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Online Residential Rental
Business Model
for
Hotel Management Company
Youjin Lee Ecole Hoteliere de Lausanne (EMBA 2015)
August 2015
Capstone
Project
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Table of Contents
I. Executive Summary .......................................................................................... 3
II. Introduction .................................................................................................... 3
A. Objective ....................................................................................................................... 3
B. Project Scope & Research Methodology ....................................................................... 3
III. Online Residence Rental ................................................................................. 4
A. Sharing Economy in Accommodation industry ............................................................. 4
B. Business Model ........................................................................................................... 22
IV. Competitive Analysis .................................................................................... 32
A. Market Research ......................................................................................................... 32
B. SWOT analysis ............................................................................................................. 44
V. Business Model ............................................................................................. 52
A. Overview ..................................................................................................................... 52
B. Business Canvas .......................................................................................................... 55
C. Services ........................................................................................................................ 68
D. Brand/Marketing Strategy .......................................................................................... 72
E. Financial Plan ............................................................................................................... 80
VI. Conclusion ................................................................................................... 88
Appendix 1. Non-‐exhaustive list of ORR companies ................................................... 90
Appendix 2. Non-‐exhaustive list of Ancillary Service Companies ............................... 91
Appendix 3. Financial Statements of HomeAway ....................................................... 93
VII. Bibliography ................................................................................................. 97
This report and its contents is the property of the author, unless otherwise
stated. Reproduction, editing, distribution as well as the use of any kind
outside the scope of the applicable copyright law require a written permission
of the author. The commercial use of the contents without written permission of
the author is prohibited.
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I. Executive Summary
This report (the “Project”) studies the presence and impact of the sharing
economy in the accommodation industry, especially regarding the meteoric growth
of Online Residential Rental (“ORR”) though the success of Airbnb. The drivers of
this trend are analyzed in three categories; technological, economic, and societal
drivers. The ORR business model of Airbnb and other benchmarks are compared to
understand their respective strengths and weaknesses.
As market research, in-‐depth interviews of business travelers and ORR hosts
were conducted. Based on this research, a SWOT analysis between ORR and the
traditional hotel business has been carried out.
The Project builds a new business model and brand (the “Brand”) of ORR that
will be run by a hotel management company, namely AccorHotels (“Accor”). The
Project elaborates the overall business canvas, the service sequence, the branding
and marketing strategy, and the financial plan of the Brand to evaluate its viability.
II. Introduction
A. Objective
The objective of the Project is to analyze the drive behind the growth of the
sharing economy, to assess the competitive advantage of hotel management
companies, and to embrace the winning elements of the sharing economy in a new
business model.
B. Project Scope & Research Methodology
For the Project, the first step was research about the sharing economy, especially
regarding new business models in accommodation industry. For the research (i)
media articles (e.g. newspaper, magazine, TV interview, online media), (ii) industry
report (e.g. publication by consulting firms, international organizations), (iii)
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academic journal/paper (e.g. Harvard Business Review, thesis), and (iv) books
including The Business of Sharing (Alex Stephany, 2015), Business Model Generation
(Alexander Osterwalder & Yves Pigneur, 2010), The Culting Brands (Douglas Atkin,
2004) were used. Airbnb and other 3 businesses were chosen as benchmarks and
their business models were analyzed. At this stage, the information was obtained on
each company’s official website and interviews of the founders, as well as the other
desk research materials above.
Based on desk research result, market research about both of customer
segments, namely business travelers (end-‐users) and Airbnb hosts has been
conducted. The main part of research was done through semi-‐structured qualitative
individual interviews, as in-‐depth interviews were preferred to group discussions, in
order to draw out honest opinions (not hindered by group thinking). Interviewees,
20 travelers and 3 hosts were chosen randomly, mixing the profiles.
To add credibility, numerous industry experts were consulted (e.g. senior
personnel of hotel management companies, web developers) were also consulted.
Based on the research above, a SWOT analysis between the sharing economy
model and traditional hotel businesses was performed. The new business model
was then developed combining the benefits and strengths of both business models.
No empirical test has been performed for the Project.
III. Online Residence Rental
A. Sharing Economy in Accommodation industry
1. Definition
The lack of an industry-‐wise definition of the term ‘Sharing Economy’ is the first
struggle for researchers who try to analyze this global phenomenon. Even the term
itself is confusing among ‘Sharing Economy’, ‘Collaborative Consumption’, ‘peer-‐to-‐
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peer economy’, etc. Ignoring Wikipedia, the Project takes the definition of Alex
Stephany, CEO at JustPark and the author of The Business of Sharing.
“The sharing economy is the value in taking underutilized assets and
making them accessible online to a community, leading to a reduced
need for ownership of those assets” (Stephany, 2015)
2. History
a) Old tradition
The renting out of a furnished apartment or house on a temporary basis to
tourists is not new. From ancient times, many societies developed an ethic of
hospitality to protect the travelers. Hospitality developed into “Private hospitality”
in the household and “Commercial hospitality” for profit with minimum level
accommodation provided for commoners. The latter was to expedite trade or mail
delivery, or to accommodate government and religious travelers. (King, 1995)
Aristocratic travelers rented houses or apartments and brought their own
servants, but as demand grew for suitable accommodations, and following the
French Revolution and industrialization in the 1800’s, “grand hotels” to cater the
middle and merchant classes were built. (King, 1995)
Rental housing and rooming houses eventually led to condos, timeshares and
bed and breakfast facilities. Later hotels became standardized and commercialized.
1970 saw the beginning of the construction of hotels for business people (Levy-‐
Bonvin, 2003). In Europe, after WWII, “vacation home sharing” became popular. The
idea of vacationing in homes became widely accepted in the United States in the
1960’s. By the 1970’s and early 1980’s many property management companies
emerged, largely as a by-‐product of real estate companies (Holiday Vacation Rentals
Blog, 2013).
So the residential rental was there from the beginning of commercial hotels.
Why the fuss now?
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b) Airbnb -‐ “Online Residence Rental”
In October 2007, Brian Chesky and Joe Gebbia couldn’t pay the rent, and they
knew the hotels in San Francisco were sold out for an annual conference. They
created the concept for Air Bed & Breakfast during the Industrial Design Conference
and rented an air mattress in their living room. Founded (launched) in 2008,
headquartered in San Francisco, California, Airbnb announced its 1 millionth booking
in February 2011. In June 2012, it reached its 10 millionth booking. In June 2015,
Airbnb secured $1.5 billion in additional funding, bringing its funding total to $2.3
billion. The valuation is estimated at $25.5 billion now (Wikipedia contributors,
2015).
Airbnb is an ORR marketplace for the hosts to list, and for the travelers to
discover and book accommodation. It has grown to be the disruptive force in the
hospitality industry solely through its online presence.
Before Airbnb, only hotels were easily accessible and reliable. In the case of
private residences, before the websites like Expedia or Tripadvisor, one needed to
contact an agency (e.g. tour operator, vacation rental management company) or the
owner directly, and options were limited. Even with the relevant websites, one
usually needed to book for a minimum length of stay (e.g. 4-‐7 nights), the
geographic location of properties were limited (e.g. in vacation region only), and it
was difficult to predict actual quality. Airbnb solved the issues with (i) easy-‐to-‐use
online interface, (ii) innumerable variety of properties (e.g. city to beach, couch to
castle), (iii) review system (to increase the predictability), and (iv) the option of
short-‐term rental1, which means a traveler can now book a one night in a city as easy
as booking a hotel room.
1 A short-‐term rental is usually from 1 day onwards to less than 30 days (source: http://www.zoopla.co.uk/askme/details/renting/wales/newport/52662#rqMexY1utQLwsKtR.99, http://www.wsj.com/articles/SB10001424127887324595904578118994097238724).
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There was a gap between leisure travelers and affordable private hospitality.
And the technology to build the bridge was already developed. Airbnb was just the
first one to realize that they can build the bridge and charge the fee.
c) Current trends
(1) Expansion & Diversification
As the business and user base grows, the sharing economy seems to be here to
stay, rather than to be a passing fad. A PwC survey showed that 44% of US adults are
familiar with the sharing economy, 6% of the US population has participated as a
consumer in the hospitality sharing economy; 1.4% has served as a provider (PwC,
2015)
Counting beds on offer, Airbnb was already the
fifth-‐largest hotelier in the world in 2014, with
unparalleled global reach across 190 countries (Carr,
INSIDE AIRBNB'S GRAND HOTEL PLANS, 2014). Airbnb
averaged 425,000 guests per night, totaling more than
155 million guest stays annually—nearly 22% more
than Hilton Worldwide, which served 127 million
guests in 2014 (PwC, 2015).
Its Geneva room supply has reached 16% of the total hotel room supply, and 40%
of Dutch hotels are facing competition from private citizens who rent out their
homes or rooms to tourists using Airbnb or similar services (PwC, 2015). The hotel
market in San Francisco is reporting yearly occupancy decline in specific price
segments (the upscale and upper-‐upscale segments), which “would not make sense
in this booming environment, except for a new competitive influence: alternative
accommodations”(Swig, 2014).
Figure 1 source: HotelNewsNow website
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A more interesting number than size is its unprecedented speed of growth.
Airbnb reached all the numbers above since 2008, in less than a decade (cf. graph
below).
PwC reported, “The popularity
of the sharing economy and
rented homes websites will
continue to grow”, and
“traditional industries are in the
midst of disruption from the
sharing economy as S-‐curves for
traditional products and sectors
are displaced by the start of a new
“Sharing S-‐curve” (PwC, 2015)
(PwC, 2014).
The ORR market itself
expands beyond America or
Europe. Now there are clones of
Figure 2 Source: Airbnb website
Figure 2 source: PwC UK business blogs
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Airbnb everywhere, including Asia and Europe, and there are already 121 companies
listed in comparison on the Compare & Share site (Appendix 1. ORR Companies).
Airbnb diversified their regions globally and are now trying to expand to Africa,
recently hiring a general manager for Middle East and Africa and increasing the
listing in South Africa by 138% a year (Stone, 2015).
They also try to diversify the offerings beyond leisure accommodation for budget
sensitive millennials. Airbnb wants to become a global hospitality brand, with CEO
Brian Chesky’s strategic road map to deliver a seamless end-‐to-‐end experience in
“the entire trip”, and Chip Conley, the head of global hospitality and one of the
pioneers in the boutique-‐hotel sector (Carr, INSIDE AIRBNB'S GRAND HOTEL PLANS,
2014). It launched the ‘Airbnb Business Travel’ webpage for “making it easy for
corporate travelers to plan their next business trip without sacrificing the comforts
and amenities of home.” (Airbnb)
Hotels, on the other hand, have jumped into certain aspects of the sharing
economy based business model (e.g. Workspace on Demand by Marriott).
(2) Own Ecosystem
Around ORR, there’s a new eco system growing. Numerous startups have
emerged to help inspired or busy hosts on ORR platforms such as Airbnb, VRBO,
HomeAway and others. There are companies providing ancillary services including
property management, key exchange, cleaning, or even tax & legal advice (Appendix
2. Ancillary Service Companies).
(3) Segmentation
New, highly segmented ORR companies targeting for example luxury family
travelers, young students/professionals, business travelers, etc. are starting to
appear. They are segmenting based on economic class, region, or reason of stay.
This suggests that ORR are now sustainable with a small segment, as the market has
grown enough to make its own niche.
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3. External Drivers
So what made sharing economy grow so dramatically in less than a decade?
What’s the force behind this trend? Is it a sustainable megatrend?
Rachel Botsman, so-‐called evangelist of the sharing economy, argues that the
four drivers above are behind this trend (Botsman, The Sharing Economy Lacks a
Shared Definition). The last one, however, is shaky at best. “A 2013 survey by The
People Who Share found that five times more people said their use of sharing
services was primarily motivated by making and saving money than by
environmental concerns. What some say should be the strongest driver is actually
the weakest” (Stephany, 2015).
In this section, I shall analyze the remains of three drivers, namely
technological, economic, and sociological drivers.
a) Technological drivers
Sharing is nothing new. “What is new, however, is the application of
technology” (Stephany, 2015).
Figure 4 source: rachelbotsman.com
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(1) Accessibility
PwC commented that one of the core pillars of the sharing economy is “Digital
platforms that connect spare capacity and demand” (PwC, 2015). Internet made the
demand and supply mutually accessible. Social media integration provides the
public reference and put the user on a locatable social map.
Moreover, social media provides connection with speed. “Social networking
aggregates supply and demand at an unprecedented speed and scale.” (Finley, 2012)
ORR exchanges the commodity, which cannot exist in a physical offline market:
the temporary and partial usage of real estate. It’s not even ownership or lease
right. Technology turned an intangible concept into a transferable commodity.
(2) Generalizing Trust
Generalized trust is crucial in ORR. Trust is basic ‘expectation’ regarding the
behavior of an interaction partner and ‘risk’ (Finley, 2012). Information asymmetry
in the identity of online parties and product quality generates ‘risk’. How, therefore,
is it possible to engender this notion of trust in the P2P market place?
Social graph integration, reputation systems, a “collaborative filtering
mechanism”, and trust in marketplace intermediaries work intertwined.
Websites like Airbnb or TripAdvisor have integrated a user's social graph from a
social network e.g. Facebook in order to better confirm a user’s identity.
Collaborative Filtering is a mechanism used to filter large amounts of information
by spreading the process of filtering among a large group of people (source:
Wikipedia). The collaboratively filtered social web can have infinitely many editors
and gets better as you increase the number of participants (Saleem, 2008). Nearly
69% of U.S. adults are hesitant to engage in the sharing economy until they receive a
positive recommendation or other reassuring word-‐of-‐mouth (PwC, 2015).
Accumulated word-‐of-‐mouth increases the reassurance.
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Due to the importance of establishing trust among users, there is a strong
incentive for sharing economy platforms to build and offer reliable and effective
reputation systems, fueled by user data (Dambrine, Joseph, & Ambrose, 2015). As
seen above, reliable user data is (i) collaboratively filtered user-‐generated data (ii)
combined with the data about users themselves.
