Company Case Airbnb: Making Hospitality Authentic

Like many services industries, hotel companies have done a tremendous job of ensuring the quality of
the customer experience through standardization. People booking rooms through any of the major hotel
chains can be pretty much assured of certain basics. They’ll enter the 13-by-25-foot room into a short
hallway with a bathroom and closet on one side or the other. In the bathroom, they’ll find the basics
along with a sterile display of soaps, hair care products, and other toiletries. The room features a bed or
two flanked on both sides by nightstands with a reading light by each. An upholstered chair and ottoman
sit at an angle in the far corner with a desk opposite. A dresser topped with a flatscreen TV sits across
from the foot of the bed. Visitors might also discover a mini-fridge and a microwave oven. The artwork
and décor are fairly contemporary although impersonal and nondescript. Other details throughout the
hotel

property are equally predictable. And although luxury level across these features varies from chain to
chain, the vibe is the same. Many travelers count on this standard experience—it assures that their
experience will be within a set of narrow, expected boundaries. Minimizing the risk of negative
outcomes typically results in a satisfactory lodging experience for most guests most of the time. But one
lodging provider is targeting travelers who have a different set of needs and expectations. Airbnb is
turning lodging services upside down by promising a hospitality experience that is the complete
opposite of the one provided by major hotel chains. A major player in the new sharing economy, Airbnb
is an online community marketplace that connects people who want to rent out space in their homes
with those who are looking for accommodations. Like a true online marketplace, Airbnb doesn’t own
any lodging properties. It just brings buyers and sellers together and facilitates transactions between
them. But Airbnb’s promise of value is what really sets it apart from the hospitality world’s status quo.
The new-to-the-game lodging provider pitches an authentic experience—a true sense of what life is like
in the place you visit. Whereas the hotel industry has spent decades sculpting its standardized offering,
in just eight years Airbnb has built a global network of more than 2 million listings and 60 million guests
throughout 34,000 cities in 191 countries. It has also built a market value of more than $25 billion.
Although these numbers may sound impressive on their own, in its brief existence Airbnb has managed
to exceed the accomplishments of the largest hotel chain in the world—100-year-old Hilton Worldwide
with its 765,000 rooms, 4,660 properties, and a market value of $22 billion. How did Airbnb pull of this
amazing feat? According to Brian Chesky and Joe Gebbia—the start-up’s founders—Airbnb simply
recognized that the travel industry had lost touch with its customers by offering only one cookie-cutter
option—ticky-tack rooms in antiseptic hotels and resorts. This standardized model seemed to dictate an
unintended goal for the entire hotel industry—to ensure that nothing remotely interesting happens.
Once Chesky and Gebbia recognized this, they set out a strategy to bring authenticity back into the
hospitality industry.

Two Million Rooms—No Two Alike It all started when the founders had a hair-brained thought on how
to generate some extra income to help pay the rent on their modest San Francisco loft apartment.
During a major convention that had every hotel room in the city booked, they rented out three air
mattresses on the floor of their apartment for $40 a night each. In the process, they discovered that the
people who booked that real estate got more than just a place to stay at a time when they needed it
most—they got a unique networking opportunity. From that moment, Chesky and Gebbia moved quickly
to develop and formalize the business concept. Today, using Airbnb to either list a property or rent one
to stay in is relatively simple. For hosts—Airbnb’s official term for property owners who want to rent out
space—it’s a simple matter of registering and being vetted to ensure legitimacy. Listings can be pretty
much anything from a couch, a single room, a suite of rooms, or an apartment to a moored yacht, a
houseboat, an entire house, or even a castle (Airbnb currently claims more than 1,400 castle listings).
Some hosts even rent out space in their yards for guests to pitch a tent. With more than 2 million listed
properties for rent, each is as unique as its owner. Because listings are in private homes and apartments,
they are typically located in residential neighborhoods rather than commerce centers where national
and global hotel brands abound. Bookings can be offered by the day, the week, or the month, and hosts
decide on price and the other details of their service and listings. Airbnb keeps only 3 percent of the
booking fees and returns the rest to the host within 24 hours. For guests, the process is about like
buying or booking most anything online. Registered users search by city, room type, price range,
amenities, host language, or various other options, including entering their own keywords. Most listings
provide photos and details that give potential guests a reasonably accurate idea of what their stay will
be like. Guests can contact potential hosts with questions before booking. On top of the fee for the
property, guests typically lay down a security deposit and pay a 6 to 12 percent service fee to Airbnb.
Bookings are made

through Airbnb, so money changes hands only through a secure interface. When guests arrive at the
chosen property, the host either greets them or arranges for entry. As the founders were getting Airbnb
off the ground, they constantly faced a big challenge. Many people—investors included—were skeptical.
In fact, during Airbnb’s first year, the founders were turned down by every venture capitalist they
approached. “When we started this company, people thought we were crazy,” said Chesky. “They said
strangers would never stay with strangers, and horrible things are going to happen.” They also had a
hard time convincing guests; few people were willing to risk staying with someone they’d never met. But
Airbnb overcame these concerns through various means. First, it set up a standard rating system for
both hosts and guests, allowing each side to assess the other and reviewing what others have said about
prior experiences. A “superhost” status gives an assurance of extensive booking experience and high-
quality service. A “business travel ready” badge notes that the host provides specific amenities like Wi-
Fi, a desk, and basic toiletries. Airbnb also puts guest and host minds at ease with its verification
process, tips for safe and satisfactory bookings, and a 24-hour Trust and Safety hotline. Hosts are further
protected by an included insurance policy that protects their property from damages of up to $1 million.
Airbnb admits that although these measures do not guarantee that nothing bad will ever happen, the
likelihood of a negative outcome is no greater than it is for staying at a chain hotel.

