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January – June 2018

Airbnb – corporate entrepreneurship served up on a digital platter

  • Labeeqah Schuurman
  • MAY 2018
  • Tags Insights, Futures Studies
13 minutes to read

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Article written by USB MPhil in Futures Studies alumnus Labeeqah Schuurman

The Fourth Industrial Revolution – a game changer

Economic growth and industrial development have been the building blocks of all four the industrial revolutions up till now. The First Industrial Revolution (1760 to 1840) was characterised by machine manufacturing while the Second Industrial Revolution (1870 to 1914) boosted rapid industrial developments and mass production and the Third Industrial Revolution (also called the digital revolution) introduced computers and the internet in the 1960s.

The Fourth Industrial Revolution started at the beginning of the 21st century by building on the technological achievements of the previous industrial revolution. This new revolution differs fundamentally from the previous three because of the combination of, and interface between, the emerging technologies predetermining exponential growth and continuous change to create a new world and a new future.

… the online exchange of goods and services opened up a completely new trade platform to re-use existing and under-utilised goods and services at affordable prices.

The Fourth Industrial Revolution will not only change the patterns of consumption, production and employment, it will also challenge businesses, governments and individuals to adapt proactively in order to remain at the cutting edge in this perpetually changing world.

Advanced technologies have a major impact on businesses across all industries. This means that the established industry value chains are disrupted because technology-enabled platforms drive, among others, demand and supply. This is evident in the sharing economy which creates new ways of buying and consumption, and lowered barriers for entrepreneurs and individuals to enter the economic landscape in order to claim their proverbial slice of the economic pie.

Here, Airbnb serves as an excellent example of the Fourth Industrial Revolution type of company. Airbnb, established in San Francisco in 2008, is a digital hosting platform on which available accommodation in homes, flats and privately owned suites in hotels are advertised and rented out.

The unique quality of these online platforms allows for worldwide trading without any assets being owned by the operating platforms.

What is the sharing economy?

The conclusion of local and international transactions has changed drastically over the past few years. New terms and phrases – such as collaborative consumption, access economy and sharing economy – have been coined to describe new trading trends. Collaborative consumption is defined as peer-to-peer-based exchanging of goods and services online, while the access economy focuses on technology-based platforms that cater commercially for individuals as well as businesses. This study uses the term sharing economy, as it is more widely used across the board, and regularly features in academic literature and the broader media environment.

In general, sharing economy refers to a new way of going about transactions using technological advancements that develop at a disruptive and exponential pace. It allows everyone with access to the internet to participate in the exchange of goods and services. What’s more, the online exchange of goods and services opened up a completely new trade platform to re-use existing and under-utilised goods and services at affordable prices.

Using Airbnb to explore the sharing economy

This study examined the role and impact of the sharing economy on the tourism industry. For the purposes of this study, it was decided to select a specific company in the sharing economy space, namely Airbnb. The study therefore covered Airbnb’s contribution to the tourism industry, assessed its business model and sustainability, and provided a futures perspective on Airbnb’s likely role and contribution to the tourism industry by 2030. This research also took into account the tourism ecosystem, which includes transport, hospitality, accommodation, dining and personal experiences.

Looking at Airbnb from various angles

The following combination of methodologies was used to examine Airbnb:

  • An environmental scan of the sharing economy, tourism and hospitality industry, and Airbnb
  • A business model evaluation of Airbnb
  • A scenario planning exercise.

Motivation for selecting these applications included the following: The methodologies are complementary in nature and appeared to be the best options to examine and understand the role of Airbnb and to evaluate its contribution to the tourism industry. In addition, the methodologies were considered to be the best way to evaluate Airbnb’s business model with regard to corporate entrepreneurship and sustainability in the tourism industry. Also, the methodologies allowed for a futures perspective on Airbnb.

Airbnb can be seen as the biggest disruptor of the hospitality industry. Airbnb’s listings grew from 200 000 in 2012 to approximately 1 million in 2015, and 3 million in 2017.