Figure 3
Reputation
Management
System: Accessing
your reputation -‐
Responding to
criticism -‐ Deletion
of your data
(source:
www.futureofpriv
acy.org)
How do you attract the user data in the first place? It’s related to the trust in the
intermediary. The intermediaries (websites) can build trust through aspects of
aesthetic and functional interface design, branding, active communication, and
institution-‐based mechanisms such as guarantees and escrows (Finley, 2012). As the
online marketplace grows, online companies are becoming reliable as much as brick
& mortar businesses.
(3) Frictionless Transaction
The availability of data and technological advancement in payment systems
make the transaction frictionless (Finley, 2012). It also facilitates the comparison of
merchandises and sellers, and cancelling/modifying a transaction is easier than in
the offline market.
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b) Economic drivers
It’s hard to deny that the economic crisis boosted the sharing economy. Due
to the economic crisis, unemployment rates have risen and purchasing power of
consumers has dropped. Therefore people are in need of ways to earn money and
are seeking ways to save money on their daily needs. High unemployment rates
have resulted in many potential sorters and home cooks on platforms like Sorted
and Shareyourmeal. Financial constraints make people more receptive for lending
or sharing than they would otherwise be. Moreover, the economic recession has
also made it significantly harder for consumers to acquire bank loans, or make a
return on a savings account, legitimizing the existence of peer-‐to-‐peer money
lending platforms like Fixura (Dervojeda, et al., 2013).
“[When] the [real estate] bubble burst, ownership would become a living
nightmare. Millions of consumers were left holding too much of everything:
from second homes to furniture and designer shoes. Cash-‐poor and
frightened, many of them suddenly had the financial impetus to make money
from their own excess. And sharing economy companies made sure that there
was a steady flow of PR telling them how.” (Stephany, 2015)
“When the crisis hit”, says Nathan Blecharczyk, co-‐founder of Airbnb, “there
were people in desperate need of alternative solutions. We were one of those
solutions.” (Stephany, 2015)
After all, Airbnb was built by poor young men who couldn’t pay their rent!
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(1) Crash of trust towards corporations
Since 2008 financial crisis, the consumer trust in corporate world decreased
(Dervojeda, et al., 2013). Recently, the Edelman Trust Barometer showed that
consumers trust online search engines, and partially the outcome of collaborative
filtering, more than traditional media. In most countries, around 50% of consumers
do not trust businesses, and family-‐owned and small/medium businesses have a
trust advantage (Edelman, 2015).
Industry-‐wise, the F&B industry has higher trust than financial services, but
the level is dropping rapidly.
Figure 4 source: 2015 Edelman Trust Barometer
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In the hospitality
industry, hotels have a
higher level of trust.
Despite this, only 42%
of people said they
would count on hotels
to stand by them when
there is a problem in a
recent survey by Skift
(Ali, 2013).
Meanwhile, trust towards individuals is rising. Rachel Botsman said that the
western societies are facing major mistrust issues regarding their governments and
corporate authorities, and while individuals tend to grant their trust only to their
closest relatives, an increasing number of people are placing their trust in strangers
encountered on digital platforms. Their trust in centralized institutions is completely
shaken while trust “shifts to distributed and connected communities,” according to
Botsman (Dagnaud, 2015).
Figure 5 source: http://rachelbotsman.com/thinking/
Figure 7 source: skift.com
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In terms of consumer trust, there’s hardly any distinction between corporations
and individuals anymore. Peer-‐to-‐peer firms emerged in the recession’s aftermath
as the pragmatic solution to both an economic crisis and a larger psychological value
shift (Finley, 2012). Now micro-‐entrepreneurs can build a personal brand through a
profile page in an ORR.
(2) Alternative consumer behaviors
Within the context of consumer distrust and financial strain, the power of idling
capacity and the prioritization of ‘access over ownership’ emerge (Finley, 2012).
Since the trust in ownership is destroyed, the economic value of usage increased.
Mary Meeker calls this post-‐crisis generation the “Asset-‐light generation”.
“Transactions that offer access over ownership”, which “Identify underutilized
assets—and find ways to leverage and optimize them” (PwC, 2015) is the basic
formula of the sharing economy business.
(3) Financial pressure on individuals
Owners/renters need extra income; travelers seek cheaper accommodation in
equally convenient location like a hotel. Ergo ORR.
Before the sub-‐prime mortgage crisis, real estate was the most valuable asset
globally. Since certain real estate values went down, now even the individuals know
that owning the real estate is not necessarily enough, and you need to ‘sweat the
asset’. In turn, higher levels of unemployment have led to forced entrepreneurship.
In a sense, the sharing economy is the “Capitalism distilled” (Stephany, 2015).
On the other hand, transaction costs in the ORR market have gone down
steadily.
By directly connecting sellers and buyers in the same online platform at the same
time, the technology in the sharing economy eliminates the time, money, and effort
(sometimes materialized as middle-‐agency in pre-‐internet era) needed to facilitate a
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market exchange (Given, 2015) (The Economist, 2013). The creation of trust-‐based
networks also reduces the time, effort, and uncertainty associated with gathering
and processing information, thus reducing the transaction cost (McDonald, Burton,
& Dowling, 2002).
c) Societal drivers
(1) Standardization
Mass urbanization with high population density lead to (i) the decrease of
friction of sharing behaviors and (ii) the critical mass required for successful
marketplace creation (Finley, 2012).
The majority of sharing businesses leverage the potential of large concentrations
of people and asset value in cities, and “Sharing is thriving on this urban density”
(Stephany, 2015). The social infrastructure including the Internet network in urban
area helps the digital economic transaction as well.
Figure 6 source:
https://www.bcgperspectives.com/content/articles/digital_economy_telecommunications_greasing_wheels_i
nternet_economy/?chapter=4
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Besides, for the first time in history, more than 50% of the world's population
lives in urban areas and the number is increasing in developing countries (Centre for
European Policy Studies, 2013). Urban life is getting closer to being the global
standard.
As international travel becomes more common, the travel experience is also
getting standardized in cultural globalization. Since the mid-‐1960s, the cost of
international flights has declined, and foreign travel has become a routine
experience for millions of middle-‐ and working-‐class people. Foreign travel no
longer involves the challenge of adapting to unfamiliar food and living arrangements.
CNN has been an essential feature of the standardized hotel experience since at
least the 1990s. More significantly, Western-‐style beds, toilets, showers, fitness
centers, and restaurants now constitute the global standard (Watson, 2015).
In line with this trend, most users have experienced and known the expected
sequence in accommodation: check-‐in, staying while using the bed and shower,
checkout, and paying per night. This mutual understanding made it easy to build a
certain code of conduct between the host, who are not professional hoteliers, and
the guests, who already know what to do and expect in accommodation.
On the other hand, travelers get bored with the typical experience in a
standardized hotel. The flood of information has deprived the travelers of the charm
of travel itself. Now jut visiting the place is not enough.
(2) Unique Experience
Now is the time of the “Experience Economy”, where the experience itself is a
commodity with a premium (Pine II & Gilmore, 1998).
In the hospitality industry, there’s steady demand for unique/authentic
experiences (cf. boutique/design hotels), and “Customization and local flavor are at a
premium” (PwC, 2015)
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Millennials are not necessarily financially affluent, but they are affluent with
information, exposure, and taste. And they are familiar with exchanging socio-‐
cultural experiences with
monetary value.
Travelers want ‘local’
experience, and typical
phrases in travel articles
mention qualities such as
‘can’t find this in a
guidebook’ or ‘off the
beaten track’. The common
desire not to be common
demands the customization
of experiences.
(3) Community
The desire to belong to a community of like-‐minded people, the sense of
belonging itself is another undeniable charm. The Sharing Economy builds
“Communities of users engag(ing) with each other above and beyond their
transactional needs” (Stephany, 2015)
Since social media has replaced the traditional community, people seek
‘emotional’ bonds online. PwC mentioned that another of the core pillars of the
sharing economy is “More collaborative forms of consumption” which leads to
“Branded experiences that drive emotional connection” (PwC, 2015). They call it
‘sharing’ rather than ‘rental’, ‘host’ not ‘owner’, building the illusion of non-‐
transactional relationship.
Figure 10 source: https://hbr.org/1998/07/welcome-‐to-‐the-‐experience-‐economy
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4. The Sharing Economy: conclusion
Technological innovation shows no sign of slowing down. More and more
people are recognizing the financial benefits of sharing economy. Not only ORR, but
the whole hospitality industry is moving towards the Experience Economy. To sum
up, the drivers behind the sharing economy are still pushing the trend forward.
Then where is this trend going?
The current trend of expansion seems to be on-‐going. More consumers and
businesses will jump in this trend and fill (or close, at least) the gap between
traditional corporate business and non-‐professional peer-‐to-‐peer business. Big
corporations will invest, buy, or become sharing economy businesses. Small
businesses like B&B, guesthouses, etc. will rely more on ORR.
Social value systems will change, not necessarily entirely positive way; “it will
underpin an ever-‐greater proportion of acts of generosity, hospitality, and courtesy
with cash and obvious self-‐interest” (Stephany, 2015). At the same time, every part
of the travel experience will become the subject of business, including a friendly chat
with locals.
Professionalization, easier-‐than-‐ever user technology, and the stability of the
sharing economy with a track record shall drive the growth of the sharing economy’s
market share. As discussed below, there’s already a posh version of Airbnb, namely
OneFineDay. Luxury hotels in Paris, with more Airbnb listings than any other cities in
the world, are already complaining that Airbnb is becoming direct competition
(Reuters, 2015).
The capitalization of neighborly generosity and the fragmentation of labor
value may isolate the economic lower class. It may remove the positive PR from
sharing economy and provoke the social conflict between pro-‐sharing consumers
and others as some cities are already witnessing the neighbor conflict between semi-‐
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professional Airbnb hosts and grumbling neighbors. Since the overall trend is ‘pro’
sharing economy, banning is unlikely, but the rules and regulations will certainly be
refined.
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B. Business Model
1. Airbnb
a) Customer Segment
• Guests: short-‐term leisure travelers (initial core). Now Airbnb is attempting
to address travelers (especially mid-‐term stay)
• Hosts: with additional space/property. Airbnb also provides inventory and
functions as primary contact point towards travelers. Now they include
investors who buy-‐to-‐share.
• Region: worldwide.
b) Value Proposition
(1) For travelers
• Value for Money in accommodation.
• Variety of choice: properties, price, and location.
• Local/unique experience
• Convenience: Easy user-‐interface. Integrated booking, payment, message,
and review system.
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(2) For hosts
• Financial motivation: Additional income by monetizing the underutilized
asset, including even small rooms. No fee to list and small fee per booking.
• Convenience: Easy to start, manage, and terminate. Support system
including 24/7 support team.
• Safety: $ 1,000,000 insurance for hosts.
• Experience of meeting new people from all over the world.
(3) For both parties
• The marketplace to expedite (1) the direct transaction/interaction, (2)
without friction.
• Personal interaction: Business side is dealt with by Airbnb. Instead of a
professional transaction (economic motivation), the individual transaction
becomes a personal interaction, as in a community.
c) Revenue
• No registration fee: It reduces the economic pressure/burden, and make it
easy to enter the market
• Only service fee per booking: 3% from hosts, 6~12% from guests. The
amount differs for each transaction based on the booking amount. Thus the
revenue is in line with the growth of overall transactions, i.e. the market size.
d) Key Activities
(1) Building & Maintaining the marketplace
• Product Development: improve the convenience of the transaction by
technology.
• Customer service for travelers and hosts: Airbnb runs a customer service
team available 24/7 with local/HQ phone number (the average wait time for
callers is 12 minutes) (tripping).
• The interesting feature of the Airbnb website is that the user can scroll down
multiple pages full of pictures without the screen slowing down. The
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technology is to increase the customer gratification by letting people “see
more listings, effortlessly” (Kuang, 2012).
(2) Marketing
• The brand marketing leads to trust in the brand. Airbnb tries to tackle the
regulation issue and inconsistency complaints with ‘public policy’ marketing
and the promotion of hospitality standards.
• Content Marketing: storytelling provokes favorable emotions towards the
brand. Its Marketing and Communications department define themselves as
“storytellers” who are “sharing the Airbnb love around the world” (Airbnb).
• Visual contents-‐ Listings (connected to professional photographers): the
images of listings are “Visually intensive like Pinterest, and socially curated
like a Spotify playlist”. Airbnb’s co-‐founder and chief product officer Joe
Gebbia himself said Airbnb “shifted from being search-‐based to browse-‐
based". The idea is to “encourage aspirational travel,” according to Gebbia
(Carr, 2012).
(3) Supporting the hosts
• It’s related to quality management. The launch of a redesigned app was
“really geared towards improving hosts’ mobile experience.” (Shankman,
2013).
• Airbnb’s genius is to realize the two customer segments, the hosts and the
travelers, can build a unified community. It treats the hosts as potential
travelers in the ‘profile’, so users can ‘switch’ from ‘Hosting’ to ‘Traveling’, or
vice versa, seamlessly.
e) Channels
• Website, Apps
• Online: (i) Google Display advertising (ii) Social Media including Twitter,
Facebook, and Google+, all synchronized for more or less similar contents.
Facebook is more into personal stories, whereas Twitter works more as link
to other sites (iii) Airbnb Stories (https://www.airbnb.com/stories) and Blogs
(iv) Vine, Youtube and videos
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• Offline channels: PR (centered around founders themselves), word-‐of-‐mouth
such as conferences, press events, collaboration with other companies, or
even billboards. Airbnb also runs TV commercials in global scale (Cava, 2015)
(Airbnb).
f) Customer Relationships
(1) While Traveling
• Mainly self-‐service: Airbnb builds the infrastructure and let it roll by itself.
• Airbnb intervenes when there’s trouble, with (i) 24/7 customer support and
(ii) Airbnb host guarantee. The Host Guarantee reimburses the eligible host
for up to $1,000,000 in damage to the property in the event of guest
damages (Airbnb).
• Although Airbnb tries to build the community of users, the users themselves
have rare chances to meet offline. Hence it is crucial for Airbnb to encourage
the users to network online to build the ‘sense’ of community.
(2) For Hosts
• No specific support other than free photography at request.
• Community management: ‘Country manager’ is in charge of the off-‐line
community gathering in each country. Airbnb hosts can participate in ‘Airbnb
Groups’, the online forum, and have off-‐line meetings for the Group. Airbnb
also encourages ‘Airbnb Meetups’, the offline event organized by members
of the Airbnb community or Airbnb staff (cf.
https://www.airbnb.com/meetups).
