Nowadays, a lot of firms lead to generation of disruptive innovation. Existing dominant players and products eventually lose their position in the market because of this disruptive innovation. Disruptive Innovation can be defined as an innovation wherein an existing market is disrupted and a new market is being created (Christensen, et al., 2015). Now the question is that how a firm’s disruptive innovation leads to disruption of existing market players and products. The aim of this essay is to analyze how AirBnB has become a major disrupter in the hospitality industry. This aim will be accomplished by the discussion of AirBnB disruptive innovation and the factors that make AirBnB a preferred choice for the people.
AirBnB, which was founded in 2008, has its presence online and provides hospitality services and rental services. It is a San Francisco-based online website. It allows the hosts to post their apartments, homes and cottages on their site and renters can take those homes or apartments on rent (AirBnB , 2018). AirBnB do not own houses, it just acts as a broker and takes commission on every house that is rented. Earlier, it was only focusing on low-value customers, but eventually, it started focusing on high value customers as well (AirBnB, 2018). At AirBnB, one can find the houses of low price, medium price as well as high price. Renters can select homes or apartments on the basis of location and the money they want to pay. The company is very much famous nowadays, because of its innovation. AirBnB is giving tuff competition to the hotels in the hospitality industry. The existing hotels are not able to cope up with the competition given by AirBnB because they are not able to match with the innovation of AirBnB.
AirBnB incorporates a lot of modern internet technologies in its day to day operations. The appeal of AirBnB to the customers is also very distinct (Leist , 2016). It addresses the customers as, using AirBnB will lead to the cost savings, local experience as well as household facilities. Using AirBnB services is perceived to be a beneficial option for renters as well as hosts. It created a new market wherein hosts can use the technological infrastructure of AirBnB to promote the homes, cottages and appartments in a very efficient manner (Guttentag, 2015). Hosts are able to collect the payments for the accommodations using the cloud based platform of AirBnB. For renters, AirBnB services cost less as compared to the hotels. Due to the local experience and less cost, it is gaining profitability since 2007. A major chunk of profits shifted from hotels to AirBnB.
AirBnB founders tried to place themselves in the renter’s shoes. They realized that images of the accommodations play a very important role in encouraging the renters to rent the accommodation (Tobias , 2014). Earlier, the images of accommodations at AirBnB website were not appealing to the renters. The founders themselves travelled to New York with a camera. They interacted with the hosts and replaced their non-appealing pictures with the high resolution and beautiful pictures. These new appealing pictures attracted a lot of renters and profits of AirBnB went up within a week (Gobble, 2016). This move of the founders resulted in positive financial results for the company. Another move by the founders of AirBnB to make the appeal stronger is that, they ensured safety of the persons who will rent the accommodations. If any safety concern or issue emerges in the future, then compensation will be provided to those hosts. This move further built the trusts of the renters and the company gain a lot more popularity.
Using AirBnB enables the hosts to set the prices of their accommodations. AirBnB incorporates latest technology in their system that allows the hosts to set competitive prices and earn more. Hosts can set the prices using two methods on the platform of AirBnB. First, they can use AirBnB price calculator (Biber, et al., 2017). This price calculator is beneficial for the new hosts in setting the initial prices for their accommodations. Another option is that the hosts at AirBnB can use AirBnB pricing strategy to determine the market value of their accommodations (Guttentag & Smith, 2017). There are six steps that needs to be followed in order to set the price using AirBnB pricing strategy. First step is to search for the competing properties which involves same number of rooms and in the similar area. Select any five such properties and review its calendar. Consider its rates like occupancy rate and price. After that, comparison price table needs to be created. Then the maximum revenue can be anticipated regarding each property. Following this procedure enables the hosts to set the prices in accordance with the market rate. Hosts can alter the price of their property anytime and for specific days too. This is the opportunity for the hosts to earn more on special days, vacations and on occasions. Hosts does not get such advantage of estimating the price anywhere else.
AirBnB will replace the hotels in the hospitality sector soon. This is because the hotels are not able to match with the innovative products and practices followed by AirBnB (Coomes, 2018). In such a competitive industry, regular innovations are very necessary to survive. Some hotels will withdraw from the market as a result of tuff competition from AirBnB, which is unbearable. Another problem infront of the hotels is that they need to comply with the complex laws and regulatory framework imposed on them. AirBnB do not have to comply with such complex laws and rules. This is a positive point for AirBnB and pose restrictions on hotels. It can be said that the AirBnB has an advantage over hotels that it does not have to do compliance with the complex laws and regulations.
The aim of this essay was to analyze how AirBnB has become a major disrupter in the hospitality industry. AirBnB incorporates modern internet technologies in its daily working. Its appeal to the renters is distinct. It charges less price from the renters as compared to the hotels and also provides local experience with amenities. It allows the hosts to set competitive prices and earn more. It is giving tuff competition to the hotels. Some of the players will also withdraw from the market as they are not able to compete with the innovative practices, products and ideas of AirBnB.
References
AirBnB 2018, All About AirBnB. [Online] Available at: <https://all-about-airbnb.com/>
Biber, E, Light, SE, Ruhl, JB and Salzman, J 2017, Regulating business innovation as policy disruption: from the Model T to Airbnb. Vand. L. Rev., 70, p.1561.
Christensen, CM, Raynor, ME and McDonald, R 2015, What is disruptive innovation. Harvard Business Review, vol. 93, no. 12, pp. 44–53.
Coomes , K 2018, What is AirBnb? Here’s all you need to know about being a guest or host. Retrieved from Digital Trends : <https://www.digitaltrends.com/home/what-is-airbnb/>
Gobble, MM 2016, Defining disruptive innovation. Research-Technology Management, vol. 59, no. 4, pp. 66–71.
Guttentag, D 2015, Airbnb: disruptive innovation and the rise of an informal tourism accommodation sector. Current issues in Tourism, vol. 18, no. 12, pp. 1192–1217.
Guttentag, DA and Smith, SL, 2017, Assessing Airbnb as a disruptive innovation relative to hotels: Substitution and comparative performance expectations. International Journal of Hospitality Management, 64, pp.1–10.
Leist, A 2016, Airbnb: Disruptive Innovation in the Tourism Industry. [Online] Available at: <https://digitalmarketing.temple.edu/aleist/2016/10/18/airbnb-disruptive-innovation-in-the-tourism-industry/>
Rusett , CD 2018, Disruptive innovation: a risk worth taking. [Online] Available at: <http://ideadrop.co/disruptive-innovation-risk-worth-taking/>
Tobias , J 2014, Airbnb — Disruptive Innovation At A Valuation Of $10b In Five Years. [Online] Available at: <https://www.thestrategygroup.com.au/airbnb-disruptive-innovation-at-a-valuation-of-10b-in-five-years/>
Varsamis, G 2018, Disruptive innovation: a weapon that can kneel down giants and a survival tool for difficult times. [Online] Available at: <https://blog.startuppulse.net/disruptive-innovation-a-weapon-that-can-kneel-down-giants-and-a-survival-tool-for-difficult-times-71af7bffb750>