About Airbnb

Airbnb is an online marketplace and hospitality service, enabling people to lease or rent
short-term lodging including vacation rentals, apartment rentals, home stays, hostel beds,
or hotel rooms. The company does not own any lodging; it is merely a broker and receives
percentage service fees (commissions) from both guests and hosts in conjunction with
every booking. It has over 3,000,000 lodging listings in 65,000 cities and 191 countries, and
the cost of lodging is set by the host.

How it works
Airbnb can be accessed via either the Airbnb websites or mobile applications for iOS, Apple
Watch, and Android. Registration and account creation is free. On each booking, the
company charges guests a 6%-12% guest services fee and charges hosts a 3%-5% host
service fee. Hosts can also offer "experiences", such as excursions, to guests for an
additional charge, of which Airbnb takes 20% as a commission.
Users can search for lodging using a variety of filters including lodging type, dates, location,
and price.] Before booking, users must provide a valid name, email address, telephone
number, photo, payment information, and, if required by the host, a scan of a government-
issued ID. Guests also are required to agree to any house rules of the host.

Safety mechanisms
Airbnb had to overcome the obstacle of "stranger danger" to build a level of trust between
hosts and guests and instill confidence in its platform. Airbnb did this by requiring user
profiles so that members can learn about their hosts and guests ahead of time and by
establishing a rating and review system. Founder Joe Gebbia has said that Airbnb is
specifically "designed for trust

Airbnb in india Market shaping up in India?

the Indian economy is growing and accommodation booking site Airbnb is witnessing a lot
of momentum here, the company’s co-founder and Chief Technology Officer Nathan
Blecharczyk said here on Wednesday. He was here for the official launch of Airbnb in India.
The California-based company, launched in 2008, has 2 million listings globally.

In India, 18,000 properties are listed on the Airbnb platform across 100 cities. “We have
witnessed 115 per cent growth in listings in India over the last year,” Blecharczyk said,
adding that by 2020 the Indian travel market is estimated to be worth $40 billion.
On the safety aspect, Blecharczyk said the company has a proven model and scale, and “half
of the hosts on Airbnb are women”. Moreover, each listing is reviewed by several travellers,
and this provides assurance to users, he said. It is important for hosts to maintain their
standards; else they can be removed from the platform.

Amanpreet Bajaj, Country Manager, Airbnb India, said domestic travellers also present a
huge opportunity for the company. “It also allows Indians to be micro-entrepreneurs, by
serving as hosts on the platform,” he added.

Transactions on the platform in India has nearly tripled over the past year, the company
said in a statement.

Nearly 5 lakh Indian guests have travelled via Airbnb. Also, India is a popular destination
for travellers from the US, the UK and Australia, with Goa, New Delhi and Mumbai as top

Is there any different pattern/trend that you see regarding user behavior when
it comes to India?

Consumers on the internet are always seeking value! And in that sense users
of Airbnb in India are not that different from their counterparts in the west!
Indian travellers appreciate the access to amenities like kitchen, wifi,
washer/dryer etc. which is offered at several of our properties globally. We ran
a study in India and learnt that the three top motivations to use Airbnb for
Indians are value for money, access to amenities and local experience. A
combination of all these factors make Airbnb a compelling proposition for our
guests.

Mohit Srivastava

YourStory: What can we expect from Airbnb in the coming days from an India
standpoint?

Mohit: third largest aviation market globally by 2020. Besides, India has more
than 50% of its population below the age of 25and more than 65% below the
age of 35. With increased capacity of flights this population of young travellers
will have greater access to destinations worldwide. And it’s very likely that
Airbnb will have listings in all those destinations! We currently have more than
600,000 properties across 192 countries. Hospitality is at the core of most
Indians. We will work towards our goal of meaningful trips for all people
experiencing India and the world through Airbnb.We will stay committed to our
mission and will continue to support and build our community of hosts and
guests in India. Currently, we have more than 5000 listings across the country.

Bullish Airbnb sees plenty of

room for growth in India
With half a million Indians having used Airbnb already since
its inception, India is one of the fastest-growing markets for
the company
Homestays and bed-and-breakfast options have so far witnessed
limited popularity in India. “In the whole notion of living at a
stranger’s house, an element of trust and security has been lacking in
the Indian market so far,” said Chetan Kapoor, a research analyst at
industry research firm Phocuswright Inc.