Figure 11 source: Airbnb website
26
(3) For travelers
• Initial Relationship: (1) Verifications (Verified ID, public reviews) (2)
Messaging (+reporting features) (3) Payment System (“Airbnb collects guest
payments from the moment they make a reservation and waits until 24 hours
after arrival before releasing funds to the host” (Airbnb))
• Airbnb has no loyalty program and relies on user experience. Chip Conley
said, “We've grown to more than 30 million guests without a [loyalty]
program, so there's not a need. Next year, we might launch something but it
would be less transactional (giving financial reward) and more focused on
recognition of our best guests and helping to track their preferences.”
(Conley, 2015)
g) Key Resources
• Online Platform: Website, App with the core design & technology
• Inventory of listings: (1) It has more than 1 million listings worldwide in
more than 34,000 cities and 190 countries (Airbnb).
(2) Superhost: based on experience (complete at least 10 trips in their listings
in a year), high response rate (maintain a 90% response rate or higher), 5-‐star
reviews (at least 80% of their reviews), and commitment (rarely cancel),
Airbnb selects the Superhosts. The purpose is to give the travelers a certain
sense of reliability.
• Brand image: through the story of its beginning, how it surpassed its own
record of funding, SF’s Silicon Valley culture: Airbnb has a superb brand story.
• Affluent funding
• Key Talents: (1) Well-‐networked founders who have managed to get most of
the best known funds in Silicon Valley to invest, injecting story and young
charm into the brand, (2) Some of the best technical and design talents, (3)
Chip Connely as the Head of hospitality.
27
h) Key Partners
• Airbnb has not many obvious partners: it doesn’t outsource technology or
design, which helps to differentiate the brand from other generic corporate
brands.
• For infrastructure: insurance company, and venture capital investors (e.g. Y
Combinator, a startup accelerator program).
• Local link: the tourism ministries in various countries, local photographers,
and bloggers.
• For business travel: Concur
i) Cost Structure
• Key talent (HR): top programmers, designers, “an army of MBAs and PhDs to
help perfect the customer experience” (Helm, 2014).
• Marketing: e.g Google AD, PR, professional photographers for listing pictures
• Technology: server space, licensed software
• R&D: e.g. product development
• Financial cost: capital interest, the payment system management expense
(e.g. credit card commission).
• Infrastructure: customer service, regional office in key countries (including
sales team), insurance fee, etc.
28
2. Other Benchmarks
The following section indicates several of Airbnb’s direct competitors. They are
newer than Airbnb, but each has different core customer segment.
a) Roomorama
Year HQ Website
2009 Singapore https://www.roomorama.com/
Target Customers
• (Traveler) Business Travelers, (Host) Professional Property Managers
• (Region) mainly Asia
Roomorama focuses on Business. There’s no name/personality of host on the
website, which may compromise human interaction. But its host base is mainly
professional asset management companies.
For Hosts, Roomorama provides the following features; (1) corporate partners
(property management software E.g. Xotelia, kigo, REALPAGE, resonline, Rentals
United, WebChalet, BookingSync, BookingPal, ITSolutions, Ciirus, supercontrol) (2)
marketing support including flexible rates, multiple-‐site distribution (3) multi-‐unit
listing (4) allows the host to see the full name of anyone applying to visit, so the host
can complete a background check.
29
For Guests, Roomorama also provides business travel friendly features as
follows: (1) verified Hosts, (2) instant confirmation, (3) business concierge service, (4)
shoutouts (i.e. request for offer), (5) Roomorama Perks (deals for Roomorama users
including photography services, sightseeing, entertainment & nightlife, travel gear &
accessories, food & dining out, transportation, concierge services, travel necessities,
business services, home & decorating services, shopping, lifestyle & fitness)
b) Flatclub
Year HQ Website
2010 London https://flat-‐club.com
Target Customers
• Young Professionals, students (graduate/internship)
• mid-‐term (e.g. 3 weeks ~ 6 months)
Founded by two graduate students of London Business School as a part of the
London Business School incubator program, FlatClub has a Club system, which is
based on trust and networking opportunities.
“Clubs are comprised of verified members of organizations, employees of
businesses, and students & alumni of top universities across the globe.” “On
30
FlatClub, you’ll be renting from your peers: other professionals and private
citizens that you can trust.” (FlatClub)
Promoting a certain sense of ‘exclusivity’, FlatClub allows filtering from both
sides: (i) for the host, “LiveDemand” to send offers to guests searching now, and to
‘filter the results’; (ii) for guests, “Expert Search”. It also provides the customized
service/partner: “Relocation Guides”, “Internship Accommodation”, and “Corporate
VIP”
c) Onefinestay
Year HQ Website
2009 London https://www.onefinestay.com/
Target Customers
• High-‐end/Luxury (mainly leisure) travelers
Onefinestay provides the experience of luxurious properties and lifestyle,
combined with high-‐end hotel like amenities/service (including hassle-‐free selection,
key-‐exchange).
“Our experts will help you pick the perfect place to stay”
“Each home is prepared with care by our local teams”
“We welcome you in person – and we're available 24/7”
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“We know what it takes to make a home yours—forever, or just for a little
while. When you come to stay, our local team prepares the home with care.
Every bathroom is stocked with towels and toiletries, and the beds are made
with pristine white sheets” (Onefinestay)
It invests to build a consistent brand image by developing its own keyless entry
system, “Sherlock”, and its partnership with the luxury travel network Virtuoso.
With coherent strategy targeted to high-‐end clientele, Onefinestay completed a $40
million round toward the end of 2014 with Hyatt, a hotel management company
who also targets to upscales teravelers, as one of the investors.
32
IV. Competitive Analysis
A. Market Research
Does ORR really provide the human interaction and unique experience that they
promote? Are hotels right about not worrying, or about worrying too much? What
do business travelers really want? There is not much research done for the
questions above, only speculations and current trends. To get a more precise
picture, qualitative research has been completed by interviewing actual end-‐users
and analyzing media interviews to assess what the customers really think.
Interviews were done by in-‐person meeting, Skype, or email exchange during
May to July of 2105.
1. End-users
a) Interview
• Profile: 20 users
Nationality
Asian 8
European 10
Middle-‐east 2
• Objective: to learn (1) the perception regarding ORR, (2) the motivation to
choose accommodation, and (3) the needs and concerns regarding current
options
Age
20-‐29 13
30-‐39 6
40-‐49 1
Gender
M 13
F 7
33
• Interview Result
Question Answers
Expe
riences in Accom
mod
ation
For Leisure, all the interviewees had diverse experiences and
preferences varying from luxury hotels with separate nanny to a friend’s
couch. Age and gender were not determinant factors. On the other
hand, young Europeans tend to show less resistant to staying in other
person’s residence.
But for Business, they mostly chose or were designated to stay in
business hotels.
Location mattered for most occasions, and many interviewees preferred
branded hotels in the location they first visit. Many interviewees used
booking.com or similar OTA to choose the hotel, and some compared
the result in OTA with Airbnb. Few interviewees (3 persons) mentioned
a loyalty program or promotional point as being determinant.
! ‘Sowon’ said she needs a nanny for her 2 years old, so stays only in
luxury hotels with a nanny service. Among the high-‐end hotels with
babysitting service, her second criterion is the location. ‘Antoine’ on
the other hand, preferred Airbnb when he’s with the baby since the
parents need to make the specific food for the baby.
! ‘Jun’ said he prefers big brands like Marriot and mainly 4 stars, for
quality management, rather than local hotels. ‘Chalana’ on the
other hand, said the branded hotels are so boring and he ‘cannot
associate himself with the brand’, so he chooses local hotels only.
34
Airbnb
as a
n accomod
ation
‘For’ airb
nb
Most interviewees mentioned value for money, location, interaction
with locals, and flexibility (e.g. for a group) as benefit of Airbnb. But in
most cases interviewees rarely had interaction with the hosts, especially
when they rent the whole place, and none had a lasting relationship
with the host after staying. For most interviewees who actually stayed
in Airbnb properties, the primary reasons were price and location.
And most interviewees said Airbnb is better when you travel in a group,
but not as a single.
The true attraction is in location and price. Other features are
attractive, but ancillary.
! ‘Kai’ said he like to ‘experience how they live’.
! ‘Jun’ said Airbnb is a better option when you have a group of family
or friends. ‘Antoine’ also made similar remark saying it’s better than
a hostel.
! ‘Jihoon’ said that even though he uses Airbnb and hostels, it’s for
the price, location, and a clean toilet, and that he ‘doesn’t care
about experience or interaction’ since you can socialize when you
eat out, and he prefers relaxing in accommodation. ‘Chalana’ said
he likes Airbnb because it’s somebody’s home, but he also said he
rarely saw his host.
! ‘Harvey’ said he chose Airbnb (i) in New York because the hotels
were too expensive, and he chose Airbnb based good access to
transportation only; (ii) in Vermont for 3 months for an internship to
feel cozy; and (iii) in Boston for his parents who couldn’t get a
reasonable hotel room during graduation season.
! ‘Luka’, a designer of mobile event app company, said the user
interface of Airbnb website is better than any other hotel, OTA
websites.
35
‘Against’ airb
nb
Most interviewees pointed out inconvenience and unreliability, and the
fact that there’s not much interaction with the hosts. The fact that the
guest cannot predict the quality of the host and the room (including
hygiene) was an issue for many interviewees.
Most interviewees said they need certain predictability about the room.
! ‘Kai’ complained there are no amenities as expected in a hotel
! ‘Jun’ said he used Airbnb in Venice, Verbier, and Munich, and there
was no interaction with host in any case, and it was not worth giving
up a fluffy bed in a hotel. ‘Igor’ also said, once, he never met the
host and dealt with the host’s non-‐English speaking uncle only.
! ‘Marie-‐Lise’ said she doesn’t feel comfortable about going inside
someone’s personal area, and is afraid if she breaks something it
can be personal. ‘Rachel’ also said she doesn’t want to stay in
another person’s home, worrying about messing up the place.
! ‘Mohammed’ said he booked a lot of places in Geneva (“pretty
much everything I could find under 100 CHF per night”) and “every
place I booked was cancelled in a day or two (due to unexpected
family visit, sickness, sudden change of plans... etc)”
36
Regarding the Bu
sine
ss Travel
‘For’ airb
nb
Most interviewees who haven’t used Airbnb for business travel were
skeptical about the idea. On the other hand, the interviewees who used
Airbnb for business travel (including the ones who were skeptical) were
fairly satisfied with the experience.
The main advantage of Airbnb was the location and better quality (e.g.
size) for the price.
! ‘Jun’ said if he can get the hotel-‐like service, a good bed, and the
standard of room quality in Airbnb, he’d use Airbnb once every 3~4
trips, because business hotels are boring and tiring.
! ‘Luka’ said he’d never use Airbnb, but he had no choice but to use
Airbnb for a conference in Portugal, and he was positively satisfied
by all the space he could use in Airbnb in comparison to the tiny
hotel room he would have had for the same price.
37
‘Against’ airb
nb
Most interviewees pointed out the lack of necessary facility, amenities,
and business-‐related services. And most interviewees said they cannot
tell the client they are staying in Airbnb, because of connoted image of
the brand.
Most interviewees hated the hassle related to Airbnb (e.g. key
exchange, finding the location), and mentioned they just want to ‘relax’
because the work is enough in business travel.
But some also mentioned that for food and drink, they want to explore
the city. Some don’t want an invasion of privacy or personal
interaction, but still want the ‘experience’ in a safe context.
It was clear that in business, they don’t want a ‘Home away from home’,
but rather something ‘Better than home’.
! ‘Shu-‐ying’ pointed out that there’s no conference room or the space
to receive business guest. ‘Kai’ also mentioned the lack of a printer,
or conference call facilities.
! ‘Jun’ said you cannot have services like calling a taxi, a butler, and
dry-‐cleaning/same day laundry. ‘Antoine’ mentioned lack of airport
transport/wakeup call/room service.
! ‘Shu-‐ying’ mentioned staying in Airbnb ‘sounds like you’re having
fun or your company’s having difficulty’. ‘Jun’ also said ‘if you stay
in a nice hotel, your company looks nice from other company’s view’
! ‘Sowon’ said that the hotel in or around conference venues is
‘where things are happening’, and is the place for networking. Since
the purpose of travel is ‘not about ‘the beauty of the city’, there’s
no appeal in staying alone in Airbnb.
! ‘Sebastian’ said ‘the only good thing about business travel is staying
in a nice hotel’
38
b) Sub-‐conclusion
In the interviews, the biggest difference between leisure travel and business
travel was how uncompromising the business travelers are in convenience and
predictability. In fact, recent research by Amadeus also shows that the number one
priority when travelling for business is convenience.
Then what do business travelers need for their ‘convenience’?
The first priority is location. It should be close to the venue of meetings,
conferences, or events. It should be well-‐connected in transportation as well.
The second factor is the amenities and facilities. From the morning (e.g.
coffee, breakfast, newspaper, gym) to the evening (e.g. laundry, dry-‐cleaning,
shower), all needs must be met in proximity. Working desk and air-‐conditioner are
also important. Not surprisingly, business travelers are becoming more dependent
on mobile devices, and wifi is now an expected amenity. In terms of facilities,
business travelers not only need F&B facilities but also space to meet their
clients/colleagues, such as the lobby (or library), a café, or a traditional conference
room.
Thirdly, the travelers are increasingly combining business travel with leisure
travel, with 83% of business travelers using their free time on business trips to
explore the city they are visiting, and 46% of travelers adding personal travel days to
business travel (Amadeus, 2013). Even for Bleisure (Business + Leisure), they need
convenience to squeeze in the fun part in their busy schedule.
39
Figure 12 source: www.pchousing.com
40
2. Hosts
a) In-‐person Interview
• Profile: 3 hosts.
Host “KJ” “Lionel” “Bence”
Location Seoul (S.Korea) Geneva
(Switzerland)
Budapest
(Hungary)
Status -‐ Superhost Superhost
Member since Mar. 2013 Sep. 2014 Oct. 2013
• The interviews were conducted in in-‐person or by phone between May and
July 2015.
