The biggest risk to Airbnb will happen when its hosts lose confidence in its business model. That is also the same thing for Uber. Not many people will return back to Uber after these months as drivers. This is emerging as a major risk to the aggregation business model: demoralized ecosystem partners. Convincing these partners when the pandemic is over, that the business model is resilient enough for those secondary investments, like buying houses (or cars) and putting them into the Airbnb platform (or Uber), will be another challenge for these firms. Many Airbnb hosts are already listing their properties for sale!
Towards an improving supply-demand equilibrium, with positive continuum of network effects, orchestrated through a near-zero marginal cost, anchored on modern technologies, Airbnb cannot afford to see these suppliers give up on its platform. The problem now is not a competitor causing havoc, but simply a platform collapsing from within. Airbnb must WIN itself to thrive again.
Amy Offield always dreamed of running a vacation rental in Galveston, Texas. Five years ago, she and her husband Chris got their wish and bought a house there minutes away from the beach. They immediately began restoring the property, which she named the “Blue Skies Beach Bungalow,” adding vintage items as well as retro and bright-colored decor.
But as coronavirus spread across the United States in March, Offield, who has been a full-time Airbnb host for nearly two years, started seeing a wave of cancellations. When Galveston temporarily shut down short-term rentals as part of its stay-at-home order, Offield switched her Airbnb to a 30-day stay, the minimum required to be considered a long-term listing. She didn’t get a single reservation, and her beach bungalow has stood empty for two months
Comment: Professor Ndubuisi, could perception innovation bring something to the table that’s able to regain the trust of exiting partners in this scenario?
My Response: Perception demand is a higher dimension of meeting the needs of markets. Airbnb hosts have one need: make money via their properties. Airbnb has to fix that friction for them. The challenge for Airbnb is that creating a force (product/service force) which has to overcome that frictional force (which hosts are experiencing) is something outside its control since it is only when guests return to book can it create its force.
Simply to answer you, Airbnb cannot regain trust because it does not control demand (the guests), and without that, the frictional force (within hosts) will remain larger than force its products can exert. Yes, it has a problem, leaving hosts unhappy!
Small physics there.
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How sudden the game changes. Just like my previous employer taught me in those days..”in business, there are always surprises”.
Any person coming into business must romance this ideology in his heart and stay prepared to change with the game.
One of those hangovers that could linger well beyond the disappearance of the virus, if it ever happens. The problem is not instituting social distancing, but convincing the same people who were forced into it to embrace or hug one another again; a tough deal for many.
It’s a complicated risk profile to model, because no one can truly know what is in another’s heart, due to number of barriers involved. On the one hand, you have worried hosts who don’t think they can risk that much, on the other hand, you have perplexed guests who no longer feel safe to enter someone’s apartment. It now boils down to which side of the market will blink first? Not a great thing for a brand with growth mindset.
From airlines to restaurants, from hotels to theatres and sports centres; something extraordinary needs to happen, for these sectors to attain even 80% of their optimal levels again.
The same way we created fear that far exceeded the scourge of the virus, now government, media and organisations need to even spend more resources, just to educate and convince people that things aren’t really bad as we shouted them. After telling me to run for my dear life, that being close to another person was dangerous, you now want me to forget all that?