According to a 28 April report in The Economic Times, the

government is looking to ease rules to encourage homestays and
tourism. Currently a homestay requires a licence from the state
government, which is valid for two years and needs renewal thereafter.
It also mandates the hosts to reside at the property being rented out.

Last month, Airbnb announced a strategic tie-up with the Times

Group, the publisher of The Times of India and The Economic Times.
As part of the initiative, the Times Group will promote Airbnb on its
media platforms and invest an undisclosed amount in the firm.

How Airbnb Can Strengthen Support

for Local Hosts In India
Srikanth, the proprietor of my Chennai booking, revealed to me very
specific local behaviors that are often unreported by the tech press in their
darling narrative of Aribnb’s massive growth.

Here are three points that stood out from our conversation:

1. Local guests expect an expansive hotel experience

Without a doubt, Airbnb has proven that its short term rental platform
works. The company’s revenues are expected to cross the half billion mark
in 2015, and listings on the site continue to grow. India is clearly a growth
market for the company with about 5,000 listings reportedin mid-2014.
Indians are showing an openness to share their properties with travelers,
but acceptance of Airbnb as an accommodation alternative tells a different
story.
Foreign travelers understand what Airbnb represents as a property sharing
platform. But to attract local travelers, the company will have to cultivate a
database of hosts who offer the type of accommodation locals expect.

Srikanth tells me that Indian guests prefer an experience that is similar to

any other hotel stay in the city. They want amenities that rival the big name
brands in town--that includes a pool, gym, and various dining options. For a
small operation that prides itself on offering a homely experience, that’s a
challenge to provide. Srikanth and his family realize that to attract locals,
the property has to look and feel like a boutique hotel. He may not be able
to provide a pool, but he’ll do his best to offer other comforts. The family
run operation offers in-house meals, laundry services, and a slew of tourist-
centric options.

My Airbnb in Chennai.

2. Terrorism and immigration fears outweigh property damage concerns

In the West, Airbnb has faced criticism over property safety. Media has
jumped on the very few instances of bad behavior or property damage
caused by guests which played into the safety concerns of current and
potential hosts.

That sort of worry is par for the course in a place like India. The bigger fears,
says Srikanth, are terrorism or illegal immigration. India is one country in a
very volatile part of the world, and it’s likely that potential terrorist threats
could be taking place in your backyard. Undocumented migrants flow into
the country from the borders of Pakistan, China, Nepal, and beyond. The
country is strife with internal conflicts, broader regional issues, and global
safety concerns.

It may sound dramatic, but it’s a reality for a country where many public
places are patrolled by heavily armed military personnel. Security
checkpoints are commonplace when entering shopping malls, hotels, and
office buildings.
Airbnb does make potential guests validate their identity by uploading
scans of passports or other visual identification through Jumio’s software.
Whether the system will flag suspicious behavior by a potential guest is
unknown. The Airbnb insurance policy may cover damages to the property,
but it’s unclear whether larger security matters can will the company to
cooperate if needed. Hosts could benefit from a program supported by
Airbnb that places a stronger protections around suspicious behavior
beyond property damage or theft.

To counter this, Srikanth collects visa, passport, and contact information

from each guest and submits the information directly to the federal
authorities. In the event of any suspicious behavior, all paperwork will
immediately alert him of any safety issues associated with a guest staying
on his property. Srikanth takes these measures to ensure his bases are
covered, but it’s not something every Airbnb host will do.

3. Airbnb could stand to win by navigating bureaucratic challenges for

local hosts

A country like India, known for being the largest democracy on the planet,
thrives on the intricacy of documentation. Paperwork is how the country
functions. Whether you’re a casual host, or a serious operations manager
like Srikanth, both state and federal level paperwork on taxes, registration,
and other administrative requirements can be a lengthy and inconsistent
process. In some cases, it comes down to who you know and how much you
can pay to see traction in government circles.

Airbnb has created a rather seamless experience to validate and set up

potential hosts, and facilitates the interactions between guests. The larger
opportunity here is to help local hosts legitimize their properties in front of
various levels of government. What Airbnb has is the ability to foster
relationships in localities around the country, and act as a mediary between
host and government. The technology gives access to thousands of
potential customers, but the bridge between host and bureaucracy could be
a positive transformation in the relationship between India and its
ambitious citizens. Recent policy challenges in cities around the world
display Airbnb’s ability to look out for itself, but what about its revenue
generating customers?