• Objective: to learn (1) the reason they chose Airbnb, (2) their experience as a
host, and (3) their concerns/expectations towards Airbnb
• Result
Question Answers
Motivation
! Lionel: to afford the rent
! KJ: already was running a successful B&B, and joined
Airbnb to reach a broader customer base. Low
commission (3%) and no pressure for listing was
attractive.
! Bence: as a buy-‐to-‐share investment. He “had spare
money”, and “looking to invest in a local property”.
All interviewees agreed that the attractions of Airbnb are
its broad customer base and low commission.
41
Expe
rience
Re.
Guests
! KJ: guests from Airbnb are more cultured/sensible
then the ones from booking.com. He tries to provide
cultural experience like tours and breakfast. These
days, interacting with guests is not as thrilling as
before, but it’s still a good thing. He feels like he has
friends everywhere. On the other hand, his guests
don’t leave reviews often and he never pushes the
guests to leave a review.
! Lionel: mainly business travelers, family, and couples.
No backpackers. A business traveler who visits Geneva
said he can’t make friends in a hotel.
! Bence: he feels he gets ‘inspiration’ from guests, and
has returning guests.
All agreed that (i) interaction with guests is satisfactory,
and (ii) the guests with tightly restricted budget are more
demanding.
Re.
Airbnb
! Lionel: not much of help from Airbnb. Airbnb
intervenes only when there’s trouble
! KJ: Airbnb cares for the host most compared to
booking.com or Agoda. Airbnb tries to compensate the
hosts when there’s cancellation, with coupon or
similar, and organizes the events for hosts.
! Bence: safety net of Airbnb is good. When in trouble,
he immediately got help. Airbnb group shares tips
about tax issues, because there’s no clear rule yet. But
Airbnb doesn’t give advice, they just tell the hosts
what to be aware of.
It was clear that Airbnb doesn’t do much, but
intervention/help in a crisis is certain. That’s the source of
host satisfaction.
42
Concerns
! Lionel: not much
! KJ: the ‘superhost’ system urges hosts to push the
guests. He gets review around 95, 98, but he’s not a
superhost since his review ratio is below 80% (79%).
And if someone has grudge and ruins the review, it
may jeopardize the reputation.
! Bence: he hopes the other hosts participate in the
effort to make tax rules clearer. He can handle the
current amount of guests, but it would be nice to get
additional help to increase the numbers.
It was clear that the hosts are getting more professional
and organized. On the other hand, the complaints and
worry about the Superhost system were validated by my
own experience (i.e. I stayed in Bence’s place, and he, the
superhost, asked me whether I left the review. Every
three days.)
Although the interviewees were successful on their own,
they seemed ready to get more protection from the online
‘troll’ (i.e. malicious guest with unreasonably destructive
review) or unexpected accidents (e.g. guest getting in
trouble). They also seemed open to additional help e.g.
marketing.
b) Sub-‐conclusion
• According to the interviews, more and more hosts (not just 2/3 of
interviewees) seem to getting professional. It means existing
accommodation businesses are entering the ORR platform, and individuals
are investing in residential rental like a micro-‐sized real estate investment
businesses. For those semi-‐professionals and initial Airbnb host base (i.e.
residents trying to afford the rent) alike, the appeal of Airbnb was the broad
43
guest base and the small commission.
• Hosts are also actively comparing several ORR platforms, and sometimes use
multiple platforms.
• Hosts recognize that Airbnb doesn’t do much to actively help the hosts, but
they have little complaint since Airbnb gives assurance about
‘crisis/emergency control.
• If another platform can provide the similar level of (i) host protection and (ii)
guest base, the hosts seem willing to add/change to a different platform. In
other words, it was hard to find the concept of community or loyalty to the
brand.
44
B. SWOT analysis
1. ORR
a) Strengths
• Value for Money
A study from Boston University suggests, among Budget, Economy, Midprice,
Upscale and Luxury categories (as STR hotel census divides hotels), “consumers are
increasingly substituting Airbnb stays for lower-‐end hotels in Texas, possibly
identifying the former as offering better value at a similar price point.” (Zervas,
Proserpio, & Byers, 2015). However, it’s misleading to say Airbnb is cheap
accommodation.
As seen in the table below, the average daily rate of Airbnb in Paris is higher than
the average hotel rate ($90>$88). For the middle price range in the attractive Marais
area, however, Airbnb offers more and better options:
(as of 07/23/15) # Properties Average Daily
Rate
Price $80~$100. Le Marais
Airbnb
(official website)
1000+Rentals $90 33 listings left
(including 27 entire place)
Hotels
(Google Hotel Finder)
3001 $88 3 hotels
(1*3, 1*2, 1 class unknown)
• Diversity of offerings: ORR properties cannot be mass-‐produced. The
diversity of location and unique properties are certainly a competitive point.
• Added value of Image: For leisure travelers.
There’s also the image of ‘empowering’ communities by focusing on local hosts.
Brian Chesky, the founder of Airbnb, said Airbnb should “enrich” the areas in which it
operates, how it sought to be “good neighbors” and “bring back the idea of cities as
villages” (Chesky, 2014).
45
Focusing on ‘emotions’ is also effective to build lasting loyalty. The core driver of
leisure travelers is emotion evoked by traveling. The sense of belonging and being
welcomed by strangers is strong enough to be the base of any ‘cult’ of brand (Atkin,
2004).
• Speed of expansion/adaptability
In terms of volume and speed, it’s hard for a hotel chain to catch up with ORR.
Due to the massive economies of scale and the network effect, venture capitalists
are dying to get a hand on ORR. According to research by Altimeter Group in 2013,
more than $2 billion of funding has been invested in the top 200 sharing economy
businesses. In the first nine months of 2014, venture capitalists pumped $1.37
billion into sharing-‐economy companies (Newcomer, 2015). Airbnb’s 2014
investment round valued the 6-‐year-‐old business at several billion dollars more than
the InterContinental Hotels Group whose origins stretch back to 1777 (Stephany,
2015).
“ The sharing economy is as sexy as consumer web gets, as fashionable a
category as big data but more PR-‐friendly. It is no surprise then that
sharing economy businesses are lavishly financed “ (Stephany, 2015)
“The notion of being able to add capacity unlimited by capital & real
estate” has a “dramatic effect” (Johnson)
b) Weaknesses
• Non-‐Reliability: For the safety, security, and hygiene, most ORRs are still not
reliable. Since the providers (hosts) are individuals without a binding
standard, there’s no guarantee of quality. The review system is also partially
unreliable. In the case of Airbnb, since the reviews are mutual, it’s hard to be
bluntly honest about an ‘acquaintance’ that is going to review me as well.
• Inconsistency: Since there’s no quality control, experiences are also
inconsistent. For ORR’s to rise to the hospitality standard, it may take more
46
time than a structured hotel company. Since ORR’s put the hosts and guests
on the same level, it’s hard to impose a policy on the hosts. Besides, non-‐
professional hosts may reveal negative social stereotypes (e.g. race, ethnicity
issue), which may greatly affect the guest experience.
• Weak Interaction: As revealed in the interviews, in fact, there’s little intimacy
between hosts and guests, and interactions become scarce as the hosts
become more professional.
• Inconvenience: Interviewees frequently pointed the hassle of key exchange
and lack of amenities/facilities as biggest drawback. “Moreover, business
travelers make greater use of those business-‐related hotel amenities not
typically provided by Airbnb properties.” (Zervas, Proserpio, & Byers, 2015)
c) Opportunity
• Emerging Regions: When the Cuba became open to the Western world,
Airbnb was the first one to make its presence. New regional markets like Asia
or South America create additional opportunities as well.
• Business Travelers: It’s worth noting that the origin of Airbnb was to cater
the business travelers. The money that road warriors spend with Airbnb has
gone from "zero" two years ago to nearly $1m this quarter, according to Tim
MacDonald, a Concur executive. That is only around a 1% market share, but
the growth rate is "eye-‐popping," Mr MacDonald told CNBC. The reporter in
the Economist said: “In the past, I have argued that Airbnb would not be a
realistic option for business travelers, because the rooms aren't necessarily
cheaper than hotels and come with at least some risk that a host might flake
out at the last minute. … It is probably time for a mea culpa. In the past few
years, I have used Airbnb for several business trips and been pleased every
time.” (The Economist, 2014)
47
• Hospitality services: Airbnb hired Chip Conley, the founder of Joie de Vivre
Hotels, as the head of global hospitality to try and raise the “Hospitality
Standards” saying “Hospitality is both who we are and what we do”
(https://www.airbnb.com/hospitality).
d) Threats
Chip Conley, the Head of Global Hospitality of Airbnb, recently said “We probably
have 4 higher-‐level risks: (a) regulatory (which can affect supply which is a sub-‐risk
since our demand is growing faster than supply); (b) quality and its effect on brand
reputation; (c) trust and safety; and (d) competitors.” (Conley, 2015)
• Rising Competition/Substitution: the ORR business model is easy to copy
with low entry barriers. And high-‐quality hostels and hip budget hotels also
claim uniqueness. Hotel management companies are investing in ORR
companies or trying to do something similar. Conley said “Priceline
(Booking.com) is the most likely …There really aren't any global direct
competitors in all the markets we're in.” (Conley, 2015)
• Regulation: Regulation (e.g. tax/HR/liability) for ORR’s is still vague. Should
the same rules as hotels be
applied? The NY State
Attorney General pointed out
that most short-‐term rentals
booked in New York violated
the law (The Office of Ney
York State Attorney General,
2014). Conley said “We're in
34k cities and most laws we
deal with are local, so this is
our biggest challenge”
(Conley, 2015)
Figure 13 source: The Office of Ney York State Attorney General
48
• Dilution of Image: Since the ORR companies cannot control the hosts, and
more users realize that there’s no promised intimacy or virtual community,
the image and storyline of most ORR’s may have to change.
2. Traditional Hotels
a) Strengths
• Reliability, Consistency: The strengths of traditional hotel are the opposite of
ORR’s. Hotels can guarantee the quality, service and security. It especially
appeals to business travelers. In line with this, the Boston University study
suggests that “hotels of all operation structures were affected”, however
“Airbnb has indeed had a larger impact on independent hotels.” (Zervas,
Proserpio, & Byers, 2015)
• Strong Brands & Long History: Hotels boast global awareness, and successful
loyalty programs contribute to the brand value.
• Package of offerings: The amenities and facility easily meet the specified
needs of corporate travelers. A physical presence with an actual reception
and concierge desk give reliability.
b) Weaknesses
• Standardized experience: Hotels must be impersonal even with the utmost
level of service. The guests walk into a hotel building, which is a form of
business facility, interacts with an employee with uniform over the reception
desk, and the payment is major part of that interaction. There’s also an
inherent limitation in uniqueness even for boutique hotels. And the case of
ORR’s shows that you cannot build a community with a loyalty program.
• Limited volume/expansion: There’s a limit in speed of growth/possible
locations. It requires 3~5 years to build a new hotel, and several months
conclude a management contract. Each hotel also needs large number of
49
rooms. For example, Accor requires minimum 50 ‘keys’2 for a hotel to enter
the franchise/management contract. Since each hotel requires certain
number of guests to be sustainable, they cannot be concentrated in a region
without the risk of cannibalization.
c) Opportunities
• Hotel management companies, especially the ones with an asset-‐light
strategy, may diversify the brand portfolio based on changing travelers’
needs, including soft labels and different hospitality offerings (e.g.
destination F&B, public space).
• In reaction to the sharing economy, collaboration or investment in a new
company can benefit the portfolio. W Hotels has a partnership with the
workspace sharing company DeskNearMe, and Hyatt Hotels has recently
invested into Onefinestay, providing part of $40 million funding raised by
Onefinestay in late 2014 (Billings, 2015). In an effort to “solidify reputation
management”, “for established hotels and restaurants, there is potential to
drive key consumer-‐coveted attributes like “unique” and “authentic” by
partnering with flavorful sharing economy providers” (PwC, 2015).
• Hotel management companies may advance into the sharing economy itself.
Peggy Fang Roe, Marriott’s chief sales & marketing officer for Asia Pacific,
said “[the idea behind Worspace on Demand] was partly driven by research
we did on Gen Y. They blend work and life differently. … they were ordering
room service in the lobby because they prefer to work outside their rooms.
Our hotels have a lot of unused meeting spaces, but to reserve them you
needed to talk with our sales staff, sign a contract, and agree to order food
and beverages from our caterer”, and the goal “wasn’t just revenue
generation … also about changing consumer perceptions of our hotels and
2 For ‘ibis style’ or ‘MGallery’ brand. Other brands require more minimum number of keys.
50
becoming more relevant to how people live and work today” (Botsman,
Sharing’s Not Just for Start-‐Ups , 2014)
• Hotel management companies are moving from Asset Builders to Service
Providers. But the Airbnb is already a Network Orchestrator.3 To compete
with this new trend, hotel management companies should become Network
Orchestrator of their own.
• Jeremiah Owyang, sharing economy consultant, said ‘The Six Scenarios for
Hotels to Address the Collaborative Economy’ is as follow; (i) Ignore it, and
hope it goes away. (ii) Fight it with policy, lobbying, or marketing. (iii) Sponsor
the startups. (iv) Acquire the startups. (v) Integrate your business model. (vi)
Build your own marketplace and platform (Owyang, 2013). It’s in line with
being a Network Orchestrator.
• Asset-‐light strategy demands that hotels increase their number of properties.
Hotel management companies can deal with numerous small owners and
3 HBR developed a framework based on a business model, which is the principal way an
organization invests its capital to generate and capture value. HBR suggests that Network
Orchestrators outperform other business models, including higher valuations relative to
their revenue, faster growth, and larger profit margins. (Libert, Wind, & Fenley, 2014)
" Asset Builders: who build, develop, and lease physical assets to make, market,
distribute, and sell physical things
" Service Providers: who hire employees who provide services to customers or
produce billable hours for which they charge.
" Technology Creators: who develop and sell intellectual property such as software,
analytics, pharmaceuticals, and biotechnology.
" Network Orchestrators: who create a network of peers in which the participants
interact and share in the value creation. They may sell products or services, build
relationships, share advice, give reviews, collaborate, co-‐create and more.
