Analysis is based solely on facts in the case and should reflect benefits and risks of your specific recommended marketing strategy (External research is not required).
REQUIREMENT:
Individual: up to 3 pages (no appendices required) – 12 font – double-spaced
ASSUMPTIONS: Analysis is based solely on facts in the case and should reflect benefits and risks of your specific recommended marketing strategy (External research is not required).
CASE OUTLINE:
Problem Definition
a) Identify the primary business (brand organization)
b) Define the main strategic problem and distinguish between among related issues
NOTE: <Define the problem – not the symptoms>
Objectives
What are the objectives and challenges, the decision-making organization is trying to achieve?
NOTE: <Where they are not apparent or inconsistent, may help identify the problem>
Situation Analysis
a) Define the market
-Describe potential users/buyers, influencers, etc.
-What size is the market, and how fast is it growing?
-Identify specific segments/targets within the market
-Is there brand loyalty strength? (View by segment)
-What drives buyer behavior?
-Identify overall brand positioning strategy (View by segment)
b) Define the competition
-Who are the competitors? (both direct and indirect)
-How are brand product/service offers differentiated?
-Profile the competitor’s customers (what drives their loyalty)
-Identify the strengths/limitations of the competitors
-Highlight market strategy, and competitive advantages
c) Nature of the market [from the time of the case]
-What changes are likely to take place in this market in the next year?
Business Assumptions
a) State reasonable assumptions with appropriate rationale (e.g. marketing trends, consumer behavior, … ) that may impact marketability
b) Indicate limitations of the case (e.g. additional information needed, etc.)
Alternative Evaluation (Examine rationale along with benefits and risks/limitations for each)
-Identify (up to three) possible courses of action and evaluate each
Conclusions/Recommendations
-Provide the best solution of the defined problem; select a specific course of action
-Indicate why the selected strategy is preferred
-Define and measure brand success
Requirements: 3 pages
Individual Case Analysis REQUIREMENT: Individual: up to 3 pages (no appendices required) – 12 font – double-spaced <post on Canvas> You will be assigned to one case: Airbnb: due by 10/01 or Nike-Metaverse: due by 11/12 ASSUMPTIONS: Analysis is based solely on facts in the case and should reflect benefits and risks of your specific recommended marketing strategy (External research is not required) CASE OUTLINE: 1. Problem Definition a) Identify the primary business (brand organization) b) Define the main strategic problem and distinguish among related issues NOTE: <Define the problem – not the symptoms> 2. Objectives What are the short/long-term objectives the decision-making organization is trying to achieve? NOTE: <Where they are not apparent or consistent may help identify the problem> 3. Situation Analysis a) Define the market -Target: describe potential users/buyers, influencers, etc. -Market size: what size is the market and how fast is it growing? -Segmentation: identify specific segments within the defined marketplace -Brand Loyalty: is there brand loyalty strength? (view by segment) -Buyer Behavior: what drives buyer behavior? -Brand Positioning/Differentiation Strategy: identify overall strategy (view by segment) b) Define the competition -Competitive Landscape: who are the competitors? (direct/indirect) -Offer positioning/differentiation: outline brand product/service offer strategy -Profile Competitor’s users: describe target; what drives their loyalty -Competitive assessment: identify strengths/limitations -Market strategy: outline competitive advantages c) Nature of the market [from the time of the case] -What changes are likely to take place in this marketplace in the next year? 4. Business Assumptions a) State reasonable assumptions with appropriate rationale (e.g., marketing trends, consumer behavior, … ) that may impact marketability b) Indicate limitations of the case (e.g., additional information needed, etc.) 5. Alternative Evaluation (Examine rationale along with benefits and risks/limitations for each) -Identify (up to three) courses of action and evaluate each 6. Conclusions/Recommendations -Provide the best solution of the defined problem; select a specific course of action -Indicate why the selected strategy is preferred -Define and measure brand success
Individual Case (Evaluation Criteria): This is a 3-page individual paper. Examine and interpret case facts; provide strategic objectives, recommendations along with rationale and measures of success. Evaluation will include a review of strategic recommendations referencing course content along with relevant rationale.
MHE-FTR-072 1264124317 FEBRUARY 4, 2023 FRANK T. ROTHAERMEL Airbnb, Inc. “If you want to look at how people live in the future, just look at young people and young companies. They are living in a really distributed remote way, and the best people are going to live everywhere. They are not going to live in a commuting radius around you, and so the number one benefit after compensation is going to be flexibility. So living around the world and working remotely is here to stay.” —Brian Chesky, CEO and co-founder of Airbnb, Inc.1 Brian Chesky, CEO of Airbnb and an aspiring bodybuilder, just finished a session of pumping iron with his coach Abdullah Al Otaibi. As Brian downs a protein shake, he looks out at the Pacific Ocean from the Airbnb he booked in Kauai. The Airbnb founder could not help but be astounded at how the world had changed over the past three years. The Covid-19 pandemic had a tremendous impact on Airbnb and his own life. Brian had always wanted to experi-ence what it was like to live on Airbnb, but he worked in the San Francisco office before the pandemic, if not travel-ing for business. The pandemic allowed him to stay in a different place every few weeks. Traveling as a digital nomad enabled Chesky to understand why people stayed in Airbnbs for extended periods, often longer than one month. At the same time, people traveled locally, often by car, and selected locations away from big cities. With more extended stays, “bleisure travel” became the new norm where people mix business with leisure. Airbnb, an online platform facilitating rentals by matching hosts and guests, offers more accommodations than the three biggest hotel chains combined: Marriott, Hilton, and InterContinental. In 2022, Airbnb had 6 million active listings worldwide in over 100,000 cities in 220 countries and regions (Exhibit 1). Over four million hosts rented out every imaginable accommodation, from spare rooms to castle villas or islands. From humble begin-nings, when Brian Chesky and Joe Gebbia boarded three guests in their San Francisco apartment in 2007, Airbnb’s hosts welcomed more than 1 billion guests worldwide. The average Airbnb host in the U.S. earned almost $14,000 per year. Brian was not only pumped from just having lifted weights but also from reviewing Airbnb’s second-quarter results (Q2) of 2022: Revenues were $2.1 billion, up $1.3 billion or 58% from Q2 in 2021; net income was $379 mil-lion, up from a loss of $68 million a year ago. Airbnb facilitated over 100 million nights and experiences during the quarter (Exhibit 2). The most recent quarter had been the company’s most profitable. Airbnb’s stock market Professor Frank T. Rothaermel prepared this case based on public sources; it is not intended to be used for any kind of endorsement, source of data, or depiction of efficient or inefficient management. Research assistance by Melissa Francisco is gratefully acknowledged. All opinions expressed, and all errors and omissions, are entirely the author’s. © by Rothaermel 2023. All rights reserved. For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
