Group Details
Group 6
Name Enrollment Number
Khushvi Patel AU2010104
Shrey Kakkad AU2010153
Varun Magnani AU2010259
Samyak Jain AU2010448
Tushar Jain AU2010454
Dhruv Savani AU2010560
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Companies Used for analysis
Image Link - airbnb
Image Link - Vrbo
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Acknowledgement
We would like to express our gratitude and appreciation to our faculty Prof. Kunal Mankodi, for
giving us the descriptive guidelines of the project and making things clear. The report came to
conclusion with equal efforts and contribution from each group member.
The course competitive strategy has provided us with the opportunity to learn about how various
companies analyse and develop strategies with the goal of establishing a distinct market position.
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Table of Content
Page
Sr No. Content
Number
1. List of Acronyms 5
2. Abstract 6
3. Introduction 6
4. External Environment analysis
a. Five Forces analysis 6-8
b. PESTEL analysis
c. Strategic group mapping
5. Internal Environment analysis
a. Comparative resource based analysis
b. Mission statement of Companies 8 - 13
c. VRIO analysis
d. SWOT analysis
6. Suggestions and Observations 13 - 14
7. Conclusion 14
8. Annexure 14
9. Refrences/Bibliography 14
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List of Acronyms
1. Vrbo - Vacation Rental by Owner
2. Airbnb - Air bed and breakfast
3. PESTEL - Political, Economic, social, Technological, Environmental, Legal
4. VRIO - Valuable, Rare, Imitable, Organization
5. SWOT -Strengths, Weaknesses, Opportunities, Threats
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Abstract
The study paper analyzes the industry of rental accommodation through studying the internal and
external environment and the competitive strategies of the incumbent companies: Airbnb and
Vrbo. The paper studies the environment of the industry by using the five force framework. The
paper aims to study the positioning of the incumbent companies in the market through analyzing
the core competencies and the unique resources possessed by each of them. VRIO framework is
used to analyze how the unique selling points of the companies provide them with a
differentiated position in the market. Moreover SWOT analysis is used to study the internal
capabilities and limitations of the two incumbent companies. The report concludes with the
recommendations by the writer for the company and the industry, in accordance with the
constantly changing external environment post the COVID-19 pandemic.
(Word count - 136)
Introduction
Airbnb is an online community marketplace that connects visitors with nearby hosts. The
business enables customers to look for, reserve, and rent out lodging on a short-term basis.
Additionally, it allows people to generate additional revenue and share their extra space. The
company offers short-term lodging and tourism-related activities as a platform for local hosts to
host visitors. Visitors can search using various criteria, including the kind of lodging, dates,
price, location, and the ability to narrow their search with homes, vacation homes, and bed and
breakfast options. Details like pricing, place for rent, number of guests, restrictions, types of
homes, and other facilities are posted by the hosts. About 192 countries have an Airbnb presence.
It neither owns any real estate nor sponsors many events.
Vrbo is an abbreviation for Vacation Rental By Owner, it specialises in all forms of vacation
rentals: houses, apartments, condos, villas, and so on. The service, which was created in 1995,
allows landowners to display their property listings to potential renters. Vrbo only allows you to
rent complete homes, hence it offers fewer rentals compared to Airbnb.
External Environment Analysis
Five Forces Analysis
1. Threat of New Entrants: Around the world, Airbnb has been successful in developing a
presence in more than 190 countries. The amount of capital needed to launch the business is
substantial because it must build a smooth online experience. Hence, this force is moderate, as
any disruptive idea can easily topple Airbnb’s current leadership position.
2. Threat of Substitutes: Due to its extensive customer base and presence in other nations, the
company has built a solid reputation among its clients and is thus well-protected from other
players in this field. But when it comes to alternatives, the biggest problem is that the business
has to compete with conventional hotels, motels, and bed-and-breakfasts. Hence this force can be
said to be relatively strong as there are other competitors in the market apart from these
substitutes.
3. Bargaining Power of Customers: Since there are typically many more travelers than
properties posted for, the negotiating power of the customer can be said to be pretty low. As a
result, demand is constantly high. As a result, consumers have little negotiating leverage because
there aren't many the sought-after houses available, and Airbnb has already taken most of them
on.
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4. Bargaining Power of Suppliers: The owners of these houses/hosts do not have much
negotiating power because there aren't many alternatives to the kind of service that Airbnb
offers. For visitors to have a one-stop shop for choosing the homestay of their choice and for
these homeowners to have a minimal amount of competition in the market, Airbnb demands a
high bargaining power in this regard. Therefore, this force is not very strong for Airbnb.