51
make change in their lives, rather than capital investors with higher
bargaining power.
• Hotel management companies also have expansion opportunity in less-‐
matured regions, such as secondary/tertiary cities in Asia or major cities in
Africa
d) Threats
• Rising Competition: For global hotel management companies like Accor,
other similar hotel chains and regional ones are already considerable
competition. And there are boutique hotels, youth hostels, ‘design hostels’,
student hotels, and there are so-‐called ‘white label’ management companies
luring real estate owners. Each claims differentiating features compared to
global chains and eats up one segment at a time.
• ORR’s are attempting to penetrate the business travelers market.
• Change of environment: Not just demographics, but also the regulatory
environment may change. Vijay Dandapani, the president and COO of Apple
Core Hotels, said the differences in taxation on buildings zoned commercial
versus residential areas can be significant, discussing the regulatory benefit
of ORR’s (Watkins, 2014). Bashar Wali, the president of Portland -‐based
Provenance Hotels also said: “The sharing economy is here to stay, and no
matter how much we fight it and cry about it, for the millennials it is a way of
life,”. “Our belief is if you make the playing field level—such as the payment
of taxes—then we’re OK with it.” (Watkins, 2014) The problem is, with all the
lobbies by hotel chains, the regulation may change favorable to ORR’s based
on the disproportional amount of positive PR focused on ORR’s.
52
V. Business Model
A. Overview
1. Business Summary
The Brand is an online platform of residential rental for business travelers run by
a hotel management company, Accor.
The Brand is not a hotel brand, soft brand, or OTA. It’s a marketplace. But if
Airbnb is a town market, the Brand is a sleek department store. It will (i) List
properties under the Brand’s name, (ii) Share the infrastructure, services and
facilities of Accor (e.g. public space, conference room, loyalty program), and (iii)
Customize the bundle of services for business travelers & professional hosts.
2. Opportunity
Hotel Management Companies have the know-‐how, physical infrastructures, and
the right service culture for business travelers. The services provided by ORR’s are in
fact quite similar with what hotel management companies with ‘asset-‐light’ strategy
provide for owners.
Figure 14 source: https://ownerreferral.homeaway.com/more
53
Airbnb focuses on brand management and marketing, while earning a service fee
from the properties owned by another party, i.e. hosts. Airbnb also aims to
standardize the service, with its new ‘hospitality standard’. Moreover, if a host signs
up for ‘professional service’ in Homeaway, s/he gets the following management
services.
Hotel management companies already provide the services above in better
form.
The fact that Airbnb is trying to penetrate the business market proves the
opportunity for ORR’s in business travel market. Customers are slowly reacting. If
the critical mass realizes that they can actually use Airbnb or other ORR’s for
business travel, it can become a disruptive force in this market.
At the same time, the ORR market leads the hosts to be individual
entrepreneurs, who need professional help to maximize their profit like hotel
owners do. It can be described as the individualized, segmented version of an asset-‐
light structure. ORR search engine site Tripping pointed out that “Hiring property
managers is on the rise as more people begin to invest in vacation homes further
away from home… In 2008 only 29 percent of vacation rental owners were utilizing
property managers, but in 2015 the number of owners hiring property managers
increased to 41 percent”. (Zigmond, 2015)
Accor, with its asset light strategy, can benefit from diversifying its brand
portfolio. And the Brand doesn’t require a large capital investment or a long time
period to launch. On the other hand, it was pointed out that Accor needs to improve
(i) its weak loyalty program, and (ii) its inconsistent and unappealing IT/Design online
front. The Brand could be an optimal opportunity for Accor to improve its image and
innovative skill set.
David A. Garvin said that for a new venture, the best predictors of success are
market knowledge and demand-‐driven products and services (Garvin, 2004). In this
54
case, Accor knows business travelers better than any other players in the market.
And there’s need from both sides. Garvin also mentioned the corporate culture is
the biggest deterrent to business creation, but in Accor’s case, a de-‐centralized
corporate culture and an already diversified brand portfolio sets the perfect
background.
Moreover, the pie is bigger than ever. “The consumer peer-‐to-‐peer rental
market is worth an estimated $26 billion, with Airbnb alone having more than
600,000 listings across 160 countries.” (World Economic Forum, The Travel &
Tourism Competitiveness Report 2015)
3. Limitations
As discussed, the regulatory issues such as tax, HR, or liability follows ORR
business. Accor needs to assess the regulatory implication as well as existing
contractual structure, brand policy, and internal issues before launching the Brand.
55
B. Business Canvas
Key Partners Key Activities Value
Propositions
Customer
Relationships
Customer
Segments
Existing
partners of
Accor
Door lock
provider
Local sharing
businesses
Building the
platform
Community
Management
Marketing
Business services
Combining the
benefits of ORR
and business
hotel
Bundle of
management
services for
host
Corporate sales
Training program
Community
management
Guest: Business
Travelers, 30s,
midscale
Host: semi-‐
professionals
Key Resources Channels
Online platform
IT/Design talent
Brand
Infra. of Accor
Signage, Key
Distribution:
Accor, Web/App,
search engines
Communication:
Social media,
traditional
marketing
Cost Structure Revenue Streams
Online platform development
Brand development
Operational expense
Registration fee
Service fee
Brokerage fee
1. Customer Segment
“Focused business models are most effective when they appeal to distinct
market segments with clearly differentiated needs.” (Girotra & Netessine, 2014)
For the Guests, the Brand shall target business travelers, especially in their
30s using midscale hotels, not high-‐end professionals who jet set luxurious hotels.
Accor, with its strong business traveler base, has the most infra and know-‐how for
56
this segment; and it will appeal to the Host base as well. It’s based on “Search for
commonalities across products.” (Girotra & Netessine, 2014)
For the Hosts, the Brand shall target the property owners, tenants, independent
accommodation owners/operators with small accommodation (around 10 rooms),
serviced apartments, small guesthouses, etc. including the real estate investors and
listed hosts in other platforms.
Compared to Airbnb, the Host base of the Brand shall be more professional,
inclined towards the ‘whole place’ rather than a room in the Host’s home. In fact,
the top 10 listings in Paris are all entire homes/apartments with 0~1 rooms
(http://www.airdna.co/city/fr/paris )
Figure 7 Airbnb in Paris
(June 2015) (source:
http://www.airdna.co/city/
fr/paris)
2. Value Propositions
a) For the Guests
The Guests can enjoy diversity of properties, location, and the unique experience
of ORR’s with reliability and convenience of hotels. For business travelers, the
booking and check-‐in will be hassle-‐free. Unlike other ORRs, the Guests have (i)
hotel-‐like service (e.g. wakeup call, concierge), (ii) a professional image underlined
by Accor. At the same time, the Guests can have better local experience by credible
advice from a concierge, host, and local site (e.g. Yelp).
57
The key is that the Brand is accustomed to the business travelers in the
contemporary era, combining the best of ORR’s and business hotels.
b) For the Hosts
The Brand provides the package of services for Hosts including professional
management, cleaning/security/revenue management/marketing, utilizing the
existing assets of Accor such as following (AccorHotels);
• Sales channels: e.g. (i) accorhotels.com, a multi-‐brand portal, (ii) the 13
commercial websites of our hotel brands: sofitel.com, novotel.com,
ibishotel.com, etc (iii) other indirect sales partners (cf. figure below)
• Marketing channels/know-‐how
• Centralized reservation system.
• Customer service including call center
Figure 17 source: Accor development brochure
58
• Procurement network: e.g. cleaning, laundry, transport.
• Revenue management expertise
As the interviews reveal, the Hosts are getting more professional and regard the
ORR’s as an additional investment and profession. On the other hand, most hosts
cannot join the franchise system of hotel management companies because of strict
franchise criteria (incl. brand standard) and franchisee fees. The Brand provides
professional standards and brand value without sacrificing the micro-‐entrepreneurs’
freedom.
The Hosts can also expect the professional image and reliable stream of guests,
not worrying that one troll may ruin the business with a malicious review.
3. Key Activities
For ORR’s, building and maintaining the marketplace is the crucial part. It
includes creating technological infrastructure and design base.
In addition, community management and marketing are also important, and can
be intertwined with each other. For example, the Brand may do the marketing
based on the type of business/conference/event. The community manager may
manage the guests’ community based on the same categories.
For example, Travelmob,
an ORR business belonging
to HomeAway network, has
webpages for each regional
conference/event. In each
page, they provide
information about the event
and recommend popular
listings in the same region. Figure 18 source: travelmob website (http://www.travelmob.com/events/australia/melbourne-‐writers-‐festival)
59
The Brand may develop this idea, and make a webpage for each business
conference/event with on-‐site promotion. Grouping the similar events for specific
industry/profession (e.g. industrial designers), the Brand can launch dedicated
webpages or promotions. The community manager, by managing the participants of
each event and the potential participants based on industry, can segment the
traveler base and provide more specific care.
In the Brand’s case, the additional service like business concierge (for the guests),
and management service (for the hosts) can be major activities as well.
4. Key Resources
(1) Online Platform: Website & App
• As the business model of the Brand is fundamentally different from
hotels, it needs an additional online platform. At the same time, the
platform should be synched with other Apps and websites of Accor so the
guests can access Accor’s booking system or loyalty program seamlessly.
(2) Key talent
• For the online marketplace, especially for aspirational products like
‘travel’, technology and design is the core of the brand. It needs (i) fast
adaptation to new technology and changing customer needs, (ii) and a
shorter communication chain for efficiency. Thus, building the brand and
its platform cannot be outsourced. Web/App Developer and Creative
Director will be the key talent of the Brand.
Also it’s fair to note that Airbnb’s design aesthetic and artworks provides
competitive advantage by (i) driving more traffic from Google Display
Network, visual oriented Google Ad channel, and (ii) converting the
inventory of commodity, which are listings, into marketing contents.
• Community Manager, Business Concierge
(3) Brand & Design (incl. intellectual property)
60
(4) Infrastructure & Database of Accor
• Loyalty program: The program should be tuned to accumulate the
personal information of users, which shall be the base of customized
suggestions. Loyalty membership databases are overflowing with
information about customer demographics, travel preferences, and
profitability (Deloitte Consulting LLP; Deloitte & Touche LLP, 2013). The
Brand may suggest a traveler optimal location (e.g. near a train station),
the type of property (e.g. 1st floor, smoking), desirable local experience
(e.g. local dining by middle-‐eastern chef), and even suitable host (e.g.
local resident with same profession).
• Hotel Facility: Most Airbnb properties in Paris don’t have access to a gym.
Based on the
interviews, that is
a problem for
some business
travelers.
The Brand can provide a unique opportunity of staying in an ORR and
using hotel facilities including the gym, conference rooms, or any public
space.
For example, let’s assume a business traveler is staying in one of the
Brand’s listing new Montparnasse Tower in Paris. She can make a
reservation for the meeting room in Mercure Paris Gare Montparnasse
Hotel from the Brand’s website.
Figure 8 Airbnb Property Amenity in ratio (http://www.airdna.co/city/fr/paris)
61
She can also meet her client in the lobby of same hotel, ordering a drink
and paying by the Brand’s mobile App. During the meeting, she can
request babysitting service in nearby Pullman Paris Montparnasse Hotel
for her child who accompanied her on the trip.
Figure 20 source: Accor website
Figure 21 source: Accor website
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After the meeting, she can have
dinner in the same hotel, or
make a reservation by the
Brand’s app for the private dining
with a local chef.
The next morning, she can use
same Pullman hotel’s fitness
center and business center after having the breakfast in her own dining
room.
(5) Physical presence: Signage, ‘Key’, amenities
• “The biggest source of anxiety for any Airbnb guest is how to get into the
property upon arrival.” (Shatford). It’s also a huge drawback compared to
any hotel in any class. To provide the convenience the business travelers
seek, securely automating the check-‐in process is a must.
• For the automated key exchange, the Brand can provide several options.
(1) On-‐site exchange: For the Host to hand over the
key on-‐site at check-‐in. Preferable for B&B,
guesthouse, or other professional accommodations
(2) Lockbox: Safe with number combination to store
the physical key. The host can attach the lockbox
beside the door.
(3) Smartlocks: Keyless entry system working with
smartphones. (e.g. ‘Lockitron ‘, www.lockitron.com)
Guest can use their smartphone to wirelessly turn
the deadlock upon arrival
• For the professional presentation and brand differentiation, each listing
shall have the signage beside the door with Brand logo. The key, key box,
or lock shall have the logo as well.
Figure 22 source: Accor website
Figure 23 source: Lockitron website
63
• The amenities like towels and toiletries also have the Brand logo with
hotel amenity-‐like quality. For business travelers, high-‐speed wifi is also
an amenity.
5. Key Partners
(1) Existing partners of Accor
• Insurance/Cleaning/Laundry/Maintenance companies
• Other strategic partners (cf. figure below)
(2) Door Lock provider: e.g. Lockitron (https://lockitron.com/)
(3) Local Businesses or Sharing Economy business
• Transportation: car sharing companies other than car rental (e.g. Uber)
• F&B: Yelp or Open Table for the recommendation, dining sharing business
(e.g. Eatwith)
• Other sharing economy business to connect with local experience
6. Customer Relationships
• With Guests: For the corporate clients, the Brand should utilize Accor’s know-‐
how and manage the clients like existing corporate clients for hotels.
Figure 24 source: Accor website
64
Besides, the business concierge can build the relationship with individual
business travelers as well.
• With Hosts: The Brand may utilize Accor’s training program to build the
minimum level of hospitality quality management.
Accor has Académie Accorhotels campuses worldwide providing a wide range
of training courses including service attitude, marketing, and even personal
management (AccorHotels). The Brand can invite the local hosts to nearby
Académie, share the training, and answer their questions to improve the
practices. Simple know-‐how exchange about how to interact with guests in
the perspective of service attitude, that’s already something beneficial for all
the aspiring hosts.
• Community Management is the key in most of sharing economy businesses.
In the Brand’s case, the community can be built in two direction; (i) business
travelers’ community with their individual needs and interests as different
‘travelers’, (ii) hosts’ community to share the tips and concerns to cater
‘business travelers’.
