How Airbnb Disrupted the Hospitality Industry
Disruptive Innovation
A few weeks ago, we explored how disruptive innovation and digital cameras have changed the industry. Disruptive innovation is defined as a new product or service that has challenged incumbent businesses by finding a better solution that meets modern requirements, unarticulated needs, or existing market needs. However, disruptive innovation creates new market demand and adds value to the need for new products or services. Industry disruptors change everything about the industry:
- How customers view or engage with the industry
- How competitors move into the market in response to disruptors
- How disruptors maintain the market in their interest
- How consumer power shifts
In this generation, there have been countless innovations that have changed how we engage with these products or services. For example, the internet has changed the way we communicate. Video-streaming services have challenged broadcast networks. Music-streaming has changed the way consumers engage with artists and musicians, challenging record labels, and their value to both consumers and artists. One industry that has felt a mass disruption over the years is the hospitality industry with Airbnb’s rise.
The Hospitality Industry
Before Airbnb, consumers had two options for lodging in cities around the United States: hotel or motel. Often, the difference between the two was cost and quality. Consumers that could afford hotel rooms and consumers that could withstand the motel experience. Consumers were dependent on existing or established businesses in the market to provide opportunities for low-value consumers.
Airbnb has shifted this model. Consumers have become selling agents. Consumers themselves now have the agency to provide a service with reasonable price margins for the low-value consumer. For example, consumers are now able to provide reasonable price margins for large family vacations, and families looking to book large homes with cooking facilities, tools, and free parking for their holiday gateways. Airbnb shifted this model by placing the selling power in the consumers’ hands.
Low-End Value Consumers
The company was conceived shortly after founders; Brian Chesky and Joe Gebbia, moved to San Francisco in 2007 and rented out an air mattress in their living room and effectively turned their apartment into a Bed & Breakfast to offset the high cost of Rent in the San Francisco area. Even though Airbnb doesn’t own any properties, it has given agency to consumers by creating a rental platform with a vast host-base and profiles for anyone who wants to turn their homes into a mini-hotel or room rentals by offering lodging or homestays. This helped consumers who were looking for inexpensive places to stay. It also increased the tourism of the geographical areas and visitors to explore the neighboring vicinity. Airbnb claimed to be the most prominent lodging company with a million listing presence worldwide in 2017, overtaking hospitality giants like the Hilton, the Marriott, and Four Seasons.
This conventional hospitality market has to target budget-conscious travelers who wouldn’t have traveled due to the high hotel rate. Airbnb bookings predominantly consist of around 63 percent entire homes, 34 percent private rooms, while shared rooms account for approximately 3 percent of all listings. As Airbnb’s supply continues to grow, it puts pressure on the hospitality and residential markets.
The Experience: Community & Convenience
Aside from Airbnb’s low-cost options in comparison to higher-end market experiences, the appeal to Airbnb is convenience and community. Low-budget travelers now have access to an authentic local travel experience through their Airbnb bookings because they can directly communicate and/or even stay with locals in their very own cities. Current established businesses on the high-end and very low-end do not have this appeal. Hotels are known to provide a shiny, far away experience from the local environment and motels are more of a passing-through experience. Airbnb has provided a happy medium between authentic community, convenience, and price point.
Efficient Design
Since it’s beginnings, Airbnb has made efficient design a focal point of their company and thus an important piece of its success. Through Airbnb’s site, users are able to customize the experience they want when traveling. Airbnb uses a clean, user-friendly interface. When on the site consumers know everything they need to know at a glance.
As Airbnb’s main objective has everything to do with community, their design team also incorporates that into both their user experience and design. Their design team has put together a collaborative list of different ways to engage audiences through design and they utilize that knowledge in everything they put forth to their audiences. Airbnb knows that community is the core of their industry and they make that apparent, not just in their business model, but in the other avenues that they engage with people, both inside and outside of their company.
Here is a comprehensive list of different Medium articles that the design team at Airbnb have put together: https://medium.com/airbnb-design
Conclusion
As Airbnb continues to increase its presence globally, it has contributed to a shift in the lodging sector and how consumers perceive travel by utilizing the sharing economy and creating a peer-to-peer virtual trust between local hosts and visitors. In the future, we will also expect more investment activity by branded hotel chains into technology, particularly for guest reservation and property management systems. There is potential growth for multiple sources of income through Airbnb in 2020 with the strains of the pandemic and when borders will reopen to allow streams of tourists to flood vacation hot spots.
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