Harvard Case - The Airbnb Business Travel Vertical in Asia: The Way Forward
"The Airbnb Business Travel Vertical in Asia: The Way Forward" Harvard business case study is written by Nitin Pangarkar, Yuan Kay Chung. It deals with the challenges in the field of Strategy. The case study is 13 page(s) long and it was first published on : Sep 29, 2017
At Fern Fort University, we recommend Airbnb Business Travel Vertical in Asia adopt a multi-pronged strategy focused on disruptive innovation, strategic partnerships, and leveraging technology and analytics to capture a significant share of the rapidly growing business travel market in the region. This strategy will involve a combination of market penetration, product development, and market development to cater to the unique needs of Asian business travelers.
2. Background
The case study focuses on Airbnb's foray into the business travel market in Asia, a region with a rapidly growing economy and a burgeoning demand for alternative travel options. The company faces stiff competition from established players like Booking.com and Expedia, as well as emerging local players catering to specific needs. Airbnb's success hinges on its ability to differentiate itself and provide a compelling value proposition to business travelers in Asia.
The main protagonists are:
- Airbnb: A global platform for short-term rentals, seeking to expand its reach in the business travel market.
- Asian Business Travelers: A diverse group with unique needs and preferences, seeking cost-effective, comfortable, and convenient travel options.
- Competitors: Established players like Booking.com and Expedia, as well as emerging local players, all vying for market share.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Brand Recognition: Airbnb enjoys strong brand recognition and trust among leisure travelers, which can be leveraged for business travel.
- Global Network: A vast network of properties and hosts provides flexibility and choice for business travelers.
- Technology and Analytics: Airbnb has a strong foundation in technology and data analytics, enabling personalized recommendations and efficient operations.
- Community Focus: Airbnb's focus on community and local experiences can appeal to business travelers seeking authentic experiences.
Weaknesses:
- Limited Business Travel Focus: Airbnb's current offerings may not fully cater to the specific needs of business travelers, such as corporate travel policies and expense management.
- Lack of Corporate Partnerships: Airbnb needs to build stronger relationships with corporations and travel management companies to gain access to business travel budgets.
- Safety and Security Concerns: Some business travelers may have concerns about safety and security in Airbnb properties, especially in unfamiliar locations.
Opportunities:
- Growing Business Travel Market: The Asian business travel market is experiencing rapid growth, presenting significant opportunities for expansion.
- Emerging Technology: Advancements in AI and machine learning can be leveraged to enhance the business travel experience and provide personalized recommendations.
- Strategic Partnerships: Collaborations with airlines, transportation companies, and local businesses can create a comprehensive travel ecosystem.
Threats:
- Intense Competition: Airbnb faces fierce competition from established players and emerging local startups in the business travel market.
- Regulatory Uncertainty: Government regulations and policies can impact Airbnb's operations and growth in different Asian markets.
- Economic Fluctuations: Economic downturns can impact business travel spending and affect Airbnb's revenue.
Porter's Five Forces:
- Threat of New Entrants: High due to the ease of entry and the availability of technology platforms.
- Bargaining Power of Buyers: Moderate, as business travelers have multiple options but may be willing to pay a premium for unique experiences.
- Bargaining Power of Suppliers: Low, as Airbnb relies on a vast network of independent hosts and property owners.
- Threat of Substitutes: High, as alternative accommodation options like hotels and serviced apartments continue to evolve.
- Competitive Rivalry: Intense, as established players and emerging startups compete for market share.
Value Chain Analysis:
Airbnb's value chain involves:
- Inbound Logistics: Sourcing and managing properties and hosts.
- Operations: Providing booking and payment services, managing customer interactions, and ensuring property quality.
- Outbound Logistics: Facilitating travel arrangements and providing guest support.
- Marketing and Sales: Promoting Airbnb's offerings to business travelers through various channels.
- Service: Providing customer support, managing reviews, and resolving issues.
Business Model Innovation:
Airbnb can leverage its existing business model and innovate to cater to the unique needs of business travelers by:
- Developing Business-Specific Features: Introducing features like corporate travel policies integration, expense management tools, and group booking options.
- Partnering with Corporations: Establishing partnerships with corporations and travel management companies to offer customized solutions and access to business travel budgets.
- Creating a Dedicated Business Travel Platform: Launching a separate platform or dedicated section within the existing platform specifically designed for business travelers.
4. Recommendations
1. Disruptive Innovation:
- Develop a dedicated business travel platform: This platform should offer features tailored to the specific needs of business travelers, such as corporate travel policies integration, expense management tools, and group booking options.
- Focus on unique experiences: Leverage Airbnb's strengths in offering unique and authentic experiences to differentiate itself from traditional business travel options.
- Offer flexible booking options: Provide options for both short-term and long-term stays, catering to the diverse needs of business travelers.
2. Strategic Partnerships:
- Partner with airlines, transportation companies, and local businesses: This will create a comprehensive travel ecosystem for business travelers, offering seamless connections and integrated experiences.
