Featured case: Airbnb: What’s Next?

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The case

Who – the protagonists

Jeroen Merchiers, the recently promoted general manager of Airbnb for Northern, Eastern and Southern Europe.

AirbnbWhat?

Airbnb is a community marketplace where guests can book accommodation from a list of verified hosts. Much of its early success was due to a focus on nurturing trust between hosts and guests, with an emphasis on customer service and high satisfaction levels. Positive word of mouth generated a substantial amount of business and by the end of 2014, Airbnb was forecasting revenues of $850 million for 2015, and an astonishing $10 billion by 2020.

Why?Airbnb.jpg

Brian Chesky and Joe Gebbia found themselves unable to afford rent in San Francisco where they were living and let out part of their lofts to subsidise their rental payments. They saw a potential business opportunity and with former housemate, Nathan Blecharczyk, they developed a website platform for short-term home renters and providers worldwide. Between 2009 and 2011, they received funding from an angel and venture capitalists to pursue their plans.

When?

Airbnb was set up in 2008, and became the market leader in offering a variety of accommodation worldwide. By the end of 2014 it had more than 25 million customers using its services.

AirbnbWhere?

Within a few years, Airbnb had over 900,000 property listings in 34,000 cities and 190 countries – including almost every nation in the world.

Key quote

‘Marriott wants to add 30,000 rooms this year. We will add that in the next two weeks.’ – CEO Brian Chesky on Twitter, 2014

What next?

Jeroen Merchiers had to prepare for a video conference with Airbnb HQ. How could the company grow in new geographic and demographic segments without compromising the trust between host property owners and guests that had been at the heart of Airbnb's success? How should it engage with city officials to deal with regulatory issues? And how can it integrate hosts into the business model and decision-making process to strengthen their sense of community and help avoid bad press?

 
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Airbnb: What’s Next?
Ref M-1339-E

The authors
Authors

Mario Capizzani, Tommy Kim and Stefan Obersriebnig

Mario explains why this case creates so much interest in the classroom, and the importance of financial backing to the growth of Airbnb.

Previous collaboration

This case was written from generalised experience and all the information sources listed in the case are publicly available. However, I have known the protagonist Jeroen Merchiers for some time and have also previously collaborated with Airbnb on a separate project, so was familiar with some of the company and personal challenges.

This background knowledge helped me to create an interesting and engaging case and a protagonist that students can identify with.

Familiar companyAirbnb

The case resonates with students because it’s a service they’re familiar with and may have used. In addition, the company has received a lot of attention in the press over the past couple of years. Many students are already familiar with some of the issues and may even have formed opinions regarding specific courses of action, the company’s overall value proposition, or issues related to the shared economy.

Financial backing

Airbnb was started with a relatively small amount of money. It then received financial backing from seed investors (still a relatively small amount) once the concept had been proven in the US. The first large financial backing came afterwards. 

Without this, it could not have succeeded.  Scaling fast was paramount because there are elements of ‘winner-take-all’ in this type of business and the financial backing was critical to achieve that growth. 

Jeroen Merchiers on balancing global growth and local concerns

Learning objectives

I would stress the following learning objectives:

  • how to build successful branded experiences through intermediaries (i.e. hosts)
  • understanding the essence of how trust is built, reinforced and maintained in a two-sided platform
  • comprehending limitations to business model extension (eg development of the Pyrenees market).

About the authors

Mario Capizzani is a member of the Marketing faculty at IESE Business School.
e mcapizzani@iese.edu

Tommy Kim and Stefan Obersriebnig were MBA students at IESE Business School in 2015.

 

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