Especially for the host community, the Brand can utilize the Académie above
or nearby Accor hotel’s conference facility for easy offline meetings. For
example, the Brand can have offline promotion events for major
conference/events in the city, and invite the hosts as well as the potential
participants for natural social interaction.
7. Channels
• Sales/distribution channel
o Existing Sales channel of Accor: (i) Sales team for individual corporate
clients, (ii) Accor websites, (iii) partner websites of Accor
o The separate Website and App (Android/iOS) for the Brand
65
o Google and other search engines, including meta-‐search engine
campaign.
• Communication Channel
o Social media: e.g. Facebook, LinkedIn, YouTube. To utilize the Word-‐
of-‐Mouth
o Other marketing channel: including newspaper (e.g. Financial Times),
business magazines (e.g. The Economists), TV ads (e.g. Bloomberg),
billboard
o Promotional event
o Direct email, relationship marketing4
8. Revenue Streams
The revenue streams of ORR’s vary depending on the business model;
HomeAway and related companies traditionally functioned as a subscription system
with annual subscription fees and no booking fees. But Airbnb model works on
service fees per booking without registration/subscription fees. The latter clearly
has advantages to rapidly increase inventory, thus HomeAway now provides Per
Booking Option and most newcomers follow the Airbnb Model.
Figure 9 Fee comparison of 5 largest ORR sites (http://www.quora.com/Who-‐is-‐Airbnbs-‐biggest-‐competition)
In the Brand’s case, however, the registration fee is necessary since the
Brand will provide physical door signage, listing/profile optimization, and dynamic
pricing advice. The price should be just enough to cover the expense.
4 cf. Accor Franchise website (http://www.accorfranchise.com.au/brand-‐marketing)
66
• Registration fee (from host): Fixed rate (e.g. 100 EUR) + ‘Key’ expense
(optional)
The range of service fees varies per company, and many newcomers don’t charge
a fee to the hosts to attract new listings and increase the inventory. In general, the
guest fees range
from 0~15% and
the host fees
range from 0~5%
(with exception
of 9Flats). The
Brand may justify
slightly higher
service fees by
providing
additional
management
services.
In addition, if the Guests choose the additional services from partner companies
listed in the Brand, the Brand may ask for a brokerage fee from the company.
• Service fee: 10~15% from the Guest (+ additional expense for optional
service (e.g. breakfast), 5% from the Host
• Brokerage fee: 3~5%
9. Cost Structure
HomeAway categorizes its expense as following; Cost of revenue, Product
development, Sales & marketing, General & administrative, Amortization expense
(Appendix 3. Financial Statements of HomeAway). The Brand needs to add initial
cost of Online Platform development and Brand development to the categories
above.
Figure 26 Source: https://www.tripping.com/industry/rental-‐companies/rental-‐site-‐comparison
67
• Online Platform Development
! The main cost goes to IT talents like the UI Designer, iOS developer,
Android developer, and Web developer. Considering the importance of
user experience, UI designer may also function as the team lead. As
discussed, IT talents are key resources and cannot be outsourced.
! Supplementary cost: The office space, hardware (e.g. laptop) & software,
server rental fee can be expected. Since, however, the Brand plans to
integrate with Accor’s infrastructure, the cost may be less than the
industry average.
• Brand Development
! Key personnel: (i) Sales & Marketing manager who’s also in charge of
branding strategy (ii) Community manager (iii) Listing manager who’s in
charge of site inspection, listing description, and host interview (iv)
business concierge
! Pre-‐launching marketing and promotion
• Operational Expense
! Cost of Sales: (i) general variable costs (e.g. cleaning, laundry, amenities,
hotel facility usage, loyalty program expense), (ii) credit card commission
! Fixed Costs: (i) salary & employee benefits, (ii) IT equipment, (iv) sales &
marketing, (v) general & administrative expense.
68
C. Services
1. For Travelers
Join Search Booking Prepare Check-‐in Staying (day) Staying (night) Check-‐out Review
Physical
Evidence
Website
* App
Website *
App
Website * App Email (itinerary,
receipt,
guidebook) * App
App (map)
* Signage
* ‘Key’
Conference
room/lobby
in local
hotel
F&B facility in local
hotel * local
café/restaurant
Wifi * Towel *
Toiletry * other
Amenities
(optional)
(Itinerary)
* ‘Key’
Website
* app *
social
media
Customer
Actions
Register For
destination,
date *
browse the
listings
Choose the
listing * check
details & review
* Book a stay *
choose
amenity/service
Payment * check
the key option *
arrange/message
with host
(optional)
Arrival *
key
exchange
Business
meeting
Meal * Drink Shower & sleep Check-‐out
* Key
exchange
Review
(line of interaction)
“onstage”
contact
Instant booking
* Register the
chosen
amenity/service
Sending Email Check-‐in
time
notification
* airport
transfer
(optional)
Prepare
‘Conference
at demand’
* Business
Concierge
Business concierge
* Send
‘Recommendation’
notification
Morning call
(optional)
Check-‐out
time
notification
Sending
email for
review
(line of visibility)
“backstage”
contact
Arrange the
amenity/service
Call center ready Feedback
69
Detailed Sequence
Join/Register ! The Guest can join as individual (ID check by social media, Accor loyalty program, or additional ID paper) or as company/business
! Register the payment information.
Search ! The Guest can (i) search for destination, date, #persons, (ii) filter the result (e.g. room type, price range, size, neighborhood, amenity,
property type) or browse in popularity/price order, and (iii) get help from ‘Business Concierge’ for conference/business occasion
! The Guest can also do Additional Search for transportation/meal/local experience
! The Brand Website/App provides the information for prominent MICE occasions
Booking ! All Instant Booking like hotels
! The Guest can choose (in check-‐box); amenity (e.g. newspaper)/services (e.g. wakeup call, laundry, breakfast)/conference facility
(conference room reservation), additional service (e.g. airport transportation, local dining experience)
Prepare ! The Guest receives email about itinerary, local information, and transportation
! The schedule is synched with the Guest’s calendar.
Arrival ! From App: Location (map & address in local language), check-‐in time notification
! On site: Brand Signage on property
Check-‐In ! ‘Key’ exchange: (1) Key Box at property (2) online App (3) On-‐site exchange
Stay ! From App/Website: Recommendation based on locale
! The Guest may contact the Host or Business Concierge for local information.
! The Guest may (i) make Instant booking for conference room/meal/transportation/experience, (ii) use business center, gym in the
nearby Accor hotel.
Check-‐out ! The Guest may choose and get delivery of Breakfast (room service type) with additional price.
Review ! The Guest Review: Check box/rating for categories rather than long sentences
70
2. For Hosts
List Management Booking Prepare Arrival/check-‐
in Staying Check-‐out Feedback
Physical
Evidence
Website Signage, ‘Key’ Website,
App
Website, App,
Amenities
‘Key’, App App ‘Key’, App Website, App
Customer
Actions
Apply for
the listing,
Pricing
Interview Answering the
message *
prepare the
space
Greeting the
guest
(optional)
Being available Feedback
(line of interaction)
“onstage”
contact
PMS
service
Interview the host,
Install the
signage/key, Basic
training/orientation
App
notification
Providing
Amenities
App
notification
Cleaning,
Laundry
service
Feedback
process
(line of visibility)
“backstage”
contact
Index the
listing
‘Listing Package’ ‘Hosting
Package’
Customer
service (24/7)
Reflect to
community
management
71
Detailed Sequence
Listing ! The Host can Apply for the listing (home/room type, #accommodates, city) with description (USP, amenities, location), photo, desirable
price, and hosting plans (available nights) in the website.
! The Host can choose the option for ‘Key’ on the website: no change (when the Host guarantees to be physically present for key
exchange, e.g. B&B), key-‐box, or door lock changes for smart-‐lock.
! The Brand evaluates the property whether it meets the criteria: e.g. location, bed, shower, toilet, security, Wifi, and good desk.
! If the listing fits the criteria, it’s registered and indexed.
Manage ! Initial marketing: The Brand sends the staff to (i) take professional photo of the listing and the host, (ii) to interview the host.
! Interview is to ‘humanize’ the Host and to optimize the listing & profile. The interview can be video recorded and uploaded in YouTube
depending on the request/suitability
! The Brand installs the door lock (optional) & signage on the door.
! The Brand recommends the dynamic pricing synched with the Host’s calendar.
Booking ! Instant booking based on pre-‐determined criteria – App notification to the Host
Preparation ! The Brand provide Amenities: Towels, toiletries, welcome gift
Check-‐in ! The Host may greet the Guest (optional), but must be available to contact.
Stay ! The Brand provides 24/7 customer service (phone, email), and business concierge (for business travelers)
Check-‐out ! Cleaning: Hotel-‐like cleaning service + Restock supplies (e.g. toilet paper, paper towels)
! Laundry: Bed Sheets
Feedback ! Based on feedback from the guests and the hosts, the Brand provides periodic Hospitality Standard Training
D. Brand/Marketing Strategy
1. Branding
a) Brand & Image
The Brand image should strike a “balance between refinement and relaxed
warmth” (Hemp, 2002). The refinement should be in line with down-‐to-‐earth and
no-‐posh attitude, but with business savvy. The key is to make the travelers feel good
about telling their colleagues, business partners, and clients that they are staying in
the Brand, neither a boring business hotel nor a leisurely/homey Airbnb.
The Brand can benchmark Starbucks for building the image of ‘affordable luxury’
and the new space between ‘home and office’. Starbucks knew that “Customers
aren’t looking for best friends; they just want a positive connection, and they want
their needs to matter.” (Michelli, 2007, p. 74) It simply focused on building the
Starbucks Experience, “driven not just by the quality of its products but by the entire
atmosphere surrounding the purchase of coffee” (Michelli, 2007, p. 119). Starbucks
built a space where customers can feel a bit of luxury with pricier coffee and ‘extra-‐
ordinary’ atmosphere, but still within affordable range and non-‐intimidating
ambience.
The Brand should also build the space and experience different (more elevated)
from common business hotel and cheap Airbnb ‘houses’, but it should be also within
the reach of tight budget of business travelers.
Then what difference is there between a business hotel and Airbnb?
After the interviews, a recurring theme has come up. Most young business
travelers, facing or in their 30s, are not social butterflies that travel on weekdays in
spring like the beautiful people in Airbnb commercials. But they are not corporate
sharks that gaze down the skyscrapers in slick hotel commercials either. They (i)
work until evening and enjoy life after work, (ii) are a little bit awkward, but a little
73
curious about social interaction with strangers, and (iii) really don’t want to go
through small hassles in business travel (business is demanding enough) but don’t
want to be trapped in so-‐called ‘business hotel’ either (they already know what ‘fun
travel’ is).
They don’t expect to be friends with strangers on first sight, but yearning for
more than just acquaintances. They want the choice without social pressure;
whether to relax like home or to explore the city after work.
For these travelers, the Brand can be “Neighbors” [TBD], something between
friends and acquaintances, with an emotional connection and unpretentious
comfort.
It fits what the HBR article calls “Capitalizing on the Underdog Effect” (Keinan,
Avery, & Paharia,
2010). The Brand
is a late-‐mover
and, with its
corporate
background, it
cannot trump the
hip social image
of Airbnb. It
starts with a
disadvantaged
position in terms
of brand image.
However, the
passion and
determination to
please the ‘real’ Figure 27 source: HBR (https://hbr.org/2010/11/capitalizing-‐on-‐the-‐underdog-‐
effect)
74
business travelers can strike the cord.
In line with the image, the design scheme should be warm and refined with main
color of orange, brown, and dark green (cf. tentative logo below).
b) Brand Positioning
The Brand positions itself as midscale, with listings overlapping to Upper
Economy and Upper Midscale segment. The position of the Brand in the Accor
brand portfolio can be as below;
The property should be the level of midscale hotel in terms of size, bed, and
quality. The lack of hotel service/facilities can be compensated with (i) the better
amenities than midscale hotels, (ii) the uniqueness of the property, and (iii) other
conveniences including location, breakfast delivery and special services.
The related question is the price range. The median price level of the Brand
should be competitive to the brands like Novotel or Mercure, but also to Airbnb. For
the Airbnb listings in Paris, the median rate of entire home is around 100$.
75
2. Location
The Brand should target Paris as trial city. Paris has several benefits and
opportunities;
• Accor has most know-‐how and network in France, especially Paris
• Paris is strong MICE center: ICCA (International Congress and Convention
Association)’s annual statistics on the number of rotating international
association meetings hosted by countries and cities show that Paris retains
Figure 29 Airbnb in Paris (June 2015) (source: http://www.airdna.co/city/fr/paris)
Brand
Figure 28 Brand Portfolio source: Accor website
76
the top rank with 214 meetings in 20145 There are steady demand from
business travelers.
• Paris is now Airbnb’s largest market, and attracts more ORR companies every
year. Accor needs to act fast (i) to protect its primary market and (ii) to
obtain attractive ORR listings.
Figure 30
Around
MontParnasse
in Paris, there
are only 6 Accor
hotels
(midscale)
Figure 31 In
smaller area,
there are more
than 100 Airbnb
listings
The Brand should build the inventory of listings in business friendly locations,
near existing Accor hotels for the access of hotel facilities/services.
There’s no fixed rule to assess the critical mass the Brand should reach in Paris.
In reference, the number of listings in Paris for other ORR is as below6;
5 Source: ICCA 2014 stastics (http://www.iccaworld.com/newsarchives/archivedetails.cfm?id=4852) 6 Source: Official website of each company, as of August 11, 2015.
77
Airbnb VRBO HomeAway Roomorama Onefinestay FlatClub
40,000+ 7,645 7,593 1,186 200+ 114
Once the Brand reaches the
revenue level to self-‐sustain in Paris, it
can expand to other MICE center
cities.
3. Sales & Marketing Strategy
a) Marketing Strategy
Social media, as defined by the social media website Wikipedia, are “media for
social interaction”(https://en.wikipedia.org/wiki/Social_media). The Brand needs to
decide the type of audience, the format of message to deliver, and how willing it is
to actually interact. Finding the right presence matters and being authentic is the
key. Thus, outsourcing is not an option here. In an HBR article, Soumitra Dutta
categorizes social media as follows (Dutta, 2010).