valuation peaked at $130 billion in early 2021, far exceeding the combined market cap for Marriott, Hilton, and InterContinental. Chesky was proud as he reflected on how his company navigated the pandemic. Although it wasn’t easy, Airbnb incorporated over 150 upgrades and innovations to its platform in 2021, the most they had delivered in any year of its history. What astonished the CEO was that all of these innovations and tweaks to the website were achieved through remote work. This observation changed Chesky’s paradigm on organizing work in the future. Indeed, he was so pleased with the results of the distributed work during the pandemic that he changed Airbnb’s policy: Any employee can work from anywhere in the world without a pay cut. While other tech companies offer remote work, they frequently apply a cost of living adjustment for salaries. That is, a worker living in New York City earns more than a worker living in rural Mississippi doing the same job. Not so at Airbnb. As Brian looks at the ocean, he thinks back to when he was an undergraduate design student and how he has embedded his creativity in Airbnb’s culture, product, and community. Brief History of Airbnb Brian Chesky and Joe Gebbia were former classmates from the Rhode Island School of Design, and both landed in California after graduation. In 2007, Gebbia convinced Chesky to move to San Francisco to pursue entrepreneur-ial endeavors. Shortly after both had quit their jobs, Gebbia received notice that the rent for their apartment in San Francisco would increase by 25%.2 Inspired by a previous experience hosting a stranger on an airbed, Gebbia designed a way to make some quick cash. In a now-famous email to Chesky, he shared that he wanted to offer their place as a “designer’s bed and breakfast” during an upcoming industrial design conference in San Francisco that had sold out of accommodations (Exhibit 3). They then sent an email to the distribution list for the conference: “If you’re heading out to the [industrial design conference] in San Francisco next week and have yet to make accommodations, well, consider networking in your jam-jams. That’s right. For an affordable alterna-tive to hotels in the city, imagine yourself in a fellow design-industry person’s home, fresh awake from a snooze on the ol’ air mattress, chatting about the day’s upcoming events over Pop Tarts and OJ.”3 By renting out three airbeds in their apartment to host design conference attendees for $80 a night, they made some quick cash to subsidize their rent payments. But they had also discovered that they could make friends while making extra cash to pay rent. Exhibit 4 shows Airbnb’s timeline. After talking with friends and family about their host experience, they realized they had stumbled upon a new business idea: to help people rent their spare rooms.4 They facilitated an exchange via the sharing economy by assist-ing others in renting out their extra rooms. The sharing economy is a peer-to-peer business model that provides access to resources that would otherwise be too expensive to buy or are underused in exchange for a fee—in this case, underutilized space in apartments and homes.5 Gebbia and Chesky decided to test their idea with the 2008 South by Southwest conference (SXSW) in Austin, Texas. This annual music, film, and interactive media conference is an informal launch pad for new ventures. For example, Twitter, the social networking and news site, was unveiled at SXSW just a year earlier to great fanfare. In preparation, they recruited Nathan Blecharczyk, Gebbia’s former roommate, to design a website that would enable them to target more conference attendees. Despite a reluctant commitment at the start—Blecharczyk maintained his full-time job and only worked for Airbnb “after hours”—Blecharczyk became a co-founder of Airbnb and was critical Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 2 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
to its future success.6 The hoped-for success at SXSW, unfortunately, did not materialize. The Airbnb launch of AirBedandBreakfast.com flopped with only six hosts and two guests using the platform, one of whom was Chesky. Determined to turn things around, Airbnb built online payments into the booking process. The addition was partly driven by Chesky’s experience with the cumbersome and uncomfortable in-person payment process as a guest at South by Southwest. His experience also provided the basis for their business model to charge transaction fees by serving as a platform for hosts and guests. Based on customer feedback, Airbnb soon shifted from event-based list-ings to general ones. People were interested in the accommodation that Airbnb offered to visit places in general, not just to travel to conferences. Ready for a larger stage, Airbnb planned on garnering publicity in the summer of 2008 at the Democratic National Convention (DNC) in Denver, Colorado. The DNC’s lack of hotel space and increased publicity catalyzed their relaunch. Airbnb received coverage in The New York Times, The Wall Street Journal, and other media. Internet blogs also started featuring the new travel company. Airbnb facilitated about 100 rentals for the event. Unfortunately, the listings soon dropped down, hovering just above zero. To stretch the funds of Airbnb, Chesky and Gebbia leveraged their design backgrounds to create limited editions of politically themed cereals: 500 boxes of “Obama-O’s: The breakfast of change” and 500 boxes of “Cap’n McCains: A maverick in every bite.” They designed the presidential images onto the boxes and sent samples to the press for media coverage. CNN featured the cereal, and even at $40 a box, the custom political cereals sold out quickly, enabling Airbnb to stay afloat for a few more months. This round of post-DNC funding was necessary to offset the plunge in website traffic that followed the convention. The other funding source at the time for Airbnb was maxed-out credit cards. Indeed, they used so many different credit cards that the founders kept them in plastic binders ordinarily used to collect baseball cards. The fledgling venture’s breakthrough came in 2009 when Y Combinator, a startup accelerator, accepted Airbnb into its highly sought-after and super-selective program. By the time Airbnb joined, Y Combinator already had a track record of spawning famous tech companies such as Dropbox, Reddit, Stripe, and Twitch.tv. In exchange for equity in the new venture, startup accelerators provide a small investment fund, office space, mentoring, and net-working opportunities with venture capitalists looking to fund the next big thing. The funding and support of Y Combinator allowed Airbnb to concentrate on refining its product offering. One dimension that Y Combinator educates new ventures on is product-market fit. As such, the co-founders began to make frequent trips to New York City to learn directly from their hosts, who were early adopters of their service. After seeing the inferior (early) cell phone quality (low resolution) photographs of the rooms, Chesky rented a professional camera and took pictures himself. Later, Airbnb hired professional photographers to take photos of the rooms for rent. Providing professional photographs of the listings was a critical differentiator that enabled the startup to gain some traction. Gebbia and Chesky used their photoshoot interactions with hosts to understand their platform use. They learned the site took much longer to book a listing and interface with guests than anticipated. Within one week of making changes to the user interface and adding professional photographs, booking fees jumped from $200 to $400 per week. The Airbnb founders also learned quickly that their existing guests often became future hosts. The global col-lection of visitors in New York City enabled this model to gain traction worldwide. Although not a first mover in the peer-to-peer rental space, Airbnb was the first to crack the code that profes-sional photos of available rentals, combined with a sleek website that facilitated payments, made all the difference. By 2010, fortunes had turned, and Airbnb had investors knocking on its doors. Sequoia Capital, a prestigious venture Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 3 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
