Restructuring Airbnb to Attain Economic Dominance - Case Study Example

Outline and Introduction Name: University affiliation Executive Summary The shared economy is a fast growing economy. People are gaining profits from renting out their extra spaces, secondary homes and vehicles. This kind of economy has led to establishment of Airbnb Company which is based in San Francisco in US. The company helps hosts to rent out their property to the guests who then pay the renting fees and commission to the company. The company then charges the host a certain percentage for the completion of the deal. The company has various levels of stakeholders. There is top executives who need to be kept satisfied with the activities of the business. There is also Y Combinator, which is a partner and needs to manage the activities of the company closely to attain profits and retain its shares. There is also the public, the community, future recruits and family members of the employees whose activities needs to be monitored by the business for it to succeed. There is also press, interest groups and trade associations which need to be informed on the activities of the company. The company has various strengths like having a strong booming economy and helping the struggling home owners to pay their mortgage. It has weaknesses like poor customer relations and unclear methodologies of handling crises. It has opportunities of a growing shared economy and desire to visit new areas. Unemployment and laws hindering its performance are some of the threats. The business has poor customer relations, disclosure of guest details to the host, poor host property protection tactics and laws preventing its performance. The company should carry out staff retraining to improve customer care services. Also, it needs to set up policies to protect host property and provide host with comprehensive information about the guest. It also needs to avoid operating in prohibited areas to avert court struggles. Executive Summary 2 Introduction 4 Objectives 4 Systems Modelling 5 a. Rich Picture 5 b. Use Case Diagram 7 c. Context Level Data Flow Diagram 8 Stakeholder Analysis 9 i). Stakeholders Identification 9 b. Stakeholders analysis 9 SWOT Analysis 12 Problem Identification 13 Possible Solutions 14 References 17 Appendices 19 i). Appendix 1: Problem 1 19 b. Appendix 2: Problem 2 19 c. Appendix 3: Problem 3 20 d. Appendix 4: Problem 4 21 Introduction Airbnb is an online site where people website for people lease out their dwellings either as whole or part (Grout 2013). Also people can rent their vehicles and other means of transport. All these are referred to as spaces by the company. It was established in August 2008 by Brian Chesky and Joe Gebbia at San Francisco (Yeung 2013). As of 2013, it had over five hundred listings in thirty three thousand cities spanning a hundred and ninety two countries (Airbnb 2013). It is a private corporation held and managed by Airbnb, Inc. To use the site, you must register and create an individual online outline. You can be a host (space owner) or guest (in search of a space). The host profile includes features like price and amenities to enable the guest choose the best option. The services are offered online. Airbnb is a growing business that makes use of secondary residences of its customers bringing in a new kind of market which is a shared financial system (Airbnb 2013). Objectives The main objective of this report is to make leasing of apartments and other belongings more inviting thus attracting a greater market and retaining the initial one. This can be implemented by putting up strategies that make the hosts more willing to rent their property. The other objective is to make customer relations and services more improved. This is by minimising the time delay of responding to customer complaints and concerns. The last objective is to ensure host property security during the leasing period. This is by ensuring that there are not damages incurred on the property and if they happen, the person responsible will pay the damage fee. Also, putting an improved insurance of host property will boost the host property security and compensation procedures. Systems Modelling a. Rich Picture The intentions of the host are to get optimum profit for the services he or she offers. The host then offers apartment and space services to the company if there is profit in such activity. The company then offers accommodation services to the guest. The guest opts for the company if there is value for money and quality services. The guest is also interested with the public image of the company based on the past operations of the company on the hospitality industry. Other booking companies feel threatened due to market competition which stiffens the market competition between them (Business 2014). The government is concerned about the legality of this new kind of economy. It checks whether it adheres to the existing legislations. If it does not, it puts checks on it, thus controlling it. The employee is concerned about the earnings. He or she tries to reason whether the income is sufficient. If it is not, the employee opts for another company in the market where the earnings are better. The community is concerned about its security as a result of the new company. Also, it evaluates whether the company is causing a disturbance or not. b. Use Case Diagram The host pays a certain commission to Airbnb for booking purposes upon completion of the deal. It then avails the space to the company for renting out. The host then reserves the space for use during the specified period. The guest pays a certain amount of money to Airbnb Company which also includes a booking commission and space payment. The guest then books a space after paying the money. After booking the space, the guest plans about the travel including the transport charges. The company after receiving listings of space from the host, it reserves the spaces for renting. It then avails the space for use by the guests after they pay a certain fee. c. Context Level Data Flow Diagram The customer enters the login details. The system then verifies the