Figure 10 source: HBR (https://hbr.org/2010/11/managing-‐yourself-‐whats-‐your-‐personal-‐social-‐media-‐strategy)
Figure 32 Number of Airbnb listings in major cities
78
For the Brand, the following media can be of use;
• Facebook: To deliver the stories about business travel. To showcase (i) the
Brand’s expertise and (ii) how one can expect/gain ‘experience’ in business
travel.
• YouTube: Short stories (e.g. After a long conference, the Guest comes back to
the place – A neighbor hails the Guest for a drink on his/her way – the Guest
chats a bit in a casual local bar – The Guest falls on his/her bed (with the
Brand amenities on the background), smiling), or the interview from real
businessman.
• LinkedIn: To share the tips about business travel, to reach the corporate
clientele, and to deliver more professional image
As Airbnb proved, the website and App themselves can be a marketing
channel. Especially considering that the Brand focuses on business friendly
locations, it’s also a positive tactic to increase the attractiveness of the property and
its specific location rather than promoting the city.
For the Brand to take off, initial pre-‐launching marketing is critical, and
following tactics can be used.
• Promotion: Offline event or booth in MICE venue
• Free trial: e.g. (i) Accor’s internal use, (ii) existing corporate clients
• Traditional marketing tool: e.g. TV commercial, paper AD, billboard, direct
mail (1 month 1 Quarter prior to launching)
b) Sales Strategy
(1) For Hosts
A recent Entrepreneur article about ‘How to Launch a Business in the Sharing
Economy’ says, “Start with supply” (Andruss, 2014). In the article, Jamie Viggiano,
vice president of marketing at San Francisco-‐based TaskRabbit also says “You need
to get the supply infrastructure in place before you can push the demand side, and
make sure the market is in equilibrium”. For the Brand to take off, attracting hosts
and building the inventory is crucial.
79
To start with 50 listings in business friendly locations, the Brand should approach
(1) existing vacation rental hosts and B&B’s (or other small accommodation)
operators who are struggling in non-‐vacation season or are unpopular among leisure
guests. The Brand may also approach (2) real estate agencies or asset management
companies who are interested in residential rental business to increase the
inventory. New listings will be accumulated on their own as the Brand earns its
reputation.
(2) For Guests
The biggest synergy the Brand can expect from Accor is the access to the
company’s customer base, which shall provide early-‐adopters. The sales team in
Accor can suggest the Brand as an additional/alternative option, especially for
specific MICE travelers. For the organic growth of the Brand, the small/medium
sized companies, especially ‘Arty, Techy, Young’ companies, who don’t use luxury
hotels would be primary customers.
It’s also helpful to
benchmark Airbnb’s sales
strategy for business
travelers. It promotes the
big client names like Google,
TBWA to give credibility.
There are 3 selling points
targeted to business
travelers; (i) “Help your team
always feel at home” – the
amenities different from hotel (e.g. stocked kitchens) and the variety of locations (ii)
“Ideal for any type of trip” – especially for group trips, offsites and retreats, and
extended stays (iii) “All the tools you need, at no cost” -‐ simple reporting, custom
price alerts, streamlined payments, etc. to tackle the negative stereotype of
corporate bureaucrats about vacation rental.
Figure 34 Airbnb Business page (https://www.airbnb.com/business/signup)
80
E. Financial Plan
1. Financial Assumptions
The financial model is rooted in industry facts to make solid business estimates
with realistic projections. The key numbers and assumptions are based on public
information and recent trends, under the premise that no unforeseen changes in
policy shall affect the business. The financial model can be changed based on the
cost structure and financial policy of Accor.
2. Sales Forecast
Airbnb grew its revenue from $850,000 in 2009 to nearly $45 million in 2012,
translating to a 3 year compounded growth rate of 275% (Wu, Lee, & Reynard,
2012). The Brand, as a late-‐comer in already competitive market, cannot expect
such a drastic growth. The following is a rather conservative forecast based on
industry trend.
• Period: It is assumed to take 2 quarters to develop the Brand (3 months to
build the prototype of platform, 3 months for the preparation of public
version) (Evsukov, 2015), thus the Brand starts operation from the 3rd quarter
of Year 1.
• No. of listings: The Brand starts with 50 listings in the 3rd quarter of Year 1,
and expects rapid initial growth until Year 2. From Year 3 until Year 4, the
growth rate is modified to 50% per year.
• Occupancy rate: In 2014, the average occupancy rate of hotels in Paris was
79.3%, and that of Aparthotel in Paris was 80.6% (Paris Office du Tourisme et
des Congres, 2015). For the conservative approach, the Brand occupancy
starts as 50% and reachs the 80% from Year 2.
• ADR: In 2014, Accor’s average room rate for midscale hotels in France was
110 EUR7, and ADR of Airbnb listings in Paris was 90 EUR. From 2015 to 2016,
7 Source: RevPAR excluding tax by segment and market (full-‐year 2014) of Accor
81
the occupancy rate in Paris is expected to grow from 80.5% to 80.9%, and
RevPar is expected to grow 2.3% (PwC, 2015). In the Project, 2.3% of annual
ADR growth is expected, instead of fixed occupancy rate.
• Additional assumption: (i) total available nights (“TAN”) = 360 (considering
professional composition of host base), (ii) service fee = 15% (5% from host,
conservative assumption of 10% from guest), (iii) registration fee = 100 EUR,
(iv) the brokerage fee is ignored
Year 1 Q3 Year 1 Q4 Year 2 Year 3 Year 4
#listings 50 100 200 300 450
TAN 90 90 360 360 360
Occupancy
rate
50% 70% 80% 80% 80%
Occupied
nights
45 63 288 288 288
Average daily
rate
€ 110.00 € 110 € 112 € 115 € 117
Service Fee € 37'125 € 103'950 € 972'259 € 1'491'931 € 2'289'369
New listings 50 50 100 100 150
Registration
Fee
€ 5'000 € 5'000 € 10'000 € 10'000 € 15'000
Sales revenue € 42'125 € 108'950 € 982'259 € 1'501'931 € 2'304'369
3-‐year compounded growth rate 176%
(http://www.accorhotels-‐group.com/fileadmin/user_upload/Contenus_Accor/Finance/accor_pr_q4___fy_2014_revenue.pdf)
3. Projected Income Statement
Since most ORRs are private companies, it is hard to obtain detailed financial data to benchmark. Considering the Brand has unique
business model, it is also risky to apply the financial structure of hotel, OTA or any other comparable business directly. Homeaway, the
vacation rental company listed in Nasdaq (unlike Airbnb), was used as one of the benchmark in this financial analysis (Appendix 3. Financial
Statements of HomeAway). In addition, industry averages and estimates were applied. The specific cost may vary based on Accor’s cost
structure, financial policy, and changing IT industry standards.
• Cost of Sales
! Credit card commission: 3.5% (in the industry range of 1~5%, the Project takes pessimistic approach)
! Variable costs: In the Project, additional cost for cleaning, laundry, amenities or other booking related costs is hard to predict.
As an assumption, the industry standard of hotels can be used. The rooms department in a hotel generally has a departmental
operating profit of around 70~75%, which means there are 25~30% costs related to room sales. Considering that (i) the major part of
the rooms department expense is for HR, which the Brand will not share, (ii) the Brand can make better deal with local cleaning/laundry
service business based on Accor’s procurement network, but still (iii) there must be additional expense for transportation among
scattered listings, the cost is assumed to be 15% of sales revenue.
83
For example, for the ADR of 110EUR, the variable cost is assumed to be 16.5EUR. Now, considering the French minimum wage is
9.61EUR per hour, and with 40% social charges added, 13.45EUR an hour is minimum cost to hire a service. A midscale type room is
cleaned in about 15 -‐ 20 minutes, but if you add additional space in residence and transportation time, around 40 minutes per room
can be expected, which makes roughly 9EUR per room. For midscale hotels, the amenities would be around 2EUR per room in general.
Then the Brand can hire laundry with additional 5.5EUR.
! Total: 18.5%. HomeAway’s cost of revenue is 16% in average for last 3 years. Considering the additional service, it is feasible that the
Brand has the higher cost of sales ratio.
• Salary: Based on industry average8, around 20% of premium is added to retain high caliber talents. Pay rise is assumed to be 2.5%
annually based on the rise rate of 20149. Then employee benefits (roughly 40% of salary) are added based on French social policy.
Community manager, listing manager, and concierge can join the team from trial period that is 1 quarter before launching.
• IT supplementary cost & Depreciation: Based on industry practice, 10,000 EUR for 1 quarter is assumed (Evsukov, 2015). From Year 2,
same amount will be budgeted for the maintenance. In addition, 1/3 of yearly IT cost from 1st Year will be depreciated annually.
8 Source: www.payscale.com, www.glassdoor.com, www.chooseyourboss.com 9 Source : Hay Group’s Global salary forecast 2014 (http://atrium.haygroup.com/ww/our-‐products/misc.aspx?id=4287)
84
• Sales & Marketing
! Pre-‐launching: 150% of the sales & marketing budget of Year 2 budget. Considering the importance of initial marketing and the
branding process (e.g. logo design, communication material, ads, etc), marketing cost in development phase must be high.
! After-‐launching: Laurel Mintz, CEO of Elevate My Brand, a marketing consulting firm, suggested 12~20% of revenue as marketing
budget for the new companies that have been in business for one to five years. For established companies, she suggested 6~12%
(Mintz, 2015). Although the Brand is new, it will leverage on marketing expertise of Accor as well. Thus 10% of revenue will be
budgeted for marketing.
• General & Administrative: (i) pre-‐launching: 10% (e.g. drawing up contracts for hosts, any other necessary legal stuff, contingencies
etc), (ii) after-‐launching: 5% (based on industry average)
• Total development cost: € 396'825.00 (= the budget of 1st and 2nd quarter of Year 1)
Yannis Roy, Lead iOS Developer in the online event platform company Spotme, said it would require a minimum of 200,000 EUR to
develop the website, Android App, and iOS App with basic functions of sites like Booking.com (source: informal interview). Even
considering that the Brand’s platform is much more complex and additional costs ensue for internal team, it is safe to say that the
development cost is calculated in fairly conservative way.
85
Account Year 1 Q1 Year 1 Q2 Year 1 Q3 Year 1 Q4 Year 2 Year 3 Year 4
Sales Revenue € -‐ € -‐ € 42'125.00 € 108'950.00 € 982'259.20 € 1'501'931.74 € 2'304'369.26
Cost o
f Sales
Variable costs € -‐ € -‐ € 6'318.75 € 16'342.50 € 147'338.88 € 225'289.76 € 345'655.39
Credit card
commission € -‐ € -‐ € 1'474.38 € 3'813.25 € 34'379.07 € 52'567.61 € 80'652.92
Total € -‐ € -‐ € 7'793.13 € 20'155.75 € 181'717.95 € 277'857.37 € 426'308.31
Salary
IT Team Lead/ UI
Designer € 12'500.00 € 12'500.00 € 12'500.00 € 12'500.00 € 51'250.00 € 52'531.25 € 53'844.53
iOS developer € 10'500.00 € 10'500.00 € 10'500.00 € 10'500.00 € 43'050.00 € 44'126.25 € 45'229.41
Android
developer € 10'500.00 € 10'500.00 € 10'500.00 € 10'500.00 € 43'050.00 € 44'126.25 € 45'229.41
Web developer € 10'500.00 € 10'500.00 € 10'500.00 € 10'500.00 € 43'050.00 € 44'126.25 € 45'229.41
Brand
Community
manager € -‐ € 8'750.00 € 8'750.00 € 8'750.00 € 35'875.00 € 36'771.88 € 37'691.17
Listing manager
(site inspector) € -‐ € 8'750.00 € 8'750.00 € 8'750.00 € 35'875.00 € 36'771.88 € 37'691.17
Ma
rke
tin g S&M manager € 11'250.00 € 11'250.00 € 11'250.00 € 11'250.00 € 46'125.00 € 47'278.13 € 48'460.08
86
Concierge € -‐ € 7'500.00 € 7'500.00 € 7'500.00 € 30'750.00 € 31'518.75 € 32'306.72
Employee Benefits € 22'100.00 € 32'100.00 € 32'100.00 € 32'100.00 € 131'610.00 € 134'900.25 € 138'272.76
Total € 77'350.00 € 112'350.00 € 112'350.00 € 112'350.00 € 460'635.00 € 472'150.88 € 483'954.65
IT Supplementary cost € 10'000.00 € 10'000.00 € 10'000.00 € 10'000.00 € 40'000.00 € 40'000.00 € 40'000.00
Sales&Marketing € -‐ € 150'000.00 € 4'212.50 € 10'895.00 € 98'225.92 € 150'193.17 € 230'436.93
General&Administrative € 8'735.00 € 27'235.00 € 2'106.25 € 5'447.50 € 49'112.96 € 75'096.59 € 115'218.46
Total Investment € 96'085.00 € 299'585.00 € -‐ € -‐ € -‐ € -‐ € -‐
Total operating cost € -‐ € -‐ € 136'461.88 € 158'848.25 € 829'691.83 € 1'015'298.01 € 1'295'918.35
Operating Margin -‐224% -‐46% 16% 32% 44%
EBITDA € -‐ € -‐ € -‐94'336.88 € -‐49'898.25 € 152'567.37 € 486'633.73 € 1'008'450.91
Depreciation € -‐ € -‐ € -‐ € 13'333.33 € 13'333.33 € 13'333.33 € 13'333.33
EBIT € -‐ € -‐ € -‐94'336.88 € -‐63'231.58 € 139'234.03 € 473'300.40 € 995'117.58
EBIT margin
-‐224% -‐58% 14% 32% 43%
ROCE
-‐12% -‐6% 6% 12% 17%
87
• HomeAway’s operating margin is 10% in average for last 4 years with 4% profit margin and 4% Pre-‐tax ROE.
• In Accor’s case, EBIT margin was 11% last year with 4% profit margin and 14.6% ROCE.
• The Project, with its safe and conservative approach, expects 16% of operating margin at the Year 2 and 17% of ROCE in the Year 4
4. Sub-conclusion
Based on the financial plan, it seems that the Brand can be a viable opportunity of investment, given the right resources being
dedicated to the Brand and a suitable period of time for development.