The connection between the sharing economy and Airbnb

The sharing economy refers to the online transactional space that has been created for goods and services to be exchanged between individuals and businesses. The unique quality of these online platforms allows for worldwide trading without any assets being owned by the operating platforms.

By their very nature, tourism and hospitality form part of the sharing economy because they exist and function in the global space. Airbnb can be seen as the biggest disruptor of the hospitality industry with its phenomenal exponential growth and no sign of slacking in its upward trajectory. Airbnb therefore influences consumers’ buying behaviour, can be labelled as a disruptive innovation, has had an impact on the hotel industry, and has brought regulatory and legal issues to the fore.

Airbnb facts and figures

The sharing economy has had an impact on four key areas of the tourism landscape:

  • Transport (car pool, car lending and car parking at private homes)
  • Accommodation (sub-letting in private homes)
  • Hospitality (sharing a meal and social reviews of restaurants)
  • Guides and tours (locals as tour guides and online guidebooks).

Using the Airbnb platform, accommodation owners can create accommodation profiles on this website after Airbnb has confirmed that the potential hosts comply with particular terms and conditions. One or more accommodation offerings per host can be uploaded as listings, featuring photographs, availability, rental costs, etc. Hosts may view the profiles of potential clients and decide if they want to accept the accommodation request, while potential guests may communicate with the host via Airbnb’s website if answers are needed in respect of bookings or other issues.

Airbnb’s listings grew from 200 000 in 2012 to approximately 1 million in 2015, and 3 million in 2017. In June 2012, Airbnb’s bookings added up to a total of 10 million nights, with 25 million nights booked in 2015, and 52 million nights booked in 2016. Airbnb’s value grew from $24 billion in 2015 to $31 billion in 2017.

What does the future hold for Airbnb?

This study investigated the following: What is Airbnb’s role in, and contribution to, the tourism industry, and does this enterprise have a sustainable business model that will keep on growing exponentially in the next few years? The research findings led to the following insights:

  • Airbnb’s external task environment is fundamentally different to that of a conventional business model, because it has two interdependent user groups (hosts and guests) as its customer base.
  • Airbnb’s business model is a multi-sided platform consisting of hosts and guests who are dependent on Airbnb’s website to enter into and conclude transactions. At the same time, the hosts are the suppliers.
  • Airbnb’s internal environment consists of small teams focused on entrepreneurial activity and innovation. Through strategic entrepreneurship and sustained regeneration, the organisation is progressively diversifying its products and services into new and existing markets. In this way, the organisation displays high levels of corporate entrepreneurship.
  • Airbnb’s business model has completely disrupted the traditional distribution channel of the tourism industry. As a multi-sided platform, Airbnb is central to a newly evolved distribution channel enabling the flow of transactions between hosts and guests, and guests and hosts.
  • A comparative analysis of the traditional tourism industry’s distribution channel with Airbnb’s distribution channel illustrates that Airbnb has opportunities to further expand into the categories of carriers and attractions.

Airbnb’s internal environment consists of small teams focused on entrepreneurial activity and innovation … the organisation displays high levels of corporate entrepreneurship.

What next?

Airbnb’s exponential growth has had a fundamental impact on the traditional travel, tourism and hospitality industries. Some legislative reforms are needed to accommodate and respond to Airbnb’s operational structures. Additional quantitative and evidence-based research is needed to assess Airbnb’s full impact on the travel, tourism and hospitality industries, especially on hotels and cities.

  • Original research: Schuurman, L. 2017. To Airbnb or not to be: A global futures perspective on Airbnb. Unpublished MPhil in Futures Studies research report. Bellville: University of Stellenbosch Business School.

Labeeqah Schuurman is an MPhil in Futures Studies student at the University of Stellenbosch Business School. She completed her research report under the supervision of Prof André Roux, head of USB’s Futures Studies programmes.

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