capital firm in Silicon Valley that had previously invested in Apple, Google, Oracle, PayPal, YouTube, and WhatsApp, approached Airbnb. Initially, the online rental startup took a cut of around 10% on each transaction on their platform, which now contained professionally curated listings and allowed for a seamless experience between hosts and guests. With the global financial crisis in full swing, the timing was much more fortuitous. People were looking for low-cost accommodations while hosts were trying to pay rent or mortgages to keep their homes. Airbnb’s Business Model TWO-SIDED PLATFORM: MATCHING DEMAND AND SUPPLY IN TIME AND SPACE As a two-sided digital platform, Airbnb allows hosts to offer rentals to anyone looking for accommodations (guests). The tech venture mediates all exchanges between hosts and guests on the Airbnb platform. The host and guest contract with Airbnb when consummating a rental transaction. The variety, scale, and global coverage that Airbnb can offer, with over six million listings (in 2022), are unmatched by traditional competitors (Exhibit 1). GUESTS AND HOSTS Through verification of an official ID such as a driver’s license, Airbnb screens guests before they can register on the platform. But the company generally does not run background checks on hosts or guests. Through the Airbnb platform, hosts and guests communicate directly and complete transactions. Both parties can leave reviews. Guests receive reviews from hosts that could impact future stays in Airbnb properties. Hosts consider the reviews of a poten-tial guest to vet the guest’s behavior. Likewise, guests rate and comment on the properties and hosts, allowing poten-tial guests to gauge if they like the host in addition to the space they might rent. Hosts can accept or reject a guest based on reviews or ratings following a booking request. This policy has prompted cases of guests accusing hosts of racial discrimination. To address this issue, the company created the Airbnb Nondiscrimination Policy and Community Commitment (in 2016), which requires every host and guest to consent to use the service. Airbnb put in place a dedicated anti-discrimination team who works to fight any bias on its platform. In 2020, Airbnb launched Project Lighthouse in partnership with civil rights groups to measure the perception of discrimination. Airbnb uses this information to inform and design products and policies that combat racial and social injustices on the platform. In 2016, Airbnb introduced the superhost concept. Every quarter, Airbnb evaluates all of its hosts. And hosts that meet a set of criteria, including being highly rated, experienced, reliable, and responsive, receive the superhost desig-nation attached as a banner to their listings. In 2017, about 7% of hosts achieved the designation of superhosts. By 2022, superhosts made up about 20% of hosts on Airbnb’s platform. Airbnb provides insurance protection for both hosts and guests. Called AirCover, akin to a temporary home-owner’s insurance, provides hosts with a one-million-dollar guarantee for any damages caused by guests. Likewise, AirCover also includes protection for the guests in case they get hurt or their belongings are damaged or stolen while staying at the Airbnb rental. After several fatal shootings, other violent incidents, and illegal activities at Airbnb rent-als, the company introduced a “temporary party ban” in 2020 and made it permanent in 2022. Another issue of contention between hosts and guests is the addition of fees, such as cleaning, that hosts add to each visit.7 With rising inflation and labor shortage, cleaning fees are frequently above $150. What irks guests the most is that they have to pay the exorbitant fee regardless of whether they stay for one night in one bedroom of a four-bedroom home or stay for six weeks with a family of two adults and four children. Moreover, many hosts require Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 4 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
detailed checkout tasks such as stripping the linens of beds, starting the washer, doing the dishes, wiping down all counters and tables, and sweeping the floors. Guests who don’t complete all these tasks to the host’s satisfaction receive poor reviews. Many former Airbnb guests cite these issues as the number one reason they have switched back to hotels, especially since Airbnb rental and hotel prices have converged. PEER-TO-PEER RENTAL VS. COMMERCIAL PROPERTY MANAGEMENT COMPANIES Initially, selecting an Airbnb rental meant experiencing a new destination in someone’s home authentically in the way a local would. By offering properties at a cheaper rate per night compared to hotels, guests and hosts benefited: price-conscious guests found affordable short-term rentals, while hosts benefited from the extra income earned by renting a spare bedroom. Soon, available properties expanded from spare bedrooms to residential homes, tree-houses, islands, and palatial villas with chefs and housekeepers. Although Airbnb started as a peer-to-peer rental platform as part of the sharing economy, by 2022, roughly two-thirds of hosts are renting out an entire unit or a house; many are commercial property companies, often backed by funding from private equity. Over time, prices for Airbnb and hotel rooms converged. In some popular city destina-tions such as Austin, Nashville, New Orleans, San Diego, and Washington, D.C., Airbnb’s average price is often higher than that of hotels. In some attractive city destinations outside the U.S., such as Barcelona, traditional hotels are, on average, cheaper than Airbnbs. HOW DOES AIRBNB MAKE MONEY? Airbnb makes money by taking a cut of each transaction through its platform. The tech venture charges hosts and guests a percentage of the total booking. Hosts pay a 3% commission, while guests pay a service fee of 13–20%. Recently, Airbnb introduced a second option: Hosts pay a flat 15% commission on each booking, and no service fees are visible to the guest. Regardless of which payment option the host chooses, they have complete authority over what price to set for their rentals. Although hosts decide what to charge for their properties, Airbnb provides guid-ance. Indeed, while the rental platform lists millions of properties, most have low occupancy rates. Airbnb applies dynamic pricing to the properties on its platform based on seasonality and varying demand levels. The third quarter (July-September) is traditionally the busiest for Airbnb. The dynamic pricing and nudging provided by Airbnb to hosts and guests help to match demand and supply bet-ter. For instance, Airbnb can influence what a guest sees when searching for rentals and thus can help steer guests away from popular and expensive rentals in cities such as New York and Barcelona. Indeed, by applying artificial intelligence on its platform, Airbnb can dynamically match demand and supply in real-time. For instance, Airbnb can nudge demand to areas and properties with more availability, which often goes along with lower prices for guests. Prepaying Airbnb reservations, often weeks if not months in advance, is also a differentiating feature compared to traditional hotels. Airbnb facilitates payments on its platform. Indeed, Airbnb developed a customized online pay-ment system from the start, long before more modern payment options such as Square or Venmo became available. In contrast, payments for the vast majority of bookings in the traditional hospitality industry are at the end of each stay. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 5 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Covid-19: Airbnb’s Pandemic Pivot Citing “Covid clarity,”8 the three founders reconfirmed their commitment (in 2021) to Airbnb’s vision: “Belong anywhere.” In a letter from the founders to the Securities and Exchange Commission (SEC), they stated: “People are feeling increasingly disconnected in the world, and loneliness is pervading our society. The opposite of loneliness is belonging — the feeling of deep and genuine connection to a person, a place, or community. It’s the feeling of being ‘at home.’ The feeling of being known and loved. We are a community based on connection and belonging, and we will continue to design new ways to provide for it: • We will focus on connection and belonging. • We will prioritize the individual hosts who deliver it. • We will invest in building our community.”9 EXISTENTIAL CRISIS As the Covid-19 pandemic took hold in the U.S. in 2020, Airbnb faced an existential crisis. The travel company lost 80% of its bookings and 72% of its revenue in just eight weeks. People were unable to travel, especially across borders. Before the pandemic, 80% of Airbnb’s business was cross-border and short-term rentals. The typical Airbnb trip pre-pandemic was Americans visiting Rome, Italy, for a few days or Europeans visiting Disney World in Florida. As guests were canceling their planned trips by the millions, Airbnb’s CEO Brian Chesky had to overwrite hosts’ cancellation policies. The company spent over $1 billion on host refunds because of Covid-19 restrictions, no ques-tions asked. Chief executive Chesky focused on three action items to initiate a pandemic pivot: 1) ensuring liquidity, 2) cutting costs, and 3) changing the platform for pandemic travel. ENSURING LIQUIDITY With its cash flow from guests’ prepayments vanishing and over $1 billion in refunds Chesky authorized, Airbnb faced a liquidity crunch. To avoid running out of cash to fund ongoing operations, Airbnb took out a $2 billion loan with an 11% interest when federal funds rates hovered around zero in the U.S. and were negative in Europe. Such a high interest rate implies that lenders considered Airbnb in distress with a chance of going out of business. During this time, Airbnb’s pre-IPO valuation dropped 64% to $18 billion, down from a high of nearly $50 billion. CUTTING COSTS CEO Chesky decided to cut all non-essential projects and focus on the survival of the core business. Before the pandemic, Airbnb’s goal was to become a unique end-to-end travel company. It pursued dozens of strategic initia-tives, including expanding into air travel and print media (a travel magazine). The company also spent hundreds of millions of dollars on a state-of-the-art headquarters in San Francisco, which has remained primarily empty as Airbnb continues to endorse remote working. Airbnb’s expenses grew fivefold in the five years before the Covid-19 pandemic (2015–2019); see Exhibits 5 and 6. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 6 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Airbnb laid off some 2,000 people, or 25% of its workforce, to cut costs in 2020. Brian Chesky also slashed the company’s marketing budget by $800 million. He put on hold all non-core initiatives, including Airbnb Experiences, one of the projects close to Chesky’s heart. The CEO always wanted the Airbnb experience more than a mere short-term rental transaction. To achieve this goal, the company launched Airbnb Experiences in 2016. Hosts offer in-person experiences to immerse guests in their unique world. Airbnb Experiences include learning to create sushi with a distinguished chef, taking a painting class, or studying graffiti in New York. Airbnb Experiences are again offered in 2022 but receive no additional mar-keting support. The company does not breakout experiences as a separate line item in its financial reporting. Pausing all non-core projects combined with company downsizing allowed Chesky to redesign Airbnb’s organiza-tional structure. Before the pandemic, Airbnb had a dozen or so divisions (“air travel,” “customer service,” etc.). With a smaller workforce and a laser focus on providing an online rental service for accommodations, Airbnb reverted to a functional structure. CEO Chesky attributes the functional structure, in combination with Airbnb work-ing remotely, as the catalyst for becoming much more agile and innovative. For instance, Airbnb made more than 150 upgrades and innovations during the pandemic across every aspect of its service. PLATFORM CHANGES FOR PANDEMIC TRAVEL During the Covid-19 pandemic, people were unable to fly, especially internationally. Domestic air travel was also severely restricted, and most people didn’t want to risk contracting the coronavirus while sitting in an airplane. Applying machine learning to the vast stream of real-time data from its site allowed CEO Chesky to quickly notice emerging trends such as local travel and remote working. He also noted that guests booked trips closer to home in suburban and rural areas. Guests preferred entire homes with fast internet connections that afforded longer dura-tions. By the summer of 2020, more than 50% of trips guests took were to destinations less than 300 miles (less than a tank of gas) from their homes, all by car. Long-term stays of one month or more became their fastest-growing category. Long-term stays increased by nearly 25% from 2020 and almost 90% since Q2 2019.10 During the 2020–2022 period, travel longer than one week made up more than 50% of all bookings. And stays longer than one month (“staycation,” where people combine work with vacation) made up 20% of bookings. The company noted other new use cases, such as bookings closer to family, liv-ing nomadically (“digital nomads”), and working remotely. Even as cross-border travel increased, guests sought travel options closer to home. Amid the Covid-19 pandemic, in December 2020, with the Nasdaq up almost 60% from the pandemic low in March that year, Brian Chesky took Airbnb company public. At the IPO, Airbnb’s valuation was $47 billion (Exhibit 7). In the same month Airbnb went public, it reported a record loss of $4.6 billion, bringing its total losses in 2020 alone to a multiple of all prior years’ losses combined (Exhibit 8).11 Exhibit 9 provides an overview of Airbnb’s key financial data from 2018–2021. To capitalize on the unique circumstances of the pandemic, Airbnb decided to invert the travel funnel. Rather than beginning the travel search by date and destination, Airbnb introduced the concept of categories. The company updated its website and mobile apps to promote local and non-urban stays based on increased domestic and short-distance travel. Inverting the travel funnel enabled the company to match supply with demand much more accu-rately, increasing the occupancy rates for hosts in non-urban settings. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 7 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
In 2021, Airbnb introduced “I’m Flexible,” a new way to start a search on Airbnb where guests could be flexible about when or where they traveled. Most knowledge workers could work anywhere during the pandemic. As such, inverting the travel funnel started with “anywhere, any week” to focus on the type of rental (e.g., a large house on the lake with fast and reliable internet). These changes to the website simplified the guest experience by enabling them to find something that fit their unique needs for location and desired length of time. Since launching this feature, about one billion searches have used “I’m Flexible.” Hosts also increased their participation, as active listings increased by 6% to 6.0 million by 2021. That same year, Airbnb reached a record annual revenue of $6 billion (Exhibit 10). In 2022, the company released Airbnb Categories, a complete redesign of its user interface. Categories (such as bed & breakfasts, golfing, mansions, chef’s kitchens, windmills, beachfront, houseboats, amazing views, farms, etc.) help distribute guest discovery to various hosts and properties across destinations and date ranges. In the three months following its release, Categories was viewed more than 180 million times.12 In the second quarter of 2022 (April-June), Airbnb posted a profit of over $2.1 billion in revenue, up almost 60% from the same period