Case Assignment #1 - Airbnb.docx - Case 1 Airbnb in 2018 1 How would you illustrate and compare the business models for Airbnb large hotel chains such

Case Assignment #1 - Airbnb.docx - Case 1 Airbnb in 2018 1...

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Case 1: Airbnb in 2018 1. How would you illustrate and compare the business models for Airbnb, large hotel chains such as Marriott and Hilton, and bed & breakfast operators? The definition of a business model, per the text, is management’s blueprint for delivering a valuable product or service to customers in a manner that will generate revenues sufficient to cover costs and yield an attractive profit. It goes on to highlight that the two elements of a company’s business model are its customer value proposition and its profit formula. The founders of Airbnb, after utilizing the internet to rent out their apartment to convention guests, were able to jump on the “sharing” bandwagon and provide a lodging option that has since grown to revolutionize the industry. The peer-to-peer room sharing business allows the consumer to find a room virtually anywhere in the civilized world and can meet the requirements of a vast array of market segments. From a small room in a seedy downtown area to a beach-front luxury penthouse, Airbnb runs the gamut of offerings. By maintaining the app/website and handling the transactions, Airbnb makes it easy for those in need of lodging, and those who can provide the lodging, to easily find one another through a trusted source. Airbnb is very much the Uber of the lodging industry. Their profit formula, which includes an estimated 11 percent fee per room stay along with revenues generated by hosts willing to pay extra to have their space at the top of the results page, has proven to be a legitimate blueprint based upon exhibit 3 of the case. Having broken-even in 2016, and revenues growing at a fantastic pace, this model has launched them to a $31b valuation. Secondly, large hotel chains such as Marriott and Hilton rely on the longstanding and traditional ideas of the lodging industry. Real estate is procured in every major city (of most countries) which allows both business and recreational travelers to acquire a room close to their destination. These two hotel chains have diversified their offerings by creating multiple sub-
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chains that cater to a variety of travelers: extended stay suites, budget-friendly, eco-friendly, executive, luxury and resort. The costs of hotels rooms are almost always indicative of the hotel amenities/accommodations, location and time of year. Finally, the bed and breakfast operators seek to provide guests with a completely unique and home-like experience. Often times, a bed and breakfast is able to provide a lodging option in a rural or “off the beaten path” location where traditional hotels or motels may not be available. In addition, B&B’s sometimes have historical ties or may be part of a famous event/story that provides an added level of allure for guests.
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