revenue, and so on.
Airbnb competes aggressively with the lodging industry, providing options that are “21.2% less expensive than hotel rooms, and a private room in an apartment is on average 49.5% cheaper”.  This is beneficial for travelers, providing a high quality, low cost option to use during travels. Furthermore, property owners have the ability to generate income by renting out any available space: from a sofa, to a bed, to a room, to an entire house; creating huge value to hosts. Airbnb has expanded their lodging offerings to
Airbnb has been unarguably successful, with its valuation at “$30 billion, Airbnb is the fourth-most valuable venture-backed tech company in the world”.  With more than 2 million listings in more than 190 countries and more than 60 million guests, Airbnb has become the largest accommodation provider.  Such growth has resulted in major disruption in the industry, resulting in challenges that Airbnb is facing as it continues on its path to growth, particularly with regards to regulation. Local governments are concerned that a host can list them through Airbnb with commercial intentions, as opposed to additional income stream due to spare rental space, among other things. For example, New York has recently passed a law “that carries fines of up to $7,500 for certain short-term rental listings…against those who offer to rent out their entire living space for less than 30 days.”   To address these challenges, Airbnb should enhance their verification processes in order to vet that individuals who are listing properties are indeed listing just one property, and not doing so out of commercial reasons. Airbnb needs to proactively work with governments to shape regulation as cities adjust to the new model, given that these regulations, especially in key markets like New York, can pose a threat to the company. Moreover, Airbnb should continue expansion to other services, such as it has with enabling people to assist property owners in their neighborhood to host Airbnb stays, as well as be able to host “experiences and tours” such as “sumo wrestling, truffle hunting and off-road biking”; this will help the company to diversify and grow .
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