in 2021. The increase in revenue allowed the company to post its first quarterly profit since going public. Chief executive Chesky’s goal is to achieve full-year profitability for 2022, which would also be a first in the company’s history. Taken together, Airbnb responded quickly and reshaped its business during the pandemic. They rebranded their app and withdrew from China (in 2022) due to a prolonged zero Covid policy and other challenges experienced by U.S. web-based platforms (Exhibit 11). Additionally, to retain the best talent, Airbnb allows its employees to work from anywhere in the world.13 The company also made several financial moves to protect its liquidity and cut costs to invest in its platform.14 The Hospitality Industry The hospitality industry encompasses various services such as lodging, travel and tourism, food and drink service, restaurants and bars, and theme parks. The global hospitality industry is estimated to have about $4 trillion in annual sales. Hotels, with some $570 billion in 2022 revenues worldwide, are among the more significant hospitality industry segments.15 Hotels offer a variety of services and amenities at varying price points. Hotel rooms differ from listings on Airbnb, primarily through consistent expectations of rooms and amenities. For Airbnb listings, homes and rooms can vary, descriptions might not be accurate, there is no front desk, and owners might leave long lists of instructions. Although offerings such as Airbnb Plus aims to bridge the gap in quality expectations by ensuring a standard set of amenities, the pool, and fitness studio that await guests in hotels are unlikely to make the Airbnb amenity lists. Instead, Airbnb Plus listings guarantee essentials such as fast Wi-Fi and fully equipped kitchens.16 The hotel industry is estimated at approximately $171 billion in revenue in the United States. The industry’s growth rate was negative in the U.S. during 2016–2021 (–7.6%). However, it is expected to grow at an annual 10.8% rate from 2021–2026. Key drivers of the hotel industry’s performance include domestic travel by Americans, inbound travel to the U.S. by non-residents, and trends in the macro environment affecting consumer discretionary spending. As became apparent during the Covid-19 pandemic, certain customers, such as healthcare workers, truck-ers, contractors, construction workers, and other essential workers, cannot work from home and must travel. Indus-try operators expect an increase in demand in these segments over the next few years.17 Some speculated at the pandemic’s beginning that daily average room rates would fall materially, and it would take about five years for them to rebound. By 2020, rates had gone up, partly because hotels were often limited in Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 8 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
capacity (∼50%) due to Covid restrictions and precautions. Leveraging technology and next-generation analytics enabled some companies to differentiate themselves by enhancing demand forecasting. This approach also allowed them to crunch third-party data, including competitor pricing and marketplace events, to adjust pricing based on demand. Many hotel companies also decided to implement property improvement and renovation plans during the pandemic to increase demand and accommodate customer expectations.18 The main trends that affected the travel industry during 2020–22 included coronavirus variants, labor shortages, inflation, recession, and the war in Ukraine.19 Another trend that emerged as pandemic restrictions ended was the growth of traditional hotel brands. Further industry consolidation came from independent hotels converting into larger chains such as Marriott, which grew significantly during 2021.20 The primary reasons that drove consumer travel post-pandemic included pent-up demand, accumulation of savings during the lockdown, and increased flexibil-ity resulting from work-from-anywhere arrangements, including digital nomads – traveling full time. Competition Successful innovation breeds imitation. Airbnb’s business model innovation spurned new entrants to enter the industry and old-line competitors to adjust their business model to include new listings or enhancements to their platforms. As a result, the competition that Airbnb faces is formidable. Key competitors include online travel agen-cies (such as Priceline.com), internet search engines (such as Google), listing and metasearch websites (such as TripAdvisor), traditional hotel chains (such as Marriott and Hilton), property management companies (such as Vacasa), and online platforms offering experiences (such as GetYourGuide).21 Traditional hotels such as Marriott and Hilton compete for guests in many ways, such as quality of accommoda-tions and service, brand recognition and reputation, location, guest satisfaction, room rates, amenities, safety and security, and the ability to earn and redeem loyalty program points. Both Marriott and Hilton continue to focus on building branded hotels, anticipating that chain affiliation will continue to be attractive as local economies grow, trade barriers decline, international travel accelerates, and hotel owners seek the benefits of centralized reservation systems, marketing support, and loyalty programs.22 Peter Kern, the CEO of online travel company Expedia, stated that generational trends move toward online book-ings versus offline or more traditional bookings. He considers the “big four” in the online booking agency to include Expedia, Booking.com, Airbnb, and Trip.com. He estimates that together these four make up roughly 20% of the entire multi-trillion dollar travel market globally. CEO Kern considers the other 80% attributable to “small players, offline players, airlines, hotel chains and direct.” Kern considers these as partners as they facilitate growth in the industry.23 Airbnb faces stiff competition in acquiring and retaining hosts, a critical success factor to its business model. Hosts have a range of options for listing their homes and experiences. Indeed, many hosts list their rooms and prop-erties on multiple platforms (“multi-homing”). Moreover, many hosts resented the one-sided cancellation by Chesky in favor of guests during the Covid-19 pandemic, overriding hosts’ policies. Hosts feel that Airbnb is managed in favor of guests but guests feel the opposite. Also, hosts are unhappy because most properties have low occupancy rates. In 2021, most Airbnb accommodations had less than 30% occupancy rates, with some in the single digits. In contrast, traditional hotels such as Marriott reported an occupancy rate of over 60% in the same year. To address some of the hosts’ concerns, Airbnb works to build trust and increase human interactions (conven-tions), to increase the ease of platform use, provide simplified service fee structure and host protections, through the Airbnb global brand. Indeed, Airbnb’s brand has become so powerful that 91% of all searches for its rentals start on the Airbnb website. As such, almost all of Airbnb’s traffic is organic and Chesky cut all spending on performance Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 9 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