The Brand is expected not only to be more profitable than Accor’s ROCE level, but also to have the potential to earn higher returns as
the years go by. It can be valid opportunity for Accor to start a new brand, a new business model with reasonably limited amount of
investment.
VI. Conclusion
The rapid growth of ORR’s signifies that there was a large amount of latent
demand that companies such as Airbnb managed to tap into. The disruption has had
its largest impact in the leisure market, but is currently spreading to business travel
as well. Travelers are becoming more and more exposed and used to ORR, realizing
it is a feasible alternative for a hotel.
Hotels cannot cater to all of travelers’ needs; it’s difficult to be everywhere
like ordinary houses; it’s hard to be cheaper than a room in a house; and it’s more
than tricky to provide unique local experience with a minimum of 50 rooms in the
same property. There are, however, certain things only hotels can provide. Hotels
started as shelter, the epitome of comfort and reliability.
Travelers want the best of both: a unique local experience but with reliability
and comfort; all of this provided in the context of the greatest value for money
possible. This new economy could be viewed as a threat by traditional hotel
companies, but it can also be seen as an extraordinary opportunity to increase their
market share through an asset-‐light strategy that allows them to maximize the
potential of their existing properties as well. The Brand is therefore a win-‐win-‐win
solution:
• it caters to the needs of the guest in terms of unique local experience, price,
location and level of comfort and reliability (being backed by hospitality
professionals);
• it caters to the needs of the host in terms of distribution, simplicity, security,
and services provided;
• it caters to the needs of a hospitality company by providing a park of new
rooms that will deliver a revenue stream without heavy investments in
assets, and allows them to ensure their market share is not eroded by ORR’s.
89
Traditional hotel companies are currently at a crossroads: it is evident that
the sharing economy is not a fad and that it is a trend they will have to deal with in
some way. They can choose to fight this growing competitor using their traditional
means (investing in renovations and technology, cutting prices), or they can choose
to fight fire with fire. After all, what are hotel companies particularly good at? They
are specialists in the logistics of room distribution and management. The fact that
those rooms may no longer need to be under the same room is just a supplementary
logistical twist to deal with.
The ORR model functions: there is no doubt about it. The economic success
of companies such as Airbnb and its clones are ample proof that this business model
has both market and financial potential. The hotel company that seizes this
formidable opportunity today and acts as a first mover will gain considerable
competitive advantage in creating the first hybrid Hotel – ORR model. By providing
the best of what both models propose, with a relatively moderate investment (and
therefore a relatively moderate risk), the company that seizes this opportunity will
not only reap financial benefits, but will also be the one who shapes the face of the
hospitality industry of the future.
Appendix 1. Non-exhaustive list of ORR companies
# Brand Year HQ Website
# listing
(July 2015
website)
1 VRBO 1995 Austin (US) http://www.vrbo.com/ 1,000,000
+
2 HomeAway 2005 Austin (US) http://www.homeaway.com 1,000,000
+
3 FlipKey 2007 Boston (US) https://www.flipkey.com/pag
es/about_us/ 300,000+
4 Airbnb 2008 SF (US) www.airbnb.com
1,200,000
+
5 roomorama 2009 Singapore https://www.roomorama.com 300,000+
6 Onefinestay 2009 London (UK) http://www.onefinestay.com -‐
7 FlatClub 2010 London (UK) http://flat-‐club.com/ -‐
8 Housetrip 2010 London (UK) http://www.housetrip.com/ 300,000+
9 9flats 2011 Hamburg
(Germany) http://www.9flats.com/ 225,957
10 Vive Unique 2011 London (UK) http://www.viveunique.com/ -‐
11 alterkeys 2011 Madrid
(Spain) http://es.alterkeys.com/ -‐
12 Wimdu 2011 Berlin
(Germany) http://www.wimdu.com/ -‐
13 Travelmob 2012 Singapore http://www.travelmob.com
14 Homestay.com 2013 Dublin (UK) https://www.homestay.com/ 30,000+
Appendix 2. Non-exhaustive list of Ancillary Service Companies
# Brand Type Website Locale
1 Guesty Management and Logistics https://www.guesty.com/ Worldwide
2 Pillow Management and Logistics https://www.pillowhomes.com US (SF, LA and Napa areas)
3 Easy Guests Management and Logistics http://easyguests.com/ Europe(Paris, London, Munich),
US(NY, Miami), Canada(Montreal)
4 Guest Hop Management and Logistics http://www.guesthop.com US(SF)
5 Urban Bellhop Management and Logistics http://www.urbanbellhop.com US(SF)
6 Proprly Management and Logistics http://proprly.com/ US(NY)
7 Beyond Management and Logistics http://beyondstays.com/ US(SF)
8 Beyond Pricing Pricing https://beyondpricing.com Worldwide
9 Smart Host Pricing http://www.smarthost.me -‐
10 Everbooked Pricing https://www.everbooked.com/ US (SF, Portland)
11 PriceLabs Pricing https://www.pricelabs.co worldwide
12 Keycafe Key exchange https://www.keycafe.com Europe(London), US(NY, SF, Austin,
Seattle), Canada(Vancouver)
13 Lockitron Keyless entry device https://lockitron.com/ -‐
92
14 Skybell Smart video doorbell http://www.skybell.com/ -‐
15 Renting Your
Place Data Analysis http://rentingyourplace.com/ worldwide
16 handy Cleaning & Maintenance services http://www.handy.com/ UK, US, Canada
17 Porter & Curtis
LLC for Peers Homesharing Liability Insurance
https://www.peers.org/homesharing-‐
liability-‐insurance/ -‐
18
Kaufman
Dolowich &
Voluck, LLP
Legal services http://kdvlaw.com/practice-‐
areas/sharing-‐economy-‐legal-‐services/ US
19 ouishare Community http://www.ouishare.net/en Worldwide (except for Asia)
20 The People Who
Share Community http://www.thepeoplewhoshare.com Worldwide
21 tripping Search engine https://www.tripping.com/ -‐
22 peers Portal http://www.peers.org/ -‐
23 Compare and
Share Comparison marketplace http://www.compareandshare.com/ -‐
Appendix 3. Financial Statements of HomeAway
• Source: SEC filling, Nasdaq website 8/14/2015 HomeAway, Inc. (AWAY) Income Statement - NASDAQ.com
http://www.nasdaq.com/symbol/away/financials?query=income-statement 1/1
Follow$30.5 * 0.08 0.26%*Delayed data as of Aug. 13, 2015 Find a broker to begin trading AWAY now
AWAY Company Financials
Income Statement Balance Sheet Cash Flow Financial Ratios
Get Quarterly DataAnnual Income Statement (values in 000's)
Period Ending: Trend 12/31/2014 12/31/2013 12/31/2012 12/31/2011
Total Revenue $446,762 $346,489 $280,404 $230,223
Cost of Revenue $67,612 $54,638 $45,342 $34,456
Gross Profit $379,150 $291,851 $235,062 $195,767
Operating Expenses
Research and Development $77,082 $58,226 $43,152 $32,744
Sales, General and Admin. $248,126 $188,136 $149,677 $128,800
NonRecurring Items $0 $0 $0 $0
Other Operating Items $13,916 $11,668 $12,438 $11,542
Operating Income $40,026 $33,821 $29,795 $22,681
Add'l income/expense items ($5,454) ($4,806) ($1,659) ($4,010)
Earnings Before Interest and Tax $34,572 $29,015 $28,136 $18,671
Interest Expense $13,333 $0 $0 $0
Earnings Before Tax $21,239 $29,015 $28,136 $18,671
Income Tax $7,272 $11,724 $13,175 $12,493
Minority Interest ($583) $395 $0 $0
Equity Earnings/Loss UnconsolidatedSubsidiary
$0 $0 $0 $0
Net IncomeCont. Operations $13,384 $17,686 $14,961 $6,178
Net Income $13,384 $17,686 $14,961 $6,178
Net Income Applicable to CommonShareholders
$13,384 $17,686 $14,961 ($18,500)
See also: Company Financials data entry page
Home > Quotes > AWAY > Company Financials
Figure 11 HomeAway Income Statement (source: http://www.nasdaq.com/symbol/away/financials?query=income-‐statement)
94
8/14/2015 HomeAway, Inc. (AWAY) Cash Flow - NASDAQ.com
http://www.nasdaq.com/symbol/away/financials?query=cash-flow 1/1
Follow$30.5 * 0.08 0.26%*Delayed data as of Aug. 13, 2015 Find a broker to begin trading AWAY now
AWAY Company Financials
Income Statement Balance Sheet Cash Flow Financial Ratios
Get Quarterly DataAnnual Income Statement (values in 000's)
Period Ending: Trend 12/31/2014 12/31/2013 12/31/2012 12/31/2011
Net Income $13,384 $17,686 $14,961 $6,178
Cash FlowsOperating Activities
Depreciation $51,230 $29,097 $25,898 $20,228
Net Income Adjustments $50,273 $33,582 $19,519 $36,681
Changes in Operating Activities
Accounts Receivable ($3,625) ($1,790) $251 ($7,170)
Changes in Inventories $0 $0 $0 $0
Other Operating Activities ($3,815) ($1,628) ($7,659) ($5,240)
Liabilities $37,334 $27,810 $42,433 $26,295
Net Cash FlowOperating $145,364 $104,362 $95,403 $76,972
Cash FlowsInvesting Activities
Capital Expenditures ($31,647) ($19,616) ($17,260) ($12,978)
Investments ($486,880) $5,757 ($23,120) ($54,475)
Other Investing Activities ($19,149) ($209,513) ($17,595) ($6,049)
Net Cash FlowsInvesting ($537,676) ($223,372) ($57,975) ($73,502)
Cash FlowsFinancing Activities
Sale and Purchase of Stock $62,203 $243,821 $25,878 $106,692
Net Borrowings $390,978 $0 $0 $0
Other Financing Activities ($919) $0 $0 ($1,131)
Net Cash FlowsFinancing $369,501 $252,047 $33,000 $51,630
Effect of Exchange Rate ($9,472) $2,093 $842 ($2,589)
Net Cash Flow ($32,283) $135,130 $71,270 $52,511
See also: Company Financials data entry page
Home > Quotes > AWAY > Company Financials
Figure 12 HomeAway Cash Flow (source: http://www.nasdaq.com/symbol/away/financials?query=cash-‐flow
95
8/14/2015 HomeAway, Inc. (AWAY) Balance Sheet - NASDAQ.com
http://www.nasdaq.com/symbol/away/financials?query=balance-sheet 1/1
Follow$30.5 * 0.08 0.26%*Delayed data as of Aug. 13, 2015 Find a broker to begin trading AWAY now
AWAY Company Financials
Income Statement Balance Sheet Cash Flow Financial Ratios
Get Quarterly DataAnnual Income Statement (values in 000's)
Period Ending: Trend 12/31/2014 12/31/2013 12/31/2012 12/31/2011
Current Assets
Cash and Cash Equivalents $292,325 $324,608 $189,762 $119,247
ShortTerm Investments $520,844 $66,798 $80,330 $65,748
Net Receivables $33,863 $31,861 $22,543 $20,019
Inventory $0 $0 $0 $0
Other Current Assets $17,913 $9,309 $7,312 $5,680
Total Current Assets $864,945 $432,576 $299,947 $210,694
LongTerm Assets
LongTerm Investments $35,285 $10,112 $0 $0
Fixed Assets $56,173 $39,807 $32,901 $25,865
Goodwill $493,671 $507,611 $312,412 $301,015
Intangible Assets $70,456 $80,665 $59,727 $61,515
Other Assets $8,053 $8,781 $15,881 $3,748
Deferred Asset Charges $1,545 $1,120 $1,807 $1,794
Total Assets $1,530,128 $1,080,672 $722,675 $604,631
Current Liabilities
Accounts Payable $59,880 $60,156 $51,606 $36,408
ShortTerm Debt / Current Portion of LongTerm Debt
$0 $0 $0 $0
Other Current Liabilities $170,522 $151,991 $126,351 $101,955
Total Current Liabilities $230,402 $212,147 $177,957 $138,363
LongTerm Debt $316,181 $0 $0 $0
Other Liabilities $12,192 $7,557 $7,191 $6,427
Deferred Liability Charges $29,803 $27,029 $20,494 $18,832
Misc. Stocks $9,742 $10,584 $0 $0
Minority Interest $0 $0 $0 $0
Total Liabilities $598,320 $257,317 $205,642 $163,622
Stock Holders Equity
Common Stocks $9 $9 $8 $8
Capital Surplus $1,022,586 $908,632 $618,700 $558,667
Retained Earnings ($62,734) ($78,539) ($96,225) ($111,186)
Treasury Stock $0 $0 $0 $0
Other Equity ($28,053) ($6,747) ($5,450) ($6,480)
Total Equity $931,808 $823,355 $517,033 $441,009
Total Liabilities & Equity $1,530,128 $1,080,672 $722,675 $604,631
See also: Company Financials data entry page
Home > Quotes > AWAY > Company Financials
Figure 13 HomeAway Balance Sheet (source: http://www.nasdaq.com/symbol/away/financials?query=balance-‐sheet)
96
8/14/2015 HomeAway, Inc. (AWAY) Key Financial Ratios - NASDAQ.com
http://www.nasdaq.com/symbol/away/financials?query=ratios 1/1
Follow$30.5 * 0.08 0.26%*Delayed data as of Aug. 13, 2015 Find a broker to begin trading AWAY now
AWAY Company Financials
Income Statement Balance Sheet Cash Flow Financial Ratios
Annual Income Statement (values in 000's)
Period Ending: Trend 12/31/2014 12/31/2013 12/31/2012 12/31/2011
Liquidity Ratios
Current Ratio 375% 204% 169% 152%
Quick Ratio 375% 204% 169% 152%
Cash Ratio 353% 184% 152% 134%
Profitability Ratios
Gross Margin 85% 84% 84% 85%
Operating Margin 9% 10% 11% 10%
PreTax Margin 5% 8% 10% 8%
Profit Margin 3% 5% 5% 3%
PreTax ROE 2% 4% 5% 4%
After Tax ROE 1% 2% 3% 1%
See also: Company Financials data entry page
Home > Quotes > AWAY > Company Financials
Figure 14 HomeAway Financial Ratios (source: http://www.nasdaq.com/symbol/away/financials?query=ratios)
97
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