How Covid-19 Disrupts Airbnb’s Business Model.
when a tree falls in the forest when no one is there does it make noise? Yes it does, no it does not make noise. The two responses are actually correct depending on the person that is responding.
To a forest or an agricultural expert he will answer that the tree that fell makes great sounds. That just because no one is there does not mean it did not cause great vibrations, panics and scare other rodents away.
To a non-expert his response will be; it does not make a sound simply because nobody is there to listen to it.
That is the exact occurrence of the coronavirus pandemic. To people that don’t know the impact of this virus they will claim that things will be normal again and in a short while. To others who have an economic lens and entrepreneurial lens they will say the world has not seen this kind of economic catastrophe before.
Strive Masiyiwa in his article on his facebook page pointed out five problems this global recession will cause to the world and how we should respond. They are; restarting our economies, getting children back to schools, food security, creating jobs again and addressing other neglected diseases.
In this article, we shall see how the Airbnb business model was disrupted by covid-19 and how they can pivot with some exceptional ideas.
The Areas of Disruption by Covid-19
In my article on how the coronavirus disrupted the ride hailing business model, I explained the disruption based on the architecture of the business. The same pattern I will apply to show how Airbnb was affected and disrupted. Let's get started.
The Guest Component:
The uber for hospitality ecosystem works by bringing the hosts and guests together in order to create value for both parties. The guests are the one that will book an accommodation to stay in the host’s lodge. The problem created by the covid-19 pandemic to this component are;
- Guests are strangers that come into a city. Now that the hospitality, tourism and airline industry is halted, it means there is a decline in demand for airbnb lodge.
- The social distancing is one of the directives of the pandemic experts. That means, stranger cant be accepted to stay in a community being that they can be threat to the health of the people in that community if they are carriers of covid-19.
If there is no guest in the business model of the airbnb that means the demand side of the business is zero.
The Host Component:
How can there be supply when the demand for lodging is zero. In this case supply is currently higher than the supply of Airbnb lodge because some of the hosts depend on their properties listed on Airbnb for livelihood.
The host component part of the model is disrupted this ways;
- Fear of welcoming strangers because the coronavirus can be transmitted from one person to another.
- The government has even ordered the closure of the tourism sector and other businesses. The stay at home order is actually staying out of business for others.
Now that the supply side of the architecture of the model is also affected what should we do? What about the technological component? Let's say if this is still valid in the equation of Airbnb.
The Technology Component.
Mobile Application technology is the technology that brings together the host and the guest. These are how the tech component of the business is affected;
- There is no listing of lodges by Airbnb hosts on the App.
- There is cancellation of bookings by Airbnb management.
- There is no new booking by the Airbnb community.
At this stage there won't be an increase in the number of downloads of the applications because it virtually has lost time value.
What can we do with this disruption? Here are my suggestions for a successful pivoting of the airbnb model.
Pivoting the Airbnb Model or be Overtaken
Peter Druck is always correct that marketing and innovation make money, others are cost. This has become more valid in this coronavirus pandemic than ever. Every business will either pivot or innovate in order to be sustainable in the new economy. Here is what I think Airbnb should do;
The Real Estate Sector Pivoting:
Airbnb is actually in the hospitality industry which is related to the real estate industry. What I think will be a successful pivoting for the business is pivoting to the real estate industry. The reason is simply because they have experience in a related industry. Brain Chesky and his management should use their wealth of entrepreneurial experience to innovate in the real estate business.
The e-real Estate Sector Pivoting:
I have come to believe that the digital revolution has replicated everything that is tangible and intangible or digital forms. Some of the examples are shop and e-commerce, book and e-book etc. In the same vein, we have real estate and e-estate. E-real estate is the buying of space (properties) on the internet in the form of domain names and hosting.
It will be wise for Airbnb to pivot into this industry since it is also a tech company that is solving lodging problems.
With proper innovations of the business and pivoting, the business will continue to thrive.
We need to change the way we see things because when we do the things we look at will change.
Now, let's think of new ways we can do business in the new economy that will emerge after the coronavirus pandemic only then will our survival be guaranteed.
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