Case connected to the tourism and travelling industry,

 

 

Case study – Sharing economy model as a means to
supplement revenue for Casual Hosts/homeowners/leasers

 

Supplementing
revenue with the sharing economy using Airbnb

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How Casual
Hosts can leverage the sharing economy to supplement their revenue using Airbnb

 

Internet
based sharing economy platforms as a means to supplementing revenue for
Vacation home rental owners.

 

How Airbnb
can help homeowners significantly supplement their revenue by using the sharing
economy – peer to peer
renting model.

 

Introduction

 

The
hospitality sector – Market,
players, statistics.

 

Include
para from the side

 

The sharing
economy short explanation

 

The sharing
economy hospitality sector

 

Airbnb
intro

 

Types of
hosts. Details about hosts

 

Questions

 

INTRODUCTION

 

For
years the the
traditional market for tourism accommodation involved travellers renting rooms
from traditional and formal businesses, such as hotels. The hotel
industry had set the primary benchmark for, and been one of the larger standard
for travelers looking for accommodation whilst on a trip away from home for
many decades. The traditional
establishments offer various type of accommodation and lodging ranging across
budgets, services, locations etc. to accommodate travellers around the globe. This  industry, intrinsically  connected to the
tourism and travelling industry, which contributed close to seven trillion U.S. dollars
to the global economy (Statista
1)in the year 2013 is certainly a profitable one. So, huge is this industry
that in fact Euromonitor International forecasted 550 billion US dollars’ worth of revenue from
this industry in 2016 (Statista 2).

 

However, with the dawn of the millennium and a large shot
from the internet, the advent of the sharing economy and largely peer to peer
renting has spurred a change in how travellers book and stay in their
accommodations around the globe.

 

The sharing economy
is defined as ”An
economic system in which assets or services are shared between private
individuals, either for free or for a fee, typically by means of the Internet”
(Heo, 2016). It is basically collaborative consumption or the peer economy,
in which a person can avail for services such renting, lending, trading,
bartering, or swapping goods, services, transportation solutions, space, or
money on a sharing basis (Möhlmann,
2015).

 

The sharing economy
has become an asset to many and has created a financial benefit for properties
which were not regarded as constructive before (Geron, 2013). The development of this
industry has been so massive that researchers have predicted that the that sharing economy will
potentially increase to 335 billion by 2025 compared with 15 billion in 2015
(PwC, 2015b).

 

The major companies
that have been utilising this trade are Airbnb, 9flats, Housetrip, HomeAway,
Couchsurfing, Uber and Liftshare.

 

Sharing Economy and hospitality.

 

The sharing of assets between communities has been done for
thousands of years. Likewise, travellers staying in private homes has been on
for centuries (Black (1985)). However, the
internet has propelled the sharing economy in many ways today. The hospitality
industry today is also captured by the sharing economy phenomena wherein with
rapid technological advancement and adoption multiple web and app based
platforms serve a large population of travellers preferring and staying in
other people’s homes or rooms over traditional hotel establishments. Some of
the main functions these platforms serve in propelling the sharing economy is mainly
by making it easier for home owners and home users to find each other, building
trust, providing multiple options, experiences and more often at reasonable
prices.

 

The traditional hotel
industry has a huge number of stakeholders directly and indirectly in their
operations. The industry hires / works with professionals generally trained and
skilled to provide the necessary services. However, the sharing economy need
not have many stakeholders or a trained professional running operations. A
serviced villa in Goa is successfully operated by an elderly couple, both with
no prior experience in professional hospitality. Today individuals having an
additional room in their home or a second home can supplement their revenue by
leveraging these platforms with absolutely no experience or training in
hospitality.

 

Airbnb is one of the largest
hospitality platforms in the world using the sharing economy model. It has
empowered many homeowners with an opportunity to supplement / generate their
income by opening their doors to guests from around the world.

