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I need a case study regarding how Airbnb has developed its business by designing for trust and developing an lifestyle ecosystem (products and experiences that integrate with a customer's life as opposed to a product ecosystem)
Hello! Thanks for your question about how Airbnb has built up its business by creating trust and developing a lifestyle ecosystem. The most useful sources I found to answer your question are "Designing for Trust" by Charlie Aufmann and "May I sleep in your bed? Getting permission to book" by Logi Karlsson, Astrid Kemperman and Sara Dolnicar. The short version is that Airbnb built their business by investing heavily in building mutual trust between buyers and sellers. Below you will find a deep dive of my findings.
METHODOLOGY
I used Google to search through academic databases, industry reports, trusted media sites and corporate websites for journals and white papers on Airbnb's business practices. I found a few papers detailing what Airbnb KPIs were and how their strategy to implement trust was so successful. I also found additional articles detailing Airbnb's activities and their results.
ABOUT AIRBNB
Airbnb certainly knew how important trust was from the day the company started. In 2007 two roommates were having trouble paying rent in their San Francisco apartment. After being able to scrape up some money by allowing two people to share two air beds in their apartment, they decided to pursue the concept as a business. The company faced rejection from investors and Silicon Valley skeptics alike for years; nobody seemed to believe that "Air Bed and Breakfast" would be the next big hotel chain. Yet in April 2009 Sequoia Capital gave Airbnb a seed investment of $600,000 which jump-started the business. Despite legal issues with cities wanting to ban Airbnb and some reports of people having their houses trashed, Airbnb continued to grow quickly. In 2011 the company reached 1 million nights booked and was available in 89 countries. Now they're competing with some of the largest hotels worldwide for tourists' attention; in 2016 they were 2nd to Marriott by 100 rooms in leading lodging companies and is currently worth $31 billion USD worldwide. Their strategy of implementing trust and creating lifestyle ecosystems truly paid off.
BUSINESS ACTIVITIES
TRUST
Building trust is an activity Airbnb is constantly engaged in. Unlike a hotel room, they are trying to sell someone's personal living quarters which many people assume to require a certain level of trust. To figure out how to build trust, Airbnb gathered information regarding why anyone would not want to stay in a complete stranger's home. "Stranger Danger", they called it, was the assumption that people we don't know are dangerous. Airbnb flipped this assumption on its head by creating ways to make sellers and buyers seem more like potential positive experiences and less like strangers. Profile pictures, the ability to link social media accounts, all of these features on Airbnb profiles remove anonymity which would make it harder for buyers and sellers to trust each other. Longer host descriptions have been shown to make guests more likely to book places as they seemed more trustworthy. Along with well-implemented profiles; Airbnb then created safety nets for buyers and sellers. Sellers cannot access funds until a guest has been checked in for 24hrs and qualified sellers are protected under Airbnb's $1 million dollar guarantee if something goes wrong. The second way was by creating a reputation system; reviews are critical to how the community on Airbnb works. When guests leave a positive review it also reflects positively on them; it shows that they're aware of how the system works and gives hosts a small view as to what the guest is looking for. On the other hand, places with 10 or more positive reviews are x10 more likely to be booked.
LIFESTYLE ECOSYSTEM
3 in 4 Airbnb listings are outside traditional tourist districts. Many hotels are now being outsold by Airbnb in almost every single metric. How did Airbnb cater to people's lifestyles in a way hotels did not? The biggest answer is location. Airbnb hosts are normally off the beaten path; which is very appealing to tourists who want to experience something new. Airbnb's core concept of belonging and creating connections between strangers is emphasized in the company's actions. They are currently working together with local cities to create more tourist friendly destinations to set up on the website. Airbnb firmly believes that hanging out with the locals; not just other tourists, creates experiences you cannot get from staying at a hotel. The system is heavily personalized to cater to this; from guests being able to add topics or places they'd like to go to, to hosts being able to personally contact guests before accepting or rejecting them.
The Airbnb experience is radically different from a hotel that simply attempts to sell multiple rooms. Airbnb allows significantly more personalization that appeals to the lifestyles of both guests and hosts.
SUCCESS
One of the KPIs Airbnb used to check for success was retention. Were first time tourists coming back to rent out more places on Airbnb after their first one? The data shows that yes, most guests rented an Airbnb in the same year after their first one. Retention is important to hotels as customers refusing to come back can seriously damage the hotel's reputation, and may also be a look into what issues are serious problems that need to be addressed. The other KPIs were the number of listings and instant book listings. An increase in listings would be a major metric to show that business is continuing to be successful; Airbnb is currently at 4 million listings worldwide, compared to just 1 million in 2011. Instant book listings were another important metric. After being under fire for discrimination issues on the website, Airbnb created instant book listings to solve the issue. As of 2017, There are now 1.9 million instant book listings which is a significant increase from the 1 million listings near the end of 2016.
CONCLUSION
To wrap it up, Airbnb built trust and provided unique experiences to successfully disrupt the hotel market.
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