details and determines whether the customer is a host or a guest. If the customer does not exist, the system offers registration option to the new customer. Then, the customer fills the data and is stored in the customer information database. After logging in, if the customer is a guest, the guest searches for space listings. The guest then views host details and selects the space to choose. The guest pays the transaction fees to the company which then carries out the transaction. The company then pays accommodation fee to the host. If the customer is a host, he or she views the guest details. After receiving accommodation fee, the host reserves the space. The space is made available to the guest who then plans travels and visits the space. A customer who is not registered cannot use the system unless first is registered by the system. The system is online based and transactions are carried out via the web. Stakeholder Analysis i). Stakeholders Identification The following table gives the list of stakeholders of Airbnb Company. Top Management: Chief Product Officer (Joe Gebbia), Chief Technology Officer (Nathan Blecharczyk) and Chief Executive Officer (Brian Chesky) Shareholder (Y Combinitor) Government (State government, federal government, foreign governments) Employees of Airbnb hosts Trades associations Business analysts guests The press Prospective customers Future recruits Interest groups The community The public Family members of the staff b. Stakeholders analysis There various strategies of managing the stakeholders of Airbnb company. These strategies are highlighted below: a) The business should collaborate with the top management. The ideas and opinions of the top executives should be considered. b) The business should involve its partner, Y Combinator for the business to succeed. Ideas from the partner should be considered (Peng 2010). c) The business should defend itself from family members, future recruits, community, and the public. It should strive to portray a good image to them. d) The business also should try to collaborate with the government and the employees. It should consider the interests of the employees and ensure good working environment. It should also follow the government expectations of it and the regulations that guide its operations. e) The business should also involve the hosts and the guests in its plans. These are the customers of the business and therefore important in the development of the business. There should be good treatment of the hosts and the guests and providing their security in the premises. f) The business analyst should be involved in the operations of the business. He or she may not be a permanent employee of the business but is a very essential person. This analyst will provide market analysis and advice the management on the best market policies to implement for the business to grow. g) The business should monitor the information the press acquires about it. Sensitive information should not be given to the press as it might cause consequencies. Also, its flaws should be monitored so that it does not destroy its public image and customer trust. h) It should also keep the prospective customers about it. Its successes, advantages and good usage should be relayed to the potential market to increase the market numbers and boost its economy. i) The business should closely monitor the activities of interest groups and trade associations. The activities of these groups involving the business should be closely watched to preserve the public image and market. Their critics should be evaluated and if based, action for change implemented. SWOT Analysis The following table gives the analysis of the company’s strengths, weaknesses, market opportunities and threats. Strengths (S) Weaknesses (W) Satisfies a wide range of customer desires which were formerly offered by hotel complementary companies like transport services Helps struggling asset owners pay their credit charges Offers a rating service for the features of stay by the guest Has varied rates hence caters for people with different income Has a strong booming economy Penetrates new places not benefitting from tourism before There is a wide market due to aggressive advertising methods Poor customer relations Controlled by individual host’s interests Inexperience of some of the hosts on hospitality procedures At the moment trying to attain financial stability (Startup School 2010) There are no clear policies to handle issues like guests refusing to leave or guests causing damage to host the property There is no established market reputation No thorough market experience of the top management Limited staff members Opportunities Threats There is a growing sharing economy market A growing tourism market with tourists liking to reside in new areas The fixed renting rates offered by hotels are not affordable for everyone The growing unemployment rates affect the market There is stiff competition with prominent hotels There are various laws that prevent residents of certain states from leasing apartments Problem Identification There are various problems of interest affecting this business. These problems are hindering the business from aggressively growing. These problems are given below: a) Poor customer care service methods which appear to have originated from inexperienced customer relations officers (Parr 2011). There is long delay in responding to customer problems and complaints. This causes tension and distrust of the company from the hosts. The hosts, after the setbacks, may lose interest in renting out their spaces again to Airbnb. This causes a decline in market numbers of the company causing a decline in its earnings. (See appendix 1). b) Poor protection of host property from vandalism by the guest which may cause serious emotional and financial problems to the host (MCT 2014). At times the guests occupying whole of the apartment or vehicles may intentionally damage that property. There are no present policies to prevent such damages or compensation process to be followed in case such damages occur. This poses a great risk to the host property which can be damaged