5. Competitive Rivalry: Since there aren't many competitors in this market and they've all found
their respective niches, there is generally little overlap between the target markets of these
businesses, which results in low levels of competitive rivalry. Despite some rivals, Airbnb has
succeeded in holding the unquestioned top spot in this sector. The brand equity attached to
Airbnb, which has a $35 million private valuation, is unparalleled.
PESTLE Analysis
1. Political: Airbnb faced several legal issues as some available locations did not follow state
housing laws and regulations. Therefore, it is mentioned that to avoid legal problems, in some
states, the listing owner must also be living on the property to rent the place legally. And they are
liable to pay hotel or tourist taxes when renting their home (Frue, 2017).
2. Economic: The company benefits the hosts since Airbnb falls under the sharing economy
industry. They offer jobs to those who rent out their place for visitors. In New York, the
economic activity accumulated to $600+ million and provided over four thousand jobs(Frue,
2017).
3. Social: Airbnb’s growth also relies on word of mouth as much as it depends on social media.
Airbnb is operating in 191 countries and more than 34000 cities. Both tenant and host have their
own culture, norm, and issues(Frue, 2017).
4. Technological: Airbnb relies heavily on technology as visitors book rooms through an app or
website, and hosts rent their places. Nowadays, their platform has reached a drastic technological
advancement. This will be further discussed in the customer interface. They also use automation.
If a host doesn’t respond to a guest’s message, Airbnb will automatically text the host for
them(Frue, 2017).
5. Environmental: Airbnb has tried to focus on reducing energy usage within America and
Europe compared to hotels. This includes lowering greenhouse gases, less water consumption,
waste avoidance, and increased environmental awareness. Home sharing is essential for the
environment primarily as Airbnb allows hosts to have a different group of visitors if the place is
big enough. From a survey conducted in 2017, it was inferred that “66 percent of Airbnb guests
say the environmental benefits of home sharing were important in their choice to stay on Airbnb.
At a time when travel and tourism account for 10 percent of the global economy and growing,
Airbnb listings generate less waste, use less water, and drain less energy than traditional hotel
accommodations”. (Airbnb, 2019).
6. Legal: The legal aspect of Airbnb is vital to study as they have faced several conflicts due to
legal issues. The conflicts they faced were due to not following the housing regulations
primarily. Therefore, to resolve this conflict, they shouldstrickenn their rules for hosts when
making them sign the agreement, allowing them to put their listing on Airbnb’s platform (Frue,
2017).
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Strategic Group Mapping
An instrument for presenting the many competitive environments that businesses face is strategic
group mapping. It is a key examination that allows businesses to quickly determine where they
need to develop. As a consequence, businesses may succeed and make a good living.
Internal Environment Analysis
Comparative analysis of resources and competencies
Resources Competencies
Threshold capabilities ● Company website. ● Local spaces
● Employees ● Property manager has
● office authority for terms of
cancellation and
changes.
● 20% base rate service
fee.
Unique capabilities
Resources Competences
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Airbnb ● Website with better ● Cheaper shared space.
aesthetic. ● Long term stay
● Wide variety of discounts.
properties. ● Airbnb Plus.
● Better representation
of policies (red: strict,
green flexible)
Vrbo ● Website with better ● Stand-alone vacation
functionality homes only.
(Refer Figure 1 in Annexure)
Mission Statement
Airbnb
Mission: Belong Anywhere
Vrbo
Mission: To give people the space they need to drop the distractions of everyday life and simply
be together.
VRIO Analysis
Airbnb
Valuable: The VRIO analysis of Airbnb demonstrates how beneficial the company's financial
resources are since they enable investment in new external opportunities. These aid Airbnb in
funding off outside threats. Its locally produced foods are a great resource because they are quite
distinctive. Customers therefore believe these to be of high value. Due to the uniqueness of these
products, people value them higher than the competition. An important asset of Airbnb is its
workforce. A sizable portion of the workforce has received advanced training, which boosts the
organization's output productivity. Additionally, the workforce is devoted, and the company
enjoys high employee retention rates.Its patents are a crucial asset since they let the company sell
its products free from competition. As a result, Airbnb earns more money. When Airbnb sells
these patent rights to other producers, it also makes money from licensing fees. The distribution
network of Airbnb is a useful asset. This enables it to connect with an increasing number of
clients. As a result, Airbnb will generate more money. Additionally, because the products are
readily available, it ensures that promotional efforts result in sales.