- Collaborate with travel management companies: This will provide access to corporate travel budgets and expand Airbnb's reach within the business travel sector.
- Develop strategic alliances with local businesses: This will enhance the overall travel experience for business travelers by providing access to local services and attractions.
3. Leveraging Technology and Analytics:
- Utilize AI and machine learning: This will enable personalized recommendations, optimize pricing, and improve the overall user experience.
- Develop data-driven insights: Analyze user data to understand the needs and preferences of business travelers in Asia and tailor offerings accordingly.
- Invest in secure and reliable technology: Ensure the platform is robust and secure to address the concerns of business travelers regarding data privacy and security.
4. Market Segmentation:
- Identify key business travel segments: Target specific segments based on industry, travel frequency, and budget.
- Develop tailored marketing campaigns: Create targeted marketing materials and promotions to appeal to each segment.
- Offer customized packages: Provide packages that cater to the specific needs and preferences of different business travel segments.
5. Pricing Strategy:
- Offer competitive pricing: Maintain competitive pricing while offering value-added services to justify higher prices.
- Implement dynamic pricing: Adjust prices based on demand, availability, and other factors to maximize revenue.
- Offer discounts and promotions: Provide incentives to attract business travelers and encourage repeat bookings.
6. Brand Management:
- Strengthen the Airbnb brand image: Emphasize the benefits of Airbnb for business travel, such as cost-effectiveness, convenience, and unique experiences.
- Develop a strong brand presence in Asia: Engage with local media and influencers to promote Airbnb's offerings to business travelers.
- Build a positive brand reputation: Address any concerns about safety and security to ensure a positive brand image.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Airbnb's core competencies in technology, community building, and providing unique experiences align with the proposed strategy. The recommendations are consistent with Airbnb's mission to create a world where anyone can belong anywhere.
- External customers and internal clients: The recommendations address the needs of both external customers (business travelers) and internal clients (hosts and property owners).
- Competitors: The recommendations aim to differentiate Airbnb from its competitors by focusing on disruptive innovation, strategic partnerships, and leveraging technology.
- Attractiveness - quantitative measures if applicable: The recommendations are expected to generate significant revenue growth and improve profitability by capturing a larger share of the rapidly growing business travel market.
Assumptions:
- The Asian business travel market will continue to grow at a rapid pace.
- Airbnb will be able to successfully develop and implement the proposed strategy.
- The regulatory environment in Asia will be conducive to Airbnb's growth.
6. Conclusion
By adopting a multi-pronged strategy focused on disruptive innovation, strategic partnerships, and leveraging technology and analytics, Airbnb can capture a significant share of the rapidly growing business travel market in Asia. This strategy will involve a combination of market penetration, product development, and market development to cater to the unique needs of Asian business travelers.
7. Discussion
Alternatives:
- Focusing solely on market penetration: This approach would involve simply expanding Airbnb's existing offerings to business travelers without significant innovation or differentiation. This approach may not be sufficient to compete effectively in the crowded business travel market.
- Acquiring an existing business travel platform: This approach could provide immediate access to a customer base and infrastructure. However, it may be expensive and difficult to integrate the acquired platform with Airbnb's existing systems and culture.
Risks:
- Competition: Airbnb faces intense competition from established players and emerging startups in the business travel market.
- Regulatory uncertainty: Government regulations and policies can impact Airbnb's operations and growth in different Asian markets.
- Economic fluctuations: Economic downturns can impact business travel spending and affect Airbnb's revenue.
Key Assumptions:
- The Asian business travel market will continue to grow at a rapid pace.
- Airbnb will be able to successfully develop and implement the proposed strategy.
- The regulatory environment in Asia will be conducive to Airbnb's growth.
8. Next Steps
Timeline:
- Year 1: Develop a dedicated business travel platform and establish strategic partnerships with key players in the Asian market.
- Year 2: Launch the platform and begin marketing to specific business travel segments.
- Year 3: Expand the platform's features and functionalities, and further develop strategic partnerships.
Key Milestones:
- Develop a detailed business plan for the business travel vertical.
- Secure funding for the development and implementation of the strategy.
- Recruit a team of experienced professionals with expertise in business travel and technology.
- Conduct market research to identify the needs and preferences of Asian business travelers.
- Develop targeted marketing campaigns to reach specific business travel segments.
- Monitor the progress of the strategy and make adjustments as needed.
By taking these steps, Airbnb can successfully establish itself as a major player in the Asian business travel market and capture a significant share of this rapidly growing segment.
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Case Description
In March 2017, Airbnb needed to make some important decisions regarding its strategy for the Airbnb Business Travel Vertical (ABTV) in Asia. Despite a short history of less than three years since the formal announcement of its launch, the ABTV had exhibited promising performance. The business travel market offered many attractive characteristics, including its large size. Despite the attractiveness of the business travel segment, two issues related to the choice of countries and the choice of segments were of concern. Another key issue related to identifying the specific corporate clients to approach-whether to leverage existing relationships with multinational customers or to approach Asian corporate clients directly.
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