In the accommodations market, Airbnb appears to have a significant advantage over its competitors as it relates to regulations affecting the operations of its business. Case 2: Airbnb in 2018

Develop a business strategy that will allow Airbnb to meet local, state, and international regulatory requirements and motivate individuals to benefit from participating in this space of the accommodations market. Address the following questions:

• How can Airbnb ensure the ethical treatment of consumers?
• Should there be a separate strategy for the international component of their business model?

tho75109_case02_C6-C10.indd!C-6 12/18/18 09:23 PM

Airbnb In !”#$

John D. Varlaro Johnson & Wales University

John E. Gamble Texas A&M University–Corpus Christi

Airbnb was founded in 2008 when Brian Chesky and a friend decided to rent their apartment to guests for a local convention. To accommo- date the guests, they used air mattresses and referred to it as the “Air Bed & Breakfast.” It was that week- end when the idea—and the potential viability—of a peer-to-peer room-sharing business model was born. By 2018, Airbnb had seen immense growth and suc- cess in its 10-year existence. The room-sharing com- pany had expanded to over 190 countries with more than 4 million listed properties, and had an estimated valuation of $31 billion. Airbnb seemed poised to revolutionize the hotel and tourism industry through its business model that allowed hosts to offer spare rooms or entire homes to potential guests, in a peer- reviewed digital marketplace. Case 2: Airbnb in 2018

This business model’s success was leveraging what had become known as the sharing economy. Yet, with its growth and usage of a new business model, Airbnb was now faced with resistance, as city officials, owners and operators of hotels, motels, and bed and breakfasts were all crying foul. While these traditional brick-and-mortar establishments were sub- ject to regulations and taxation, Airbnb hosts were able to circumvent and avoid such liabilities due to participation in Airbnb’s digital marketplace. In other instances, Airbnb hosts had encountered legal issues due to city and state ordinances governing hotels and apartment leases. Stories of guests who would not leave and hosts needing to evict them because city regulations deemed the guests apartment leasees were beginning to make headlines.

As local city and government officials across the United States, and in countries like Japan, debated regulations concerning Airbnb, Brian Chesky needed

to manage this new business model, which had led to phenomenal success within a new, sharing economy.

OVERVIEW!OF! ACCOMODATION!MARKET Hotels, motels, and bed and breakfasts competed within the larger, tourist accommodation market. All businesses operating within this sector offered lodg- ing, but were differentiated by their amenities. Hotels and motels were defined as larger facilities accom- modating guests in single or multiple rooms. Motels specifically offered smaller rooms with direct parking lot access from the unit and amenities such as laun- dry facilities to travelers who were using their own transportation. Motels might also be located closer to roadways, providing guests quicker and more con- venient access to highways. It was also not uncom- mon for motel guests to segment a longer road trip as they commuted to a vacation destination, thereby potentially staying at several motels during their travel. Hotels, however, invested heavily in additional amenities as they competed for all segments of trav- elers. Amenities, including on-premise spa facilities and fine dining, were often offered by the hotel. Further, properties offering spectacular views, bol- stering a hotel as the vacation destination, may con- tribute to significant operating costs. In total, wages, property, and utilities, as well as purchases such as food, accounted for 59 percent of the industry’s total costs—see Exhibit 1. Case 2: Airbnb in 2018

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