at will without consequences to the guest. (See appendix 2). c) Hiding or rather disclosure of comprehensive personal details of the guest to the host preventing familiarity and communication between the guest and the host (Tate 2011). There is no prior communication between the guest and the host before the booking deal is complete. This hinders comprehensive knowledge of the guest by the host and the vice versa. At times the apartment or vehicle usage approaches may differ between the host and the guest. A prior communication before the deal is complete ensures that the host gets satisfactory usage of the property while the guest chooses the best compatible place. (See appendix 3). d) Presence of laws preventing temporary renting of individual property in some cities which hinders operation of the company in those cities. There are certain states like New York where there are laws protecting the hotels from collapsing (Mathias 2013). These laws prevent individual property owners from temporarily leasing their property to other people. This prevents the hotels from competing with individuals in the hospitality industry. There are a times the company was litigated and fined. This slows the company’s operations in that area and hence cutting its market. (See appendix 4). Possible Solutions The company can take various options of solving these problems. Among the best options are outlined below in this report. a) Re-educating the staff on customer relations to solve the problem of inefficient staff. The re-education of staff and fresh education on ethics of handling the customers will boost the company’s customer services. This can be implemented by carrying out trainings to the customer service officers or taking them to relevant conferences. Alternatively, the company can employ professional customer relations officers who have a thorough experience with handling customers. Few experts can be introduced into the staff who will be guiding the other staff members. This will help retain the initial market of the company. It will also act as a way of creating new market based on user experience advertisements where the customers inform others. b) Initiating a “round the clock” customer service. By initiating a 24 hour customer service which promptly responds to customer needs and complains will provide assurance to the customers. This service should be effective and giving the necessary advice and help to its customers at all times of the day. This will help solve customer concerns at any time of the day. This method can be implemented by putting customer service employees on as shift roster. When the working hours of one employee ends, another takes the docket and the routine continues. This will make it easy for the customers to get help whenever they need it no matter the time of day. This will also help in retaining the initial market and minimise the customer complains of inefficiency of the customer service. c) The company needs to put in place an effective insurance policy to protect the host property from vandalism by guest(s). This will ensure that the host property is compensated in case it is vandalised by the guest. Also, they need to put in place security measures to prevent such vandalism acts in the first place. This will prevent incurring unnecessary costs at the same time ensuring the host property security. A guest before checking in needs to sign a legal document of preserving and not damaging the host property. Also, the guest should be charged a certain fee for the damages incurred. This will alleviate vandalism intentions from the guests. d) The company also needs to put in place clear host – guest policies. These policies will outline the ways of litigating a guest who goes contrary to the expectations such as vandalism acts or refusing to leave. At such occurrences, the company should give legal assistance to the host and help in eviction of a guest who refuses to leave. Also, there should be a misconduct penalty given to such a guest who does not meet the expectations. This will help curb the occurrences of guests who may want to take the advantage of the hospitality of the host. e) The company should put in place procedures that will enable the host to communicate with the guest even before the deal is completed. The host should be able to communicate effectively with the guest to create familiarity. At the same time, there should be ways of preventing the host from carrying out the deal without the knowledge of the company. Such methods include inability to conclude money transaction without brokering by the company despite the communication. This will ensure comfort in the usage of property by the host and a sense of belonging by the guest in the new environment. This will attract more customers and boost the company’s market gain. f) The company should avoid aggressively venturing in areas where there are laws preventing it. This will make it not face unnecessary court proceedings and fines. Alternatively, it can meet the standards of laws in those areas like the day limits. This will save the company’s public image and prevent it from entering into court battles which might hinder its operations. References Airbnb. (2013). Airbnb Annual Global Growth, Local Love. Airbnb. Retrieved 22 September 2014 from https://www.airbnb.com/annual/ Airbnb. (2013). Airbnb economic impact study New York City. Airbnb. Retrieved 22 September 2014 from http://blog.airbnb.com/wp-content/uploads/Airbnb-economic-impact-study-New-York-City.pdf Airbnb. (2013). The Rise of the Sharing Economy: Estimating the Impact of Airbnb on the Hotel Industry. Boston University. Retrieved 22 September 2014 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2366898 Business. (2014). Airbnb versus hotels Room for all, for now. Economist. Retrieved on 22 September 2014 from http://www.economist.com/news/business/21601259-there-are-signs-sharing-site-startingthreaten-budget-hotels-room-all Grout,V. (2013). How To Use Airbnb To Profit From Your Second Home. Forbes. Retrieved 22 September 2014 from http://www.forbes.com/sites/vanessagrout/2013/11/04/how-to-use-airbnb-to-profit-from-your-second-home/ Mathias, C. (2013). Airbnb Illegal in New York City, Judge Rules. Huffington Post. Retrieved 22 September 2014 from http://www.huffingtonpost.com/2013/05/21/airbnb-illegal-in-nyc_n_3314155.html MCT. (2014). Airbnb host's horror as squatter takes over.Traveller. Retrieved on 22 September 2014 from http://www.smh.com.au/travel/travel-planning/travel-news/airbnb-hosts-horror-as-squattertakes-over-20140721-3cahg.html  Parr, B. (2011). Airbnb: "We Screwed Up And We're Sorry. Mashable. Retrieved 22September 2012 from http://mashable.com/2011/08/01/airbnb-ransackgate/ Peng, T. (2010). Where to get startup cash now. CNN Money. Retrieved 22 September 2014 from http://money.cnn.com/galleries/2010/smallbusiness/1003/gallery.startup_cash_now/. Startup School (1000 days of AirBnB", AirBnB Founder - Brian Chesky - Startup School 2010 ). 