What market should AirBnB expand into?

Answer Strategic Questions for Product Management Interviews

What is this product management question about?

This is a very typical strategic insights question which asks how you would enter a new market! The interviewer can also ask “What market should AirBnB enter next?” or “If you were the CEO of AirBnB what would be your strategy for AirBnB for the next year or two?”

The interviewer is testing you to see the following:

  1. Can you understand the competitive landscape, emerging tech and consumer trends?
  2. Can you analyze the strength, weaknesses of the company/product and accurately understand it’s goals?
  3. Can you logically evaluate all of the different options and choose the best one that (1) fits with the company/product goal and mission and (2) fits with the user needs
  4. Can you communicate in a structured and concise way?

How do you answer this question?

Of course like always I want to introduce you to a framework, so in case you get stuck in the interview you can write it down on a whiteboard or on paper and keep on track.

Use the CASE Framework…

  1. Clarify & Set Context: (1) ask the interviewer questions (2) set the structure (3) set context by explaining how AirBnB currently works and makes money.
  2. Analyze: Use the SWOT (strength, weaknesses, opportunities, threats) framework to brainstorm trends that AirBnB can capitalize on to enter a new market.
  3. Solutions: Brainstorm 3–5 ways you could reach your goal which is to open up a new market for AirBnB, that either introduces the company to a new revenue stream or a new user group that will eventually help them make more money.
  4. Evaluate: Pick some criteria such as (1) revenue potential (2) effort (3) alignment with company mission (4) user value and choose which one of your 3–5 ideas fits the criteria the best.

What to become a product management? Check out this email class on Product Management and learn everything you need to know about product management interviews in 6 easy lessons.

Example Answer

Follow along to see how I would answer this question. :)

Clarify

As the interviewer clarifying questions to narrow down scope…

  1. Are we focused on any type of the business like just the host or the AirBnB experiences or overall AirBnB strategy? Overall strategy.
  2. Are we focused on any specific geographic location? No, everywhere.

Context

Set context about how you think AirBnB works and makes money, and make sure the interviewer agrees…

How does AirBnB work? AirBnB connects guests & hosts (people who provide accommodations) to enjoy home-like experiences. AirBnB also offers experiences, where hosts can offer a tour or unique education/travel experience on the platform. AirBnB makes money when they take a commission on the bookings of both accommodations and travel experiences.

Goal: I will pick the goal of making AirBnB more money, since they have a large user base already and penetration into a lot of markets internationally. It would be great for AirBnB to look for more revenue generating opportunities, by expanding into new user groups or use cases. Since again, AirBnB is one of the main way people already book travel accommodations, on par with hotels — especially I assume with the 18 to 50 age rage.

Analysis

Quickly run through SWOT — (1) what strength does AirBnB have that you can leverage? (2) What weaknesses does AirBnB have that you can zero in on and close (3) What threats or in other words competitors and alternatives does AirBnB face that would threaten the business? (4) Lastly, what are some opportunities in the market around travel, peoples lifestyle and spending habits that you can leverage?

  • A large user base of hosts and guests
  • A large database on unique homes of different sizes, locations, decor, unique qualities, etc.
  • Guests are now seeking out authentic, unique and luxurious travel opportunities, fuelled by the growing wealth gap in the US. When traveling abroad, guests trust AirBnB to provide a unique travel experience in an unfamiliar, culturally diverse area.
  • Guests are seeking out fully planned travel experiences, where their activities, and logistics planned on arrival.
  • More hosts are acquiring property to start an AirBnB side hustle. Many are putting a lot of thought into the decor and experience to stand out and many are using 3rd party management companies to provide an amazing guest experience.
  • Due to the pandemic that started in 2020 we saw the rise of vacancies: More long-term renters are moving out of the cities, leaving homes vacant. More companies are going remote, and people are choosing to live outside of the city. Hotels have seen a decrease in bookings as well.
  • Remote work is on the rise: There will be more demand to rent office space for team collaboration and meetings, bringing remote workers together. Guests are also seeking longer term rentals in unique locations they can work remotely from.
  • With the rise of self-employment, people will need spaces to host gatherings for their teams, film promotional materials and videos (if they are an online entrepreneur), host workshops and host different classes (i.e. if they are self employer yoga instructor).
  • People are more cautious and require optimal cleanliness due to the pandemic which can make them less likely to stay in a place that is not modern, or clean. This can cause some AirBnB hosts to lose demand, impacting AirBnB revenue.

Based on some of the opportunities above, AirBnB can strategically expand into the following business lines:

Unique Experience and Logistics:

  • Overnight events and weddings venue rentals and planning. Aggregate AirBnB listings that rent large properties together and allow guests to select add ons for event planning (catered meals, decor, music).

Remote Working & Self Employment & Vacancies:

  • Long-term rentals options (1–6 months)
  • On demand hourly, space rental option. Ask corporate offices, yoga studios, gyms, hotels, cafes and hosts that beautifully decorated their homes to rent their space where people can (1) meet for working events (2) host work events (3) film promotional videos, etc.

Property as an Investment:

  • Start a property management business, and software that hosts can use to manage the entire experience of guests, from check in to cleaning.
  • Ability to sell items people see in an AirBnB like art work or showcase furniture that can be purchased by the guests, with hosts earning commission.

Evaluate

Now let’s evaluate the strategic options above based on the following criteria:

  1. Alignment with existing strategy
  2. Revenue potential
  3. Value to guests / hosts
  4. Effort

Recommendation: On demand hourly space rentals, because there is a high revenue potential, value to users and hosts, the effort is medium as it uses existing infrastructure and the majority of the effort is in recruiting new hosts with new types of spaces. It’s also in alignment with AirBnB strategy to connect guests and hosts for amazing experiences, and opens up a new revenue stream by accessing a new user group and use case.

Like what you’ve read?

I’m Angelina Fomina, and I’m a Product Manager at Facebook, Oculus VR, and ex-Shopify. I also built a 7 figure start-up, and thriving non-profit. I didn’t learn to speak english till I was 12, and I didn’t study a technical degree in University. I also didn’t even know Product Management was a career path until way into my 20s. Now, I’m here to help you build a career you love and tell you that you can thrive in Product Management too!

Want to become a product management? Check out this email course on Product Management and learn everything you need to know in 6 easy lessons.

If you have any questions — any at all I’d LOVE it if you joined Product Circles. It’s a private Facebook group for you to ask anything you’ve ever wondered about product management. You can also just reach out to me as well — angelina.fomina@gmail.com! I’m happy to help.

I’ll help you do the work you love! Product Manager — Facebook, Oculus VR, Shopify.👇Free product management course www.productemailcourse.com