Competitive And Economic Sensitive Hotel Industry Essay Example

for rent and make it attractive and appealing to potential renters (guests).

While listing a rental on their website is free, Airbnb charges a 3% fee to the property owners for all bookings and 6-12% of the booking price to renters. In terms of dollars, Airbnb experienced gross sales of $45 to $50 million dollars in 2011. Considering the low overhead of a web-based hoteling application, and the cost of professional photography service; coupled with the apparent popularity of the unique (rare) experience provided to their direct customers (property owners) and their end user customers (guests), Airbnb appears to be highly valuable to both direct customers and their end user customers.

Since Airbnb’s cost do not include intense fixed cost, capital property investment, and variable service industry costs, they can accept relatively low margins (9-15% of all transactions) and still realize high economic profits if the value exists for their direct customers and their end users. Considering the current state of the economy, the opportunity to generate income from a couch, trailer, empty room, or vacant apartment has proven to be appealing to many property owners ($500 million worth of transaction in 2011).

Additionally, with a few clicks of the mouse, 100’s to 1000’s of property owners monthly are becoming Bed and Breakfast owners around the world every month, making lodging more affordable for millions of consumers and draining millions of dollars from the hotel market. Similarly, penny conscious consumers seem to become more and more adventurous in the interest of saving precious disposable income by cutting their lodging cost considerably and becoming more of a guest and less of a customer

in common homes (Airbnb listings) around the world.

Airbnb has a competitive advantage (price and differentiation), uniqueness, relevance, and . However, is this competitive advantage in cost and value sustainable? While the services they offer seem relatively easy to replicate, there doesn’t seem to be a large undertaking in entering their blue ocean. Perhaps by the time that other potential entrants catch on the value to both the property owners and the end users will diminish.