1000 days of AirBnB [video file]. Retrieved on 22 September 2014 from https://www.youtube.com/watch?v=L03vBkOKTrc Tate, R. (2011). Woman Utterly Pillaged via Airbnb. Gawker. Retrieved 22 September 2014 from http://gawker.com/5825262/woman-utterly-pillaged-via-airbnb Yeung, K. (2013). With 8.5m guests, Airbnb seeks to build a more uniform customer experience via its Hospitality Lab. The Next Web. Retrieved 22 September 2014 from http://www.forbes.com/sites/morganbrennan/2011/09/16/the-most-amazing-and-absurd-places-for-rent/ Appendices i). Appendix 1: Problem 1 There are poor customer care service methods which appear to have originated from inexperienced customer relations officers. There is long delay in responding to customer problems and complaints. This causes tension and distrust of the company from the hosts. The hosts, after the setbacks, may lose interest in renting out their spaces again to Airbnb. This further causes a decline in market numbers of the company causing a decline in its earnings. There are reported numbers of instances when the customer service officers failed to respond to customer needs in time. The customers used other people to contact the company. The company should have the following objectives of the customer service office: a. Qualified staff members who are able to handle customer needs professionally. b. A 24hr customer care service that caters for customer needs around the clock. c. A good environment and trust between the customers and customer care officers. To implement this, the company needs to take the staff members to training sessions and conferences. Also, it can employ qualified personnel to handle customers. The financial status may restrain some of these moves. b. Appendix 2: Problem 2 There is poor protection of host property from vandalism by the guest which may cause serious emotional and financial problems to the host. At times the guests occupying whole of the apartment or vehicles may intentionally damage that property. There are no present policies to prevent such damages or compensation process to be followed in case such damages occur. This poses a great risk to the host property which can be damaged at will without consequences to the guest. The company should have the following objectives in ensuring host property protection: a) To have well laid policies of compensation of host property in event of damage. b) To have ways of preventing the guest from vandalising the host property during the stay. c) To attract more host customers who are willing to rent out their property. These objectives can be implemented by laying down regulations and agreements for operations in the company. The management should come up with rules that monitor guest usage of host property and deter them from damaging the property. At times this may not be possible as there is no physical contact between the guest and the company. Also, the guest may be uncooperative in event of damages. c. Appendix 3: Problem 3 There is hiding or rather disclosure of comprehensive personal details of the guest to the host preventing familiarity and communication between the guest and the host. There is no prior communication between the guest and the host before the booking deal is complete. This hinders comprehensive knowledge of the guest by the host and the vice versa. At times the apartment or vehicle usage approaches may differ between the host and the guest. A prior communication before the deal is complete ensures that the host gets satisfactory usage of the property while the guest chooses the best compatible place. The company should have the following objectives to handle this: a. Giving comprehensive information regarding the guest to the host. b. Ensuring the host does not complete the deal without involving the company. At times this may not be achieved easily. The host may hijack the process and complete the deal without involving the company. Also, the guest may not be comfortable with comprehensive display of his or her details. Therefore this becomes a challenge to implement. d. Appendix 4: Problem 4 There is presence of laws preventing temporary renting of individual property in some cities which hinders operation of the company in those cities. There are certain states like New York where there are laws protecting the hotels from collapsing. These laws prevent individual property owners from temporarily leasing their property to other people. This prevents the hotels from competing with individuals in the hospitality industry. There are a times the company was litigated and fined. This slows the company’s operations in that area and hence cutting its market. The company should have the following objectives when solving this problem: a. Having an aggressive market penetration with least government interference. b. Having a healthy market competition with hotels without involving court battles. These objectives may hard to achieve. The company may opt to cease its operations in certain cities, states or countries where there is protection of its main competitors, the hotel industry. The best way the company should opt is slowing its operations in sensitive areas an being aggressive in free trade areas. Also, it may push for legislation repeals which are at times not very successful. Read More