Analysis of The Innovation of Airbnb Based on The Idea of Disruptive Innovation

Introduction

Airbnb is all called AirBed And Breakfast. Its headquarter is in San Francisco, California. Airbnb has infiltrated 190 countries since it was founded in 2008, leading the global sharing economy boom. Specifically, it helps users to book spare room (for home stay facility) via the Internet, opening the supply end of the idle housing to meet potential demand side. Its properties and trading volume have already begun to rival international hotel, in 2017 it’s rooms number surpassed that of the sum of top two traditional hotels: Intercontinental and Hilton.

Airbnb is very cost-effective and has become the choice of travel, tourism, business and office. It enables customers to communicate in real time through Internet platforms and apps, makes the most of resources and saves a lot of intermediate costs in hotel management, personnel recruitment. In a public interview earlier this year, Airbnb executives said that 300 million people had used their service, and after a decade of growth, Airbnb has been valued at more than $30 billion, making it the second-largest unicorn company in the United States after Ube.

The environment before the born of Airbnb

The birth of Airbnb coincides with the U. S. financial crisis in 2008. Its huge impact brought severe losses to many industries in the United States. The bankruptcy of large and small enterprises and the wave of unemployment came, and the accommodation industry could not be excluded. Affected by the economic crisis, the US hotel market suffered a severe shortage in supply in 2006-2008, and the industry was unable to effectively supply market demand due to its cost dilemma, which brought an important development opportunity for Airbnb.

The United States is home to multinational corporations. Since the 1980s, the presence of multinational companies in the United States has provided a large and stable market for the country's accommodation industry. The staffs of US-funded multinational companies can create huge business opportunities for the domestic accommodation industry only by business travel. Business travelers accounted for 44% of all hotel stays in 2007, according to the American Hotel and Lodging Association (2017).

Besides, tourism, one of the ten pillar industries in the United States, is a huge consumer force for the accommodation industry. According to the United States Department of Commerce (2008), the number of visitors to the United States increased year by year from 2006 to 2008. According to statistics from the American Hotel and Lodging Association, the number of hotel rooms in the United States in 2006 decreased compared to 2005, while the number of visitors increased, resulting in supply shortage of rooms. Over the next two years, this dilemma became more pronounced, setting the stage for the difficulty of ordering hotels for the American Industrial Design Conference in October 2007, and providing the best historical opportunity for Airbnb's accommodation innovations.

The new offering provided by airbnb

Airbnb provides a platform based on the Internet and mobile Internet to help travelers find short-term accommodation, as well as to help owners rent out spare rooms, to create realization channel for idle assets. House owners with vacant rooms post information on the Airbnb platform, they can decide to rent out an entire house/ apartment or a room, the accommodations can also vary from low-costed one to luxury one.

The houses provided on the platform stick to service scenario design, forming their own characteristics, the most popular houses are: Nature theme houses such as treehouse in Atlanta, Canada unique small wooden house, Romantic Theme houses such as Mexico charming shell house, Rome mini attic, California pirate theme tent, and Experience Theme houses such as igloo, vans, lighthouse and cave.

Tenants make online appointments based on the "Internet of things +" technology (cloud computing, big data, Internet of things and mobile Internet) to meet their needs. They can filter the rooms based on location, dates, number of people, price or design styles on Airbnb’s straightforward website. The website generates an individual list for the customer based on the refined attributes, the customers can view the housing information and previous guests’ evaluation. Dialog boxes are provided for guest to communicate with the host for extra information and reservation can be made and responded on website, as well as payment transaction.

How has it changed the market?

Change the profitability in accommodation industry

The hotel industry has been greatly impacted by Airbnb's onslaught, especially those low-end, non-business hotels. Airbnb shocked the relationship between demand and supply of this industry with its plenty of hosts in 190 countries that can cater millions of customers per year. Importantly, the accommodation provided by Airbnb is perfect substitute for hotels. Guttentag and Smith did market survey in 2017 and found that most of travellers shift to Airbnb from traditional hotels, primarily lower-end hotels. Zervas et al. (2015) also pointed out that Airbnb creates great supply for middle-level hotels.

Guttentag and Smith (2017) stressed that the relationship between demand and supply and consequent reduction in revenue can significantly change profitability of accommodation industry, because most hotels’ cost structure consist of high proportion of fixed cost and low marginal cost. In an empirical paper from Boston University, the authors used evidence to show that for every 10 percent increase in the supply of Airbnb, the local hotel's monthly revenue declined by 0. 35 percent, while in Austin, where is mostly covered by Airbnb, the impact expanded to 13 percent of revenue.

Affect local tourist industrylocal tourist industry benefited a lot from Airbnb

Because Airbnb makes a large proportion of its guests extend their staying period in destination by easing the burden of accommodation and engaging guests in local environments. Thus, guests are willing to spend the saving from accommodation to other tourist consumption include tourist attractions, restaurants and transportation.

Airbnb makes "Sharing Economy” become market trend

The short rental service, led by Airbnb, subverts the traditional hotel service and creates new housing rental experience. Airbnb brings the Sharing Economy into people's eyes by pioneering sharing model. Sharing economy expands optional space and welfare promotion space of trading main body, and make the both sides of supply and demand can release their share or demand items (or skills, time, money) via the Internet, increasing the alternative trading objects, and making both sides to master more information, fundamentally improving the quality of transactions and creating more welfare.