marketing (e.g., paying search engines such as Google to drive traffic with digital ads) because Airbnb has become synonymous with a new category of travel that they built. TRADITIONAL HOTELS Airbnb’s presence in the travel industry impacted the operations of traditional offerings. Companies such as Mar-riott, Hilton, Accor, Wyndham, InterContinental, OYO, and Huazhu (in addition to boutique and independent hotels) have disrupted Airbnb’s business model.24 One response by the old-line hotel chains has been industry consolidation through horizontal mergers and acquisi-tions. In 2016, Marriott acquired Starwood Hotels & Resorts for $13 billion, creating the largest hotel company with 5,700 hotels with more than 1.1 million rooms in more than 110 countries.25 Marriott estimated a cost savings of $250 million. It also highlighted increased leverage when negotiating with Expedia and other online travel agents and viewed consolidation as a way to grow and improve its negotiating power.26 The Marriott International Hotel chain now includes over 30 brands, including luxury hotels such as Bulgari Hotels and Resorts, The Ritz-Carlton, St. Regis, and the JW Marriott. At the same time, Marriott covers all price segments in the market with the standard Marriott business hotels; AC Hotels by Marriott, Marriott Courtyard, Marriott Fairfield Inn, and so forth.27 In 2021, the size and influence of such hotel giants were evident through Marriott’s $13.9 billion, Hilton’s $5.8 billion, Hyatt’s $3.0 billion, and IHG’s $2.9 billion in revenue.28 The same year, Airbnb’s revenues stood at $6 billion (Exhibits 9 and 10). Hotels are increasingly attracting guests by offering experiences.29 Bonvoy is Marriott’s customer loyalty program, offering member benefits such as travel experiences, room upgrades, early and late checkout, free Wi-Fi, and so forth. These experiences compete with Airbnb’s Experiences to some extent, allowing guests to immerse themselves in local activities. Hotels are moving away from a consistent experience and transforming to give travelers a taste of local cuisine, artists, and cultural activities. As such, traditional hotels started to expand into the boutique segment of the industry. For instance, Marriott has the Autograph Collection, a new brand of some 200 boutique hotels glob-ally. Each hotel is unique, with modern spaces professionally designed and packed with luxury and comfort. In 2022, Marriott CEO Anthony Capuano stated that Marriott continues to be optimistic about its future, pri-marily because it is a data-driven company.30 The Marriott analytics team tracks the inflationary environment, rising interest rates, and sociopolitical unrest, among other things. They measure short-term bookings (transient bookings) and longer-term bookings, primarily group bookings. Hilton Worldwide is also a leading competitor in this industry. In a 2021 worldwide ranking of leading hotel com-panies by revenue, Hilton placed second, with Marriott International taking the top spot. When ranking by hotel units, Hilton came in fourth by the number of its properties. In 2020, the Covid-19 pandemic resulted in Hilton’s global occupancy rate falling to just over 40%. Although their occupancy rates grew in 2021 to close to 57%, they have not yet reached pre-pandemic levels.31 A key consideration for many companies in this industry, especially during the pandemic, has been how they have approached labor changes and the resulting influence that employee absences have had on their business operations. Hilton CEO Christopher Nassetta mentioned that his workforce required a fundamental business model shift to accommodate enhanced cleanliness standards, labor shortages, school closures, and other pandemic restrictions. Figuring out creative and innovative approaches to flexible labor, including part-time employee scheduling to accom-modate workers who want less than full-time work due to health issues or caring for multi-generational families dur-ing the pandemic, has been a challenge for the business. Traditional hotels curtailed their services, such as room cleaning (only once per week). Many hotels kept this policy and other Covid rules even after the pandemic to reduce cost structure and address labor shortages.32 Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 10 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
InterContinental Hotels, owners of the Holiday Inn and Crowne Plaza brands, has over 56,000 hotels worldwide. As Airbnb rose in prominence, InterContinental CEO Keith Barr invested in its technology platform. He made acquisitions to fill gaps in its portfolio by expanding in market niches, such as luxury hotels.33 They also invested in AI technology in their reservation systems to improve customer service and offered their loyalty members extensions on reward expiration dates. Their focus for the past few years has been on improving existing hotel quality and scale, the breadth of their portfolio, and the value of their technology and loyalty offerings.34 ONLINE TRAVEL COMPANIES Airbnb faces increased competition through online booking websites offering hotel rooms and nontraditional accommodations, such as apartments and vacation rentals. In 2018, Priceline Group Inc. became Booking Holdings Inc. This name recognized the importance of leisure-related booking sites over a name that highlighted consumers’ ability to name their prices.35 Booking Holdings decided to create a distinct category for “alternative accommoda-tions” after obtaining the same number of listings as Airbnb. Using acquisition-led hotel industry growth, both Expe-dia and Priceline have jumped into the home rental market, thereby expanding their offering of apartments and vacation rentals. In 2015, Expedia bought HomeAway (now Vrbo), a vacation rental site, for close to $4 billion. Those listings slowly made their way onto Expedia.com and Hotels.com. Expedia’s business president Ariane Gorin stated that strategic moves included simplifying the company, re-platforming their technology stack so that new implementations go across all brands instead of one, and implementing a loyalty program refresh so that they can earn across all lines of business. In addition, Expedia has also targeted Airbnb hosts with an opportunity to expand host distribution by sharing their listings on the Expedia platform in a few simple steps.36 Booking.com is available in 44 languages and offers more than 28 million total reported accommodation listings, including more than 6.3 million listings of homes, apartments, and other unique places to stay.37 Booking.com charges the host only. The amount depends on location and demand. Unlike Airbnb, Booking.com relies heavily on performance marketing, spending billions to have Google and others drive traffic to their site. Booking.com’s mar-keting expenses have been increasing over time, with nearly $8 billion in 2021 alone on $11 billion in revenues. And the company expects marketing expenses to increase over time and as a percentage of sales.38 Booking’s CEO Glenn Fogel indicated that getting back to 2019 numbers has been their focus in the short term, especially as China contin-ues with some pandemic restrictions.39 Challenges While Brian Chesky was happy with how his company navigated the Covid-19 pandemic, he wonders if the shift he noticed during the pandemic towards more extended stays of “bleisure” travel is permanent and if cross-border travel will return to pre-pandemic levels. He is also considering whether pandemic trends will continue where people book extended stays in suburban and rural areas (“staycation”), away from big cities. Cross-border travel, which accounted for 80% of Airbnb’s bookings pre-pandemic, has yet to recover. Brian had big hopes when Airbnb entered China in 2015. Now, he feels disillusioned and worries about Airbnb’s geographic diversification. At this point, Airbnb is mainly a U.S. and European business. Yet, most of the world’s people live outside those two regions. The macro environment of high inflation and recession led to an overall drop in the stock market during 2022, with the Dow Jones Industrial Average falling 20% and the tech-heavy Nasdaq, which Airbnb is part of, falling by over 30%. By the fall of 2022, Airbnb’s market cap had dropped to $57 billion, down 56% from its high of $130 bil-lion just 18 months earlier (Exhibit 11). Brian Chesky realizes that a challenging macro environment will affect the Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 11 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