Rare: The VRIO Analysis of Airbnb reveals that the financial resources of the company are
uncommon. Only a small number of businesses in the sector have substantial financial resources.
According to Airbnb VRIO Analysis, local food goods are not uncommon. These are readily
available on the market from rival businesses. This implies that rivals could utilise these
resources similarly to Airbnb and undermine competitive advantage. Its staff are a scarce
resource. Unlike employees at other companies, these workers have extensive training and
expertise.The Airbnb VRIO Analysis identifies the company's patents as a valuable and
distinctive resource. These patents are difficult to get and are not owned by competitors. As a
result, they are free from competition for Airbnb to use.It Indicates that its distribution network
is a valuable asset. This is because it would cost a lot of money and time for rivals to create a
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distribution network that is better than Airbnb's. Quite few companies in the industry also have
these.
Imitable: The Airbnb VRIO Analysis found that it would be expensive to replicate Airbnb's
financial resources. The corporation has amassed these resources throughout the years through
consistent profitability. For new entrants and competitors to accumulate large sums of money,
they must generate comparable earnings over a protracted period of time. The VRIO Analysis of
Airbnb found that it is not that expensive to copy the local culinary products. Competitive
companies can also acquire these if they spend a large amount on research and development.
According to the Airbnb VRIO Analysis, the company's staff are also not difficult to replicate. In
addition to this, other businesses can train their employees to learn new skills. According to the
Airbnb VRIO Analysis, it would be extremely expensive for competitors to copy Airbnb's
distribution network. Over the years, Airbnb has gradually developed this. If competitors want to
copy a similar distribution system, they would need to invest a lot of money.
Organization: According to Airbnb's VRIO Analysis, its financial resources are set up to
maximize value. These resources are strategically employed to make the proper investments,
take advantage of opportunities, and counter threats. As a result, these assets enable Airbnb to
maintain a competitive advantage. This indicates that the organization is not making the most of
these patents. If Airbnb starts selling patented goods before the patents expire, an untapped
competitive advantage might be transformed into a long-lasting one. According to the VRIO
Analysis of Airbnb, the distribution network of Airbnb is organised. By making sure that goods
are available across all of its shops, Airbnb uses this network to connect with its customers.
Resources Valuable Rare Imitate Organization Competitive
Advantage
Network Yes Yes Close-Sharin Completely Unused
Flexibility of g Some Same Consumed Competitive
Supply Chain Supplier Advantage
Chain
Market Yes Yes Challenging Yes Sustainable
Position Competitive
Advantage
Leadership Yes Yes No Yes Strong
Team Competitive
Advantage
Awareness of Yes Yes No Yes Sustainable
Brand Competitive
Advantage
Financial Yes Yes Compatible Financial Temporary
Resources With all Status is Competitive
rivals Sustainable Advantage
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Vrbo
Valuable: The VRIO analysis of Vrbo demonstrates how beneficial the company's financial
resources are since they enable investment in new external opportunities.The Valuable Resources
here with Vrbo are Filterable Search Results which allows visitors to refine rental searches
based on their choices. For instance, a visitor can limit the results to just display homes with the
characteristics or amount of bedrooms they are looking for.This is advantageous for owners who
list their short-term vacation rental on Vrbo because it enables visitors to find the precise home
they're looking for, which could be yours.Another valuable resources is that it has a vacation
rental software for professional hosts which is iGMS , which helps It helps hosts and property
managers with a wealth of capabilities, including a powerful multi-calendar, a unified inbox,
automated triggered messaging, and much more, to assist you in managing many listings
efficiently while saving you significant time.When guests are limiting the properties they want, it
has a comprehensive search filter with features that outperform Airbnb.Its robust 24by7 customer
support is also its valuab;e resource where can help Anyone who needs assistance can get in
touch with Vrbo Customer Support. It is accessible by phone or online chat around-the-clock.
Their customer support team can also assist hosts and property managers in managing the
calendar, listing, and rebooking any guests who may have been impacted during their stay in the
event of a natural disaster.Traveler Safety Program on Vrbo , the website will assist a visitor in
making a new reservation if a host's actions made them feel unsafe or uneasy. They will also look
over the complaint more thoroughly to see whether any Vrbo rules were broken.To help stop
harassment and fraud, they establish strong security and privacy regulations with relation to data
protection. Additionally, all installed monitoring devices must be disclosed by Vrbo hosts.
Rare: The iGSM software that the company has shows that it is not only a valuable resource but
also rated because this software might not be easy for other competitors to imitate. The robust
customer support which Vrbo provides is not rare as the competitors can easily include this
service and provide it to their customers.The Travel safety program by Vrbo is quite rare as it
follows a set of list and norms which are to be followed by the host without fail.