Seeing the World as the Locals Do From the beginning, Airbnb primarily served budget-minded
customers with prices for listings lower than those of comparable hotel rooms. But more and more,
Airbnb is seeing a shift toward customers—leisure and business travelers alike—who want more than
just low price. This is hardly an accident. Airbnb deliberately positions itself as a provider of unique and
authentic experiences through its branding, communications, and other aspects of its business. In doing
so, Airbnb has taken the uncertainty of staying in a stranger’s house and turned it into an asset.
Whereas hotels can compete on price and convenience, they cannot compete when it comes to the
relationship between guest and host. “Guests are looking for experiences where they connect with
people and connect with culture,” says Chesky. “You can’t automate hospitality.” Such was the theme of
the second-annual Airbnb Open—a motivational event held in Paris, the company’s biggest market, and
attended by 5,000 hosts from 110 different countries. In his keynote address, Chesky explained that the
entire hospitality industry caters to tourists in a way that makes them feel like tourists. But with an
Airbnb experience, guests start to feel like they are a part of the neighborhood and the city. As part of
his presentation, Chesky summed up the entire Airbnb philosophy by illustrating the experience his own
parents had when they arrived in Paris just days before the event. Pictures of their first day in town—
hosted by typical tourist guides—were projected on a big screen. There was a picture of them on a
double-decker tour bus, another on a generic boat ride, and a third standing in line at the Louvre.
Chesky narrated each image with comical cynicism. “Every year, 30 million people go to Paris. They look
at everything and they see nothing. We don’t need to go to monuments and landmarks to experience a
culture. We can actually stay with people.” Then Chesky showed images from his parents’ second day in
Paris—guided by some of Airbnb’s top hosts—where they experienced the city from the perspective of
locals. They had coffee at an authentic sidewalk café, took a walk in a garden, and drank and danced at a
cozy Parisian boîte. “Maybe we should not travel to Paris,” suggested Chesky. “Maybe what we should
do is live in Paris.”

Executing on the Promise This ideal—one supported by all Airbnb employees—was the driving force
behind a recent and ambitious rebranding effort by the tech start-up. The company tossed out its
original straightforward text logo in favor of something far more abstract—a symbol that resembles a
puffy capital letter “A” with the two sides crossing over. Airbnb calls it the “bélo,” “the universal symbol
of belonging.” The new logo communicates a sense of belonging through something that transcends
language, culture, and geography. A new slogan accompanies the logo—“Belong Anywhere.” To ensure
that the Airbnb guest experience is as authentic and unique as possible, the company focuses first and
foremost on its community of hosts. In fact, Airbnb considers its hosts to be its primary customers. As a
result, Airbnb has been able to nurture a huge global community of lodging providers who are true
believers in the Airbnb vision. Treated as active participants in the business, hosts develop a sense of
ownership and devotion. In this manner, Airbnb influences hosts to follow certain guidelines toward
creating the best guest experience possible. This is by no means intended to create a standardized
model. But by urging hosts to offer guest services such as airport pickup and walking tours, Airbnb
strengthens the connections formed with guests. “What’s special in your world isn’t just the home you
have,” Chesky tells the crowd at the Airbnb Open. “It’s your whole life.” The explosive expansion of
Airbnb in every world market has certainly caught the attention of the big hotel chains. Developers are
beginning to build hotels in places where they normally would not. For example, eight new hotels are
going up in Williamsburg,

a Brooklyn neighborhood that is a huge Airbnb market but not a traditional tourist locale. But even as
hoteliers attempt to invade Airbnb’s turf, they will have a tough time duplicating the Airbnb experience.
Despite its expansion and success, Airbnb still finds itself battling for legitimacy. Some cities do not allow
the rental of personal property for any duration less than 30 days. And there are many travelers who
might prefer the Airbnb experience but still have concerns about staying with strangers. Airbnb is rising
to these challenges with idealistic fervor. In fact, Chesky goes so far as to suggest that Airbnb’s mission
goes beyond providing an authentic guest experience and into the realm of establishing world peace. He
explains that living in close proximity to those from other cultures makes people understand each other
a lot more. He concludes, “I think a lot of conflicts in the world are between groups that don’t
understand each other.”

Questions for Discussion

8-19 Apply the service profit chain concept to Airbnb.

8-20 How does Airbnb differentiate its offer, delivery, and image?

8-21 How much of a threat is competition to Airbnb?

8-22 Will Airbnb last as long as Hilton Worldwide has? Explain.