hospitality industry. With the U.S., Europe, and many other parts of the world experiencing high inflation and enter-ing a recession, he wonders how to position Airbnb for the future. Brian also feels the pressure to deliver consistent results. While 2022 was a good year, with Q3 generating a net income of over $1.2 billion, he knows that investors expect more going forward. He is fully aware that he needs to deliver growth and profitability. Brian frets about activist investors telling him how to run the company he co-founded and build from the ground up. Chief executive Chesky continues to worry about Airbnb’s cost structure, which almost sank the company when the Covid-19 pandemic first hit. To cut costs, the leading tech companies in the U.S. laid off more than 100,000 work-ers in 2022. As companies such as Meta and Amazon are laying off workers, chief executive Chesky wonders if Airbnb also needs to reduce its workforce. Meta, for instance, laid off 11,000 people or 13% of its workforce. Brian is con-cerned that Meta downsized even though the average employee productivity at the Facebook parent is 80% higher ($1.8 million in revenue per employee) compared to Airbnb’s labor productivity ($1 million in revenue per employee). Chesky also has second thoughts about Airbnb’s “work-from-anywhere for same pay” policy. Managers complain that employee performance has become more challenging to assess in a distributed work-from-anywhere organiza-tion. And employees complain that they don’t get enough feedback from their superiors. They also indicate that they feel alienated from their teams and miss the kinship they felt when working together at the new San Francisco head-quarters. Brian does not rest easy. He is further concerned about innovative startups disintegrating the guest experience along specific verticals (e.g., high-end business travel with superfast internet, mansions, beach homes, treehouses, RVs, etc.), in the same way that eBay was impacted by internet startups focusing on specific categories and addition-ally providing a deeper selection and better customer service, with focus on one or few clearly defined categories. While Airbnb was able to innovate during crisis mode in the pandemic, he wonders if his company can keep up the pace of innovation and agility as the company grows larger and distributed work becomes the new normal. As he is about to begin a set of Zoom meetings, he wonders how Airbnb can provide a seamless and enjoyable end-to-end travel experience for guests while rewarding its hosts. External factors such as regulation and political pressure continue to create significant headwinds for Brian Chesky.40 Various lobbying and political efforts by hos-pitality groups continue to promote stricter rules governing local and national jurisdictions where Airbnb operates. In addition, homeowners, landlords, condominiums, and neighborhood associations implement contracts that restrict or prohibit short-term rentals. On a macro level, some critics argue that Airbnb drives out affordable housing in many metropolitan cities where apartments are already scarce. Hotel chains and resort owners continue to challenge Airbnb in courts and lobby local governments, some of which passed regulations to limit or prohibit short-term rentals. In New York City and San Francisco, in particular, Airbnb is blamed for gentrification and rising rents. Residents in other cities such as Chicago, Los Angeles, Miami, Berlin, Paris, and other cities have pressured local governments to enact more aggres-sive rules banning short-term rentals because they argue that companies such as Airbnb contribute to a shortage of affordable housing by turning entire apartment complexes into hotels or transforming quiet family neighborhoods into all-night, every-night party hot spots. Critics acknowledge that Airbnb has put in place a party ban but counter that the company has no way of monitoring properties they don’t own, let alone enforcing the ban. As he he boots up his MacBook Pro, he gets an alert on his phone about another shooting at an Airbnb, bringing back the issue of how to keep the platform safe for guests and hosts. All the while, he is trying to concentrate on the day ahead, but the challenges his company is facing are always on his mind. As Brian takes the last sip of his protein shake, he begins to work … Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 12 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 1 Airbnb Fast Facts 6M active listings worldwide 100K cities and towns with active Airbnb listings 220+ countries and regions with Airbnb listings 1B+ Airbnb cumulative guest arrivals 4M+ Hosts on Airbnb $150B+ earned by Hosts, all-time $13.8K+ average annual earning per U.S. Host in 2021 $130B stock market valuation (February 11, 2021) Source: Tabulation of publicly available data and data from Airbnb, Inc. https://news.airbnb.com/about-us/ Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 13 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 2 Airbnb’s Quarterly Nights and Experiences Booked, 2018–2022* 120 2018 2019 2020 2021 2022 0 20 40 60 80 100 Source: Depiction of publicly available data. *data for Q2 2022 is an Airbnb forecast. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 14 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 3 Email from Joe Gebbia to Brian Chesky proposing the original business idea for “AirBedandBreakfast,” September 22, 2007. From: joe Date: September 22, 2007 To: Brian Subject: subletter brian i thought of a way to make a few bucks – turning our place into “designers bed and breakfast” – offering young designers who come into town a place to crash during the 4 day event, complete with wireless internet, a small desk space, sleeping mat, and breakfast each morning. Ha! joe Source: Gebbia, J. (2016), How Airbnb designs for trust . TED Conference, https://www.ted.com/talks/joe_gebbia_how_airbnb_designs_ for_trust (15:51) Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 15 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 4 Airbnb Timeline and Key Events, 2007–2022 • Airbedandbreakfast.com debuts at South by Southwest, but has only two bookings • Airbed and Breakfast website launches for the Democratic National Convention • Chesky and Gebbia sell “Obama-O’s” and “Cap’n McCains” cereal boxes • Airbnb is accepted into Y Combinator • Airbnb record, exceeding 103 million nights and experiences booked (Q2, 2022) • Airbnb withdraws from China • Airbnb celebrates 1 billionth guest arrival since launching • Airbnb initial public offering (IPO) on December 10, 2020 • Airbnb reached 500 million guest arrivals since launching • Airbnb announces $5M investment into expanding Experiences in the U.S. • Announcement of guest loyalty program “Superguest” • Airbnb celebrates 10 years • Airbnb announces Aibiying in China • $300M acquisition of Luxury Retreats for Airbnb • Airbnb announces mobile technology involving VR and AR • Split Payments introduced • Launch of Airbnb Experiences • Airbnb announces expansion into China • Airbnb moves U.S. headquarters to San Francisco and open a European hub in Dublin, Ireland • Airbnb introduces $1M Host Guarantee • Airbnb initiates Open Homes program in response to Hurricane Sandy • Airbed and Breakfast rebrands as Airbnb • Airbnb receives funding from Sequoia Capital • Email from Gebbia to Chesky with proposed “designers bed and breakfast” • Gebbia convinces Chesky to move to San Francisco • Airbnb launches instant Book feature • Airbnb announces its 1 millionth booking since launching • Airbnb rebrands with Belo (symbol of belonging) image 2008 2022 2021 2020 2019 2018 2017 2016 2015 2013 2012 2009 2007 2010 2011 2014 Source: Depiction of publicly available data. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 16 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 5 Airbnb’s Revenues and Expenses, 2017–2021 ($ billion) Revenues Expenses $8 $3 $4 $5 $6 $7 $2 $1 $0 2017 2018 2019 2020 2021 Source: Depiction of publicly available data. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 17 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 6 Airbnb’s Costs and Expenses, 2017–2021 ($ million) Cost of Operations Product Sales and General and RestructuringRevenue and Support Development Marketing Administrative Charges $8,000 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2017 2018 2019 2020 2021 Source: Depiction of publicly available data. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 18 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exbibit 7 Airbnb’s Stock Market Performance since IPO (Dec. 10, 2020, until Nov. 14, 2022) versus NASDAQ-100 (normalized) Airbnb Inc (ABNB) Price % Change Nasdaq-100 (^NDX) Level % Change 50% –25% 0% 25% $57bn Min Market Cap June 30, 2022 $130bn Max Market Cap Feb 11, 2021 –33.15% –8.14% –50%Jan ’21 May ’21 Sep ’21 Jan ’22 May ’22 Sep ’22 Source: Depiction of publicly available data. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 19 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 8 Airbnb’s Annual Net Loss, 2017–2021 ($ million) 2017 2018 2019 2020 2021 –$5,000 –4,584.72 –$4,500 –$4,000 –$3,500 –$3,000 –$2,500 –$2,000 –$1,500 –$1,000 –$500 $0 –70.05 –16.86 –674.34 –352.03 Source: Depiction of publicly available data. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 20 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 9 Airbnb Key Financial Data, 2018–2021 ($ millions, except EPS data)* Fiscal Year 2021 2020 2019 2018 Cash and short-term investments 8,804 6,425 3,074 3,329 Receivables-total 143 190 129 81 Inventories-total 0 0 0 0 Property, plant, and equipment-total (net) 429 654 687 309 Depreciation, depletion, and amortization (accumulated) 138 126 114 82 Assets-total 13,708 10,491 8,310 6,613 Accounts payable 118 80 151 71 Long-term debt 2,355 2,246 381 0 Liabilities-total 8,933 7,590 5,886 3,899 Stockholders’ equity-total 4,776 2,902 2,424 2,714 Sales (net) 5,992 3,378 4,805 3,652 Cost of goods sold 1,865 1,623 1,897 1,391 Selling, general, and administrative expense 3,435 4,927 3,291 2,160 Income taxes 52 -97 263 64 Income before extraordinary items -352 -4,585 -674 -17 Net income (loss) -352 -4,585 -674 -17 Earnings per share (basic), excluding extraordinary items -0.57 -7.67 -1.12 -0.03 Earnings per share (diluted), excluding extraordinary items -0.57 -7.67 -1.12 -0.03 *Note: 1) Airbnb went public on December 10, 2020. Data before 2018 is not publicly available, and 2) Airbnb’s fiscal year ends on December 31. Source: Tabulation of publicly available data. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 21 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 10 Airbnb’s Annual Revenues, 2017–2021 ($ billion) $7 $0 $1 $2 $3 $4 $5 $6 2017 2018 2019 2020 2021 Source: Depiction of publicly available data. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 22 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Exhibit 11 Airbnb’s Revenues by Region, 2019–2021 ($ billion) North America EMEA Asia Pacific Latin America $3.5 2019 2020 2021 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 Source: Depiction of publicly available data. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 23 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
Endnotes 1 Skift, “Airbnb CEO Brian Chesky at Skift Global Forum 2022,” September 25, 2022, video, 34:15, https://www.youtube.com/watch?v=_ a9XfJDYKYc&t=1s. 2 “Airbnb: Joe Gebbia,” How I Built This with Guy Raz, National Public Radio, October 17, 2016. 3 Stone, B. The Upstarts: Uber, Airbnb, and the Battle for the New Silicon Valley (Boston: Back Bay Books, 2018). 4 Kessler, A. (2014, Jan. 17), “Brian Chesky: The ‘Sharing Economy’ and Its Enemies,” The Wall Street Journal. 5 “The Rise of the Sharing Economy,” The Economist, March 9, 2013. 6 Stone, B. The Upstarts: Uber, Airbnb, and the Battle for the New Silicon Valley (Boston: Back Bay Books, 2018). 7 Rana, P. (2022, Sept. 16), “Welcome to Your Airbnb, The Cleaning Fees Are $143 and You’ll Still Have to Wash the Linens,” The Wall Street Journal. 8 Covid clarity is a clarity borne from the insights gained from living and working during the pandemic. It is a clarity borne from adversity. It “can be experienced as a new lens on viewing life and/or past-traumatic growth. Covid clarity can aid in determining what’s most meaningful to us and how we connect to others, perhaps fostering an interest or stronger connection to spirituality, meaning, and purpose.” Source: Blackburn, S. (2022), “COVID Clarity,” Journal of Psychosocial Oncology, DOI: 10.1080/07347332.2022.2140094. 9 Airbnb (2021, Feb. 22), “What Makes Airbnb, Airbnb,” letter from Airbnb’s S-1 form, Securities and Exchange Commission, https://bit. ly/3EkkfS2. 10 Airbnb, Inc. (2022, Aug. 2), “Q2 2022 Earnings Call.” 11 Rana, P. (2021, Feb. 26), “Airbnb Posts Steep Losses in First Earnings Report After Going Public,” The Wall Street Journal. 12 Airbnb, Inc. (2022, Aug. 2), “Q2 2022 Earnings Call.” 13 Rana, P. (2022, Aug. 2), “Airbnb Swings to Profit as Rentals Remain Strong Despite Inflation Pressure,” The Wall Street Journal. 14 Pohle, A. (2022, May 11), “Airbnb Changes Its Booking Options with an Eye on Longer Trips,” The Wall Street Journal. 15 Data for this section are drawn from various industry reports and Statista.com. 16 Airbnb.com. Accessed November 4, 2018. 17 Ristoff, J. (2021, September), Hotels & Motels in the US (IBISWorld Industry Report 72111), IBISWorld. 18 Skift, “IHG CEO Keith Barr at Skift Global Forum 2022,” September 25, 2022, video, 24:19, https://bit.ly/3USSHtG. 19 Skift, “The Big Travel Trends to Follow at Skift Forum Europe 2022,” March 9, 2022, video, 13:43, https://bit.ly/3g1EpIM. 20 Skift, “State of the Travel Industry with Skift Research at Skift Global Forum 2022,” September 21, 2022, video, 13:57, https://bit. ly/3hy99RN. 21 Airbnb, Inc. (2021), “Form 10-K 2021,” U.S. Securities and Exchange Commission. 22 Hilton Worldwide Holdings, Inc. and Marriott International, Inc. (2021), “Form 10-K 2021,” U.S. Securities and Exchange Commission. 23 Skift, “Expedia CEO Peter Kern at Skift Global Forum 2022,” September 25, 2022, video, 27:54, https://bit.ly/3Ezzicc. 24 Marriott International, Inc. (2021), “Form 10-K 2021,” U.S. Securities and Exchange Commission. 25 Karmin, C. (2016, Sept. 23), “Marriott Completes Acquisition of Starwood Hotels & Resorts,” The Wall Street Journal. 26 Karmin, C. and D. Mattioli (2016, Jan 22), “Hotels Ramp Up Deal Making as an Antidote to Airbnb.” The Wall Street Journal. 27 Marriott.com, accessed November 8, 2018. 28 Statista.com, accessed 2022. 29 Moyer, L. (2017, May 29), “Hotels, Feeling the Pinch of Airbnb, Promote Local Experiences,” The New York Times. 30 Skift, “Marriott CEO Anthony Capuano at Skift Global Forum 2022,” September 20, 2022, video, 24:56, https://bit.ly/3UF4fRO. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 24 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
31 Lock, S. (2022, Mar. 23), “Hilton Worldwide Holdings, Inc.,” Statista. 32 Skift, “Hilton CEO Christopher Nassetta at Skift Global Forum 2021,” September 21, 2021, video, 33:04, https://bit.ly/3WY5ZHr. 33 Wilmot, S. (2018, Feb. 20), “Hotels Check into Technology Arms Race,” The Wall Street Journal. 34 Barr, K. (2021), “Chief Executive Officers Review,” Annual Report and Form 20-F. 35 Moise, I. (2018, Feb. 21), “Priceline Group Rebrands to Booking Holdings,” The Wall Street Journal. 36 Skift, “Expedia for Business President at Skift Forum Europe 2022,” March 29, 2022, video, 25:55, https://bit.ly/3TJgM5b 37 Bookingholdings.com, accessed March 25, 2022. 38 Forman, L. (2022, Mar. 2), “Booking Holdings Shareholders Need a Staycation,” The Wall Street Journal. 39 Skift, “Booking Holdings CEO Glenn Fogel at Skift Global Forum 2022,” September 20, 2022, video, 28:09, https://bit.ly/3tuBc7u. 40 Barbanel, J. (2018, Nov 11), “New York City Raids Condo Building in Crackdown on Airbnb Rentals,” The Wall Street Journal; Code 2018, “Interview with Brian Chesky, Co-founder and CEO Airbnb,” May 30, 2018, video, 34:24. Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. 25 For the exclusive use of T. Yu, 2023.This document is authorized for use only by Tiannuo Yu in Marketing Strategy – Fall 23 taught by SANDY BECKER, Columbia University from Aug 2023 to Dec 2023.
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