Growing pains

As a guest, Airbnb has been good to me. For my hosts, Airbnb has broadly
opened up a new marketplace with earning potential. But beyond the
technology lies very specific local needs that a company as resourceful and
smart as Airbnb can help to resolve or navigate.

These are typical growing pains for any company hoping to expand beyond
its known Western borders. Each host has a unique story to share on the
benefits of Airbnb in the marketplace, but it also uncovers the infrastructure
or administrative issues that private companies can help locals tackle.

Hosts are the backbone to Airbnb’s success. It’s in the company's best
interest to cater to local needs.

Can Airbnb India beat

GoIbibo & MakeMyTrip?
india – Not a priority market for Airbnb till now?
Whether the hotel industry likes it or not, Airbnb will only
become much bigger over the next decade – possibly
becoming more important than any other travel company in
the world. The Silicon Valley darling has been operating in
India for the last 3 years but India probably has not been a
focus market for it till now. Airbnb is reportedly looking at
India at some interest and will undoubtedly foot the
accelerator at some point – maybe they are waiting for
“critical mass”. Airbnb has a small staff in India and is majorly
expanding in South East Asia at the moment. It continues to
run important functions like technology from Singapore and
the US. One of the few stories about Airbnb India in the
digital media does not have a lot of details about their
strategic plans – Airbnb in India
Domestic Travel Industry is abuzz with activity
Meanwhile, the domestic Indian hospitality sector is abuzz in
2015– room aggregators like Oyo Rooms, Indian booking
engines (Makemytrip, Goibibo, etc) and even Airbnb clones
like Stayzilla are all vying for a piece of the pie. Add to the
mix niche players in the conventional hotel segment like
Roomstonite. Sitting on the sidelines is payment giant Paytm,
looking to grab a chunk of the huge transaction volume (est
USD 70 Billion Annually) which is primarily cash and card
right now.

So what does the future hold? Possibly one of two

scenarios…..
 The conventional, alternate and other travel sub
segments consolidate. All these Airbnb clones fold / get
acquired over time leading to a Uber / Ola duopoly kind of
situation in India? Airbnb could bide its time like Amazon
and make a huge splash soon taking away large market
share
 The market remains highly fragmented along the
alternate stay, branded hotel, room aggregator lines. At
least a few of the segments remain highly profitable and
immune to global companies like Airbnb – which continues
to remain a big but not dominant player
I believe that for couple of years we will see heightened
activity in each travel sub segments as companies try to
“build perceived differentiations” and “maintain strategic
moats”. But the situation will change after 4-5 years and lead
to a Flipkart/Amazon or Uber/Ola Duopoly situation in India –
with Airbnb as one of the players. There are a few strong
reasons for this…..

Alternate Stay market Vs Conventional Hospitality –

The lines are blurred in India
In developed economies, branded hotels are already
contemplating what to do about the threat from the sharing
economy. India is a slightly different market – one could take
the view that the conventional hospitality market in India
ends at the so called “star hotels”. Given the apathetic
attitude that the government has to hospitality regulation,
India is pretty much a “Self branded” market outside the star
hotels. As state, city, local rules differ dramatically, there are
no common measures of what constitute “hospitality
establishment”. Even 100 room properties in India run
without any overarching regulatory body. There have been
fits and starts to regulate the sector with food quality
recommendation, tourism guidelines, building regulations –
but most remain difficult to implement and hence on paper
only. One of the critical unifying forces (surprisingly) is the
taxation rules in India which require taxes to be collected for
“services rendered”. It is hoped that the proposed Goods and
Services tax (GST) will better define the hospitality sector–
but this is albeit a hope.
Given this background, India is indeed a very large potential
market for Airbnb – it would not only get business from the
alternate stay market (undoubtedly large and interesting) but
also the conventional stay market which is truly huge
(estimates USD 80 Bn a year). In other markets, large
establishments sell rooms on Airbnb and this may well be the
future of Airbnb in India.

