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AirBnB: A Business Model for the Sharing Economy

Introduction :

Disruption of technological innovation continues to occur in all

sectors. After conventional transportation has been hit by online

application-based transportation services, now the turn of the hotel

industry in the country is rivaled by the presence of the lodging

service site, AirBnB.

AirBnB, short for air bed and breakfast and breakfast and

breakfast, is a pioneer of the United States (US) accommodation

marketplace which was established in 2008. Its business model is

similar to Uber, AirBnB offers brokerage functions for residential


owners who want to rent rooms, houses, apartments, inns, or other

places to stay within a certain period.

From the beginning, the presence of AirBnB presents a

challenge for the hotel business. Although not yet officially present in

Indonesia, there are many property owners who offer rental housing

through AirBnB, especially in tourist blood like Yogyakarta and Bali.

The hotel industry has also begun to feel the blow of the lodging

marketplace disruptor.

Natour Hotel, for example, claims to have felt a decline in

revenue since AirBnB began offering accommodation in cities in

Indonesia. According to Kontan's records, the average occupancy rate

of 43 hotels in the Natour Hotel network in the first semester of 2017


is around 61%. According to Hotel Indonesia President Director

Natour Iswandi Said, this was the impact of the presence of AirBnB.

According to PT Pudjiadi and Sons Tbk (PNSE) Corporate Secretary

Ariyo Tejo, the entry of AirBnB presents a challenge for hotels

operated by the company. The presence of AirBnB has helped to

suppress hotel occupancy because the hotel industry in Indonesia

itself is still experiencing oversupply or oversupply.

Chairman of the Indonesian Hotels and Restaurants Association

(PHRI) Hariyadi Sukamdani agreed, the presence of AirBnB began to

undermine hotel business in the country. Because, the AirBnB

lodging service has a difficult advantage against the hotel industry,

namely from the aspect of a much cheaper price.


AirBnB is detrimental to hoteliers because its business is not

included in the legal accommodation business system and does not

pay taxes. What AirBnB does is also only offer lodging, regardless of

security and service aspects, which is an important concern for hotel

services.

The AirBnB market extends to many travelers who only stop for

a few days and do not put too much emphasis on good hotel room

facilities. From the aspect of supply, AirBnB is also not difficult

because many residential owners are willing to offer rental places to

earn income.

Therefore, Hariyadi assessed that the government should

prohibit the existence of AirBnB. If you want to run a business in


Indonesia, the company based in San Francisco must follow the

provisions in Indonesia, such as paying taxes and opening a

representative office in Indonesia.

AirBnB itself was founded by three friends Joe Gebbia, Brian

Chesky, and Nathan Blecharczyk. They built AirBnB by offering

breakfast cereals and air mattresses placed in the living room. Their

startup then received funding from Y Incubator, an elite pilot business

incubator.

Now AirBnB already offers accommodation in 34,000 cities and

191 countries. What is being offered now is not only a bedroom, a

house or an apartment, but also offers services to stay overnight on


yachts, castles, private islands, igloos, cars, workplaces, tree houses,

micro-houses, art galleries and tents in nature open.

(https://katadata.co.id/berita/2017/10/12/airbnb-mulai-mengancam-bisnis-hotel-di-indonesia)

Background

The Airbnb story started back in 2008, with the two founders, Joe

Gebbia and Brian Chesky, and 3 air mattresses in San Fransisco,

California. They create a community-based online platform for listing

and renting local homes. It connects hosts and travelers and facilitates

the process of renting without owning any rooms itself. Moreover it

cultivates a sharing-economy by allowing property owners to rent out

private flats.
Value proposition

 Transparent Cozy home like ambience when guest booking a room

that’s what guest need

 Breakfast offered more personalized, yet quieter atmosphere

 Access persons with disabilities

 For host it’s significantly smaller operating cost than hotels,

motels, and bed & breakfast. Rather than expenses related to

owning and operating real estate properties, Airbnb’s expenses


were that of technology company, with an estimated 11 percent fee

per room stay.

REVENUE STREAMS

Airbnb take a several percentage from the payment of guest. Receives

commissions from two sources upon everybooking, namely from the


hosts and guests. For every booking Airbnb charges the guest 6-12%

of the booking fee. Moreover Airbnb charges the host 3% for every

successful transaction

Customer Relationship

Producers (i.e. room suppliers) can add various attractions and places

to eat thereby advertising why a consumer should go to that city.

While this is a free feature, it encourages more users to join the

platform and grow the network effects. This is beneficial for the

producers as they have a higher possibility of filling their vacancies.

This is beneficial for consumers who will have a larger room

selection, since more users means attracting more producers. Finally,


this is beneficial for Airbnb because more producers and more users

means more revenue. These non-monetary benefits foster customer

relationships as it encourages long-term engagements between the

users, the producers and the platform.

Customer Segment

Guests: This market segment involves mostly those who enjoy

traveling and at the same time not spending all of their money in a

hotel room. They would rather spend their in visiting touristic places

while they travel because they will not be spending much time where

they will be staying. There are some travelers who rather stay

somewhere they can relax and spend most of their days without

emptying their pockets.


Hosts: Whatever the reason is, all hosts are looking to list their

current place on Airbnb because they have the ability to get to know

who will be staying in their property. People get the opportunity to

increase their income when renting out their rooms or homes. By

renting a place per night, the monthly average price, is two or even

three times more of what the rent actually costs. Also, they can rent

their vacation homes for a bit less but for longer days than average.

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