Imitable: According to the VRIO Analysis , we get to know that for the competitors it would be
very difficult to imitate the software that Vrbo.As this software it tailor made for Vrbo’s use
which helps it not to generate traffic but also helps customer find locations as per their needs.The
travel safety program which they offer involves a high cost because it involves the host to make
adjustments so it becomes difficult for the competitors to imitate.
Organization: According to Airbnb's VRIO Analysis, its financial resources are set up to
maximize value. The resources , the customer support system , travel safety program and filtered
search engine as a result, these assets enable Vrbo to maintain a competitive advantage. This
indicates that the organization is not making the most of these strategies.
SWOT Analysis
Airbnb
Strengths: The strengths are as follows:
1. First mover advantage: The sharing economy was launched in 2008 with the founding of
Airbnb. Due to its early entry into the market, it has become the preferred platform for booking
vacation rentals. As a result, it has enormous global brand awareness and a significant share of
mind.
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2. Strong network effects: Strong network effects are one of Airbnb's primary competitive
advantages. With more than six million listings across 220 countries and territories, Airbnb has
grown to become the largest vacation rental marketplace in the world.
3. Innovative business model: The conventional hotel industry was upended by Airbnb's
business strategy. Airbnb invented a new type of lodging by enabling people to rent out their
houses or individual rooms.
Weaknesses: The weaknesses are as follows:
1. Unprofitable: A significant flaw in Airbnb is that it is not yet profitable. The company will
eventually go bankrupt if it is unable to make enough money to pay its expenses.
2. Developing regulations: As Airbnb expands, local, state, and federal governments will
increasingly regulate it. These rules, which might differ greatly between jurisdictions, may
restrict Airbnb's capacity to expand and make money. In order to comply with rules in several
regions, including New York City, Airbnb was had to alter its business model.
3. Racial discrimination: According to some research, people with "black-sounding" names are
less likely to have their rental requests accepted, which has led to accusations of racial
discrimination by Airbnb. Despite the company's efforts to remedy the problem, reputational risk
exists.
Opportunities: The opportunities are as follows:
1. Expansion into new markets: Europe, Asia, and South America are just a few of the many
potential new regions that Airbnb may penetrate. There is also a sizable untapped market for
business travellers.
2. Increase in leisure travel: Today's travellers are more at ease taking leisure trips, which could
help Airbnb's bottom line. A change in travel habits, with people opting to visit more isolated
and unpopulated locations, could amplify this trend.
3. Strategic partnerships and acquisitions: The market for holiday rentals is consolidating as
numerous well-known corporations, including Expedia and booking.com, buy out smaller
businesses. Airbnb may benefit from this development by collaborating with or purchasing these
more established businesses.
Threats: The threats are as follows:
1. Competition from other vacation rental platforms: Other online marketplaces for vacation
rentals, such as HomeAway and Vrbo, are becoming more and more competitive with Airbnb.
These businesses have comparable product, are well-known in the industry, and have a solid
market presence.
2. Competition from traditional hotels: A significant rival to Airbnb is conventional hotels.
They also provide a wide range of amenities, such as on-site dining options, and concierge
services, that Airbnb cannot match.
3. Uncertain future legal and regulatory environment: The sharing economy's legal and
regulatory landscape is continually developing. Governments may also tighten laws on the
sharing economy, which would limit Airbnb's room for expansion.
Suggestions and Observations
Covid-19 made the entire hospitality industry go on vacation for many months. The entire
industry witnessed a huge surge in revenue and profits along with an increasing number of losses
and expenses to maintain their existing position. As soon as the government started to lift the
lockdowns across different parts of the nation and different countries started opening their
borders to other countries, the hospitality industry began to witness the slowly increasing number
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of visitors filling the gap which occurred during the pandemic. As people were made to sit in
their houses for an unusual number of days travel and tourism industry caught a boom.
Before the internet people used newspapers advertisement, radio or television advertisements,
travel agencies, and property management agencies across various destinations to earn some
extra income out of their vacant properties. Today in the internet era millions of apartments are
listed on Airbnb and Vrbo together growing the fashion of renting private space to a more
considerable extent.