Room aggregators – Solving problems or creating

them?
In India, the room aggregators now seem to be devolving into
quasi “booking engines” and hence would view Airbnb as a
huge threat to their business. The mathematics is simple for
the business owner – Airbnb charges 3-4% commission while
the room aggregators take away 12-25% (depending on their
bargaining power). All this without changing their mother
brand name – which is an issue for SME / small players in the
hospitality segment as it leaves them with no brand recall.
The biggest problems that non tech savvy hosts face in India
are

 Updating content on multiple websites – Online Travel

Agents and their own sites
 Lack of technical staff on premises to handle online
queries, payments, etc
Hence the Indian hospitality owner may never be able to
focus on more than 2-3 Online Travel Agents. The choice boils
down to booking.com, airbnb and domestic OTAs like
Makemytrip and Goibibo. There are new ones like Oyo Rooms
that promise to make life easier by “buying inventory”, “Co-
branding” – unique experiments that haven’t been tried
elsewhere in the world. Whether they are able to navigate
issues like confused branding, no operational control on site,
inconsistent stay experiences is something that only time will
tell. For now, they are discounting rooms using investor
money in order to get “market share”.

Why has Airbnb not focused on India till now?

A good case study to answer this question would be Amazon
– a company that stayed away because of difficult rules on
multi brand retail, complicated taxation and a fragmented
market. But they took the leap in India in 2014 – and what a
leap it has been. In a similar vein, Airbnb will need experts in
taxation, local regulation and tweak its app to make it work
seamlessly in India.

The hospitality tax regime remains complicated – luxury

hotels must be luxury taxes, while homestays are exempt.
The lines are blurred as some states charge additional taxes
from hospitality companies while some don’t. It would
therefore be prudent to incorporate this on their app – for
now they are charging service taxes directly from the user
and depositing on behalf of the host.

The average commission for India works out to be far lower

than in the West where the average rental would be USD 70.
The average rental in India would be USD 30 – which is just
40% of the US. Also Indian users are just getting used to the
concept of paying a “service charge” for their booking. Of
course, for volumes to pickup, the Indian user needs to
become comfortable with these aspects of booking an
accommodation.

Major difference between Indian and overseas travelers –

 Higher service levels are expected – Indian hotels have a
fairly high level of service and Indian guests expect this. A
completely self catered accommodation would not be a
great selling idea.
 Experiences are important but cost trumps all – Cost
differential and not necessarily the experience of living in
“someone else’s home” drives some users to use Airbnb.
Then why would Airbnb succeed in India?
There are some well published reasons why Airbnb could
succeed in India – hotels are expensive, they don’t have the
personal touch and more importantly the tax/cost structure is
heavily loaded against large organized players. Smaller
players have a large cost advantage and additionally are
more nimble in their pricing which is controlled by the host.
But the single largest factor that may drive Airbnb success in
India is – TRUST!

It’s a well known fact that staying in unbranded hotels in

India is a bit of “pot luck”. There is little standardization and a
very heavy reliance on the host, rather than any pre defined
processes. The problem with anonymous models for booking
(so called “aggregator”) a hotel is the lack of trust, reliability
and information. In a country like India, where safety is a
major concern, there are doubts whether pure online
aggregation systems that de humanize the stay process will
work. Consider the following facts

 Room aggregators do not allow exchange of information

before the stay. How would one fix accountability in the
absence of a human face?
 Room aggregators do not send the correct address
before the stay date – they are afraid that the guest will
cancel the booking and go direct to the host. This is
especially important as they don’t provide any great value
add during the stay besides the booking process.
 Genuine reviews are not allowed on room aggregator
sites as bad reviews would essentially kill the business of
some hotels. Hence guests must rely only on neutral
review sites like Tripadvisor and now more importantly
Airbnb.
Airbnb puts the host front and center as the point of contact.
Not only does this solve the security issue, it also creates a
sense of responsibility as guest reviews are public. The
reviews are all of genuine travelers and the verification
system goes a long way in ensuring that only genuine hosts
thrive in the Airbnb eco system.

Who is the typical Airbnb user in India?

Airbnb is still a concept that the Indian user is getting used
to. The issues for a lot more Indian users to become paying
clients is two fold

 Indian users are not too thrilled about paying service fee
upfront – we are too used to paying bundled fees – Airbnb
transparency policy is sort of self defeating here!
 Some Indian users hesitant to pay upfront to secure a
booking. They would rather book a single day and pay the
balance on checkout. The “Book now, Pay Later”
booking.com culture is becoming popular.
 Payment mode for many listing is still in dollars and that
is a deterrent. A simple tie up like what Uber had with
Paytm could fundamentally change this for Airbnb
How is the Indian market different from other Airbnb
markets?
An average Airbnb host in developed countries is

 Successful career person with 2-3 vacation homes –

These homes would be un catered, or at best semi catered
 Semi retired person with 3-4 properties that he would
like to let out and make extra income – typically would stay
in the same city and would cater to guests themselves
 Small companies specializing in renovating and letting
out properties or even selling them as “high yield Airbnb
investment homes”
In India, the typical Airbnb host would tend to be far more
focused on hospitality as a primary source of income source
than as a “side business”. The average host has an
established business as hosting is a rather serious business in
India! I am no management consultant, but I see a few clear
strategic steps that Airbnb could make in India

 The payment system issue – This is an easy one to fix,

including adding flexibility of various mobile payment
systems (wallets)
 Dedicated Airbnb Hotline – Specifically aimed at security
and hygiene. A real time reporting system could help them
weed out “problem properties” early on
 Segment hosts on the basis of track record and highlight
the same to guests – This could go a long way in
addressing any niggling “trust” issues
 Host Service Team – This last one is a little bit left field
but a service team that can assist hosts sort our issues
related to quality may be a winner. Yes, it hasn’t been tried
anywhere else, but look at Uber – they have a completely
different model of operation in India with a dedicated legal
team as well!
I see a Airbnb as a major player in the Indian space in the
coming years. They may have been slow off the block for
reasons best known to them – but expect to see a lot more in
the near future. For hosts, this is probably a good thing as
they will be spoiled for choice from a wide number of travel
websites, helping them market their rooms to a worldwide
audience.

Will Airbnb continue viral success with its latest ad

industry-pleasing spot?
Airbnb’s marketing sets itself a difficult challenge: how
do you make other people’s houses feel like home?
Prior to the house-sharing start-up taking off in the last
few years, the idea of bedding down in a complete
stranger’s home was the substance of a horror film’s
first act. The brand’s successful integration into the
sphere of travel accommodation is in part thanks to the
consistently high quality of its advertising campaigns.
Diverse in style but always produced with a painstaking
finish. Its latest spot is no exception. ‘A Different Paris’
begins with the shiny, aspirational gloss, characteristic
of travel advertising. A young woman sits in an
immaculately-laid atelier, gazing out over the storybook
rooftops at the Eiffel Tower. So far, so Midnight In Paris.
As she stands to take in the view, the camera pushes
into the skyline, which suddenly jumps into flickering,
animated life. As evidenced by previous campaigns,
Airbnb’s creatives clearly pride themselves on their
technical ingenuity. In order to illustrate their
protagonist’s rose-tinted memories of the City of Lights,
the brand constructed a frankly stunning zoetrope in
three dimensions. While most zoetropes (one of the most
primitive forms of movie-making) shows horses running
or athletes jumping, AirBnB’s incredible animation brings
memory to life in a manner that’s both sophisticated and
captivating. While the technical specs alone will appeal
to design buffs, the ad’s use of the zoetrope never feels
like a needless gimmick. Instead the flickering vignettes
of her Parisian life (characterised by ramshackle flea
markets, late night cafés and raves under bridges) are
perfectly brought to life by a series of tiny plastic
figurines and sumptuous sets. A week after the Emmys
finally gave Mad Men’s Jon Hamm his due, the spot
ironically recalls Don Draper’s famous pitch for the
Kodak Carousel. Nostalgia is, as Don rightly points out,
both "delicate and potent". The brand has explored this
homespun, cutesy aesthetic previously, most notably
with ‘Welcome To Airbnb’. While neither that ad nor ‘A
Different Paris’ attracted millions of shares, they
certainly demonstrate a commitment to a truly loveable
atmosphere. Compare this to their most recent
campaign ‘Is Mankind?’, a spot which turned the notion
of house-swapping into a philosophical journey into the
soul of man and was shared significantly more than any
of Airbnb’s papier-mâché charm-fests. While ads like ‘A
Different Paris’ may prove popular with industry
commentators and other creatives, the brand is yet to
score a wider viral hit with this aesthetic. On this
basis, it will be interesting to see how Airbnb learns
from this in future campaigns. Airbnb’s ‘behind the
scenes’ videos are also reliably brilliant, and this entry
is no exception. For fans of craftsmanship, ingenuity and
designers talking hyperbolically about building
dioramas, it’s a joyful mix of hard work and play. In
2015’s ranking of best ‘behind the scenes’ clips, it’s up
there with Lexus’ miraculous hoverboard (oh, and maybe
this little film trailer).