Although both the companies Airbnb and Vrbo travel operate in somewhat similar areas Airbnb
has the upper hand in the market due to their early entrance and wider operating space and
intensive marketing. Their presence has affected the business models of the hotel industry as
people desire to enjoy their vacation in larger and more comfortable spaces that feel more like
home, and less like just a room. Airbnb model has given the luxury and comfort to people to find
a home away from home and enjoy the leisure their money could afford for them. Airbnb ranges
from providing villas, Beach Houses, Penthouses, Apartments etc. for the duration of the stay of
people who could afford such luxuries to providing shared spaces to people who wish to plan
their visit on a budget. As Airbnb covers a larger area it gives various advantages to the
company.
Vrbo switched from the subscription model to the per-rental fee structure. Earlier hosts had to
pay an annual fee for the company to promote their property to suitable and potential buyers.
After the Expedia Group acquired them, they switched to a more convenient and easy way which
attracted more hosts to their platform. Vrbo doesn’t provide the option of renting shared space to
tourists, eliminating it from the affordable market product. Users have reported that the interface
of Vrbo’s website is clunky and outdated, giving them a poor user experience as compared to
Airbnb. While as compared to Airbnb, Vrbo doesn’t spend much on making the user experience
better or even behind their marketing which could help them position themselves in their desired
market segment or acquire a larger customer base. The one thing which sets Airbnb apart from
Vrbo is the service's extensive host network which offers millions of options to the person
looking to rent a place.
Conclusion
After looking at the above-mentioned points, there are a lot of gaps in the market and the
functioning of Vrbo which can be filled by taking inspiration from Airbnb. Areas like marketing,
providing low-range options to the customers and making the user experience better can help
them gain a good market share over or next to Airbnb. The short-term rental market will be
shaped largely by competitive dynamics over the coming years.
(Word count - 3338)
Annexure
Figure 1
Resources Competences
Threshold capabilities These are the resources The activities and processes
needed to meet the minimum needed to meet the minimum
requirements to continue to requirements to continue to
exist. exist.
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Competitive capabilities Resources that underpin These are activities that
competitive advantage and underpin competitive
are difficult for competitors to advantage and are difficult for
imitate or obtain. competitors to imitate or
obtain.
Threshold Resources: In the case of Airbnb and Vrbo these are the basic resources that these
companies need to operate. It includes an online presence which is in the form of a website, the
next resource are employees, office space to work, etc.
Threshold Competencies: For the companies Airbnb and Vrbo these are the competences which
the house renting industry has in common. These include the local spaces the companies are able
to help their consumers find for stay or rent. The process that is common for both the companies
is that the host/manager of the property has the authority to set the terms and conditions for
cancellation or changes. Moreover the activity of charging the service fee on rent charges are
common for both the companies, that is 20% (iGMS Inc., 2022)
Unique Resources:
Airbnb: The website of this company has better presentation and aesthetic than the other
incumbent company. This helps in creating a unique resource as the viewers are able to better
perceive the information through the website. Airbnb has a larger variety of properties on offer
than the number offered by the competitors.
Vrbo: The website of Vrbo is better in functionality as the filters provided by the company on
the website are precise and helps the consumers to find results according to their specific
requirements.
Core Competencies:
Airbnb: For this company the core competencies could be, cheaper stays as the company
provides its customers with the option of sharing a room in a house so that the customers would
not have to pay for the entire property, but just the room (Kemmis, 2022.) Another one is
long-term stay discounts, wherein if the consumer wants to stay for more than 28 days then
he/she could negotiate for a discount with the host. The activity of introducing Airbnb plus helps
customers to gain assurance about the condition of the place as it has been vetted in person.
Moreover the company has better representation of the policies as the policies are color coded
for the viewers to understand with red indicating stricter and green indicating flexibility.
Vrbo: The core competencies for this company is that it provides standalone vacation
rentals/homes only. This means that it is most suitable for families who want to spend time
together and at the same time they are able to enjoy privacy and safety.
References/Bibliography
1. iGMS Inc. (2022, October 13). Airbnb vs. Vrbo: Which Is Best for Hosts and Travelers?
iGMS. https://www.igms.com/airbnb-or-Vrbo/
2. Kemmis, S. (2022, May 3). Airbnb vs. Vrbo: Which Is Better for Travelers? NerdWallet.
https://www.nerdwallet.com/article/travel/airbnb-vs-Vrbo-which-is-better-for-travelers
3. Frue, K. (2017, May 31). PESTLE Analysis of Airbnb. PESTLE Analysis.
https://pestleanalysis.com/pestle-analysis-of-airbnb/
4. Shastri, A. (2022, October 28). End-to-end SWOT Analysis of Airbnb. IIDE.
https://iide.co/case-studies/swot-analysis-of-airbnb/
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