Singapore-based company HeyBnb which operate in the short stay accommodation

space has forayed into India. It competes with AirBnb. Kenny Blatt, co-
founder, HeyBnb in an email interview with Swaraj Baggonkar says that the brand is
focused on providing travelers a safe and secure alternate accommodation to a
traditional hotel stay. Excerpts

How do you plan to provide a consistent consumer experience to travelers

given that there are different private parties involved in your business model?

Quality has two sides to us - our hosts listing and how it is accurately portrayed and
our customer's ability to book with confidence. We have a review mechanism in
place for both but recognize that the business in India is at its infancy and we will
need to work through the education process of both our host and customer.
We have included a review section where a guest or host can review each other on
the platform and based on their experience, they rate to each other. These
ratings/reviews will help other users to select a host/guest and impact the search
preference. As both hosts and guests realize how the ratings work, they will be more
focused on constantly improving upon their operations. For instance, properties of a
host in Goa having a 5-star rating and better reviews will lead the search result when
a traveler looks up for information for Goa accommodations. To be on the top of
HeyBnb's search results and get better reviews, hosts will have to provide the best
possible services to the guests. That is what is exciting here as each time a host or
guest interacts, they learn.

How are posts screened and managed?

For posts, we have an in-house team to ensure the quality of listings with best
images, property details etc. These are collected and reviewed thoroughly by team.
Only after passing our quality test, a property is listed on our website. Any
modifications made in the listings also undergo this review process. This is to ensure
that guests see only accurate information about a property/host. A large number of
our listings outside of India are in markets where shared accommodation business is
more developed and our channel partners have a very exacting review processes.

If a host faces any issues while listing her property or bank related issues, our team,
through our 24/7 call center, guides them throughout the process. The team assists
in booking process, transaction etc. and helps in establishing a connection between
the guest and the host.

How will you differentiate yourself against AirBnb?

As of now, there is no differentiation between Airbnb and us. Our goal is to provide
excellent customer service to our customers and really understand their needs and
help educate them in the process of booking or listing. In terms of brand building,
our focus market is South & South-East Asia. We are also focusing on listings in key
cities in Europe and the United States as that is where our India guest wants to
wander. As far as product/technology is concerned, we have the same approach
with some refinements to account for the local market preferences.

This is an unregulated market, what are the challenges that you face in India?

People in India are not aware of the concept of short stay accommodations, hotels
being the preferred accommodation for travelers. Educating users about the
homestay concept, its pros and cons are a must for us to grow the market. The
Government of India is also promoting the concept of homestays as a part of Start-
up India initiative. We also must work with all of the competitors in the market to
ensure a safe secure environment for all of our customers.
Where do you drive your margins from?

As with most shared economy businesses, our margins are first derived from the
commissions that we receive from both hosts and guests. Over time, we will
incorporate other services for our hosts and guests. Residential societies have their
own bylaws in India. Don't you think members who list their properties will face
resistance from other society members?

Hosts may face some resistance from other society members. For this, we always
encourage hosts to take necessary approvals from the concerned
authorities/societies/neighbours before listing their properties with us. Also, hosts are
required to mention the rules the traveler has to follow to ensure safety for both of
the parties.

What is the number of guest bookings that you are targeting at your
properties for this year?

Initially we are looking at around yearly 25,000 - 30,000 guests/bookings for this
year.

What are going to be your key markets in India?

Goa, Kerala, Leh, Ladakh, Rajasthan, Agra, Pondicherry— these are some of the
markets for us. We have identified these places based on the customer focus
groups that we have done to date. It typically starts with vacation destination and
then the urban cities start to take real hold.

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management-assignment-harvard-case-study-june-2017