 

About
Airbnb

 

Airbnb
was initiated in 2007 by two university graduates, they advertised their apartment
as ‘Airbed & Breakfast’ for delegates attending a conference to make their
stay more economical (Guttentag 2015). It was then founded officially in 2008
and opened their online services enabling individuals to rent rooms or flats on
a sharing basis (Heo 2016). The Airbnb website
describes the platform as ‘a trusted community marketplace for people to list,
discover, and book unique accommodations around the world’ (Airbnb, 2017a).
Essentially it is a platform where people with an extra room or home rent them
out on a short/long term basis to guests/tourists from around the world. The
“listings” on Airbnb fundamentally consist of Entire Homes, Private Room or
Shared Space. An entire home can consist of anything from Entire apartments,
villas, homes, bungalows and even castles. A typical private room would be
representative of a hotel room. Shared spaces could be spaces normally shared
with the host or other guests. Airbnb “hosts” could be either living in the
accommodation thus operating it as a conventional B&B or operate the
accommodation remotely whilst on vacation, or even as a permanent rental for
guests. The Airbnb website is fairly simple and resembles other Online Travel
Agents/websites. Searches are carried out by inputting the desired location,
number of guests and desired dates of stay and choosing the appropriate filters
like type of accommodation, number of bedrooms, number of beds, price,
amenities etc. The search results in the population of Listings in the
particular area. Upon clicking on any desired listing will show photographs,
amenities, description about the listing, amenities, neighbourhood, places to
visit and more importantly Reviews. Both the “Host” and “Guests” need to have
their profile pages to “List” a space and “Book” a space respectively. There
are two ways to book on Airbnb, Instant book where the guests can directly pay
and reserve and Request to book where the guests have to send a reservation
request to the host first which will be approved by the host first upon which
the guest can pay and reserve the space. Upon interest the guest will either
directly book the place or send a request/inquiry to the host based on the
booking setting set by the host. Guests can also send inquiries about a space
to the host querying for further information. A reservation is confirmed when
the guest makes a 100% payment against the reservation to Airbnb. Guests
typically pay a service fee of 5-15% to Airbnb and any Tax if required by the
local government. Hosts pay a service fee ranging from 3-5% (Airbnb, 2017b).
Airbnb pays the host the remainder within 24 hours of check in. Today Airbnb
has over 4 million listings around the world in 191+ countries and have catered
to over 260 million guests since 2008 (Airbnb 2017b)

 

Hosting on Airbnb – Goan Perspective

Goa is a coastal state in the western coast of India. Primarily
known for scenic beaches, churches, temples, and a bustling nightlife, it is
one of the largest tourist hotspot in India. As on 31.12.2015 there were 3358
hotels in Goa with 31767 Rooms (Goa Tourism 2015). Airbnb is fairly new entrant
in Goa with operations for building supply commencing in January 2016 though
the website was available to use since inception.

 

“Hosts” are homeowners/property managers/traders who list the
accommodation on Airbnb. The normal workflow of working on Airbnb is quite
simple.

1.    
Join

The host joins Airbnb by creating a profile page with details
about himself and his photograph, he inputs his bank account details and upon
verification is ready to List his properties on the platform. Photo 1

 

2.    
List

The listing is posted with all details about the accommodation
such as Price, Photographs of the listing, what is offered, about the space,
amenities, features, location, services if any, distance from various points of
interest etc. House rules and other terms and conditions are posted as well. Photo 2

3.    
Receive first Booking

Once the listing is live it is visible and bookable in all
countries Airbnb is active in. Prospective guests can check out, interact with
the host and finally book the listing by making 100% of payment for the dates
to book.

4.    
Welcome Guests

On the day of guests arrival, the host readies the accommodation
as described in the listing and photographs. Basic standards are of course
expected but if they are not being provided are generally described in the
listing. Some hosts meet the guests, whereas some hosts have local
representatives who meet the guests on arrival.

5.    
Receive Payout

Payouts to hosts are made within 24 hours of arrival of the
guest and is an automated process.

 

Through Work experience in the company since inception of
operations, there are 3 – 4  major types
of hosts identified in the Goan Market

1.    
Owners / Subletters

Owners are homeowners based locally or offsite who have an
additional room, apartment, villa etc. to offer to prospective guests. These
hosts are the true essence of the sharing economy. In most cases unused spaces
are given out to discerning travellers from around the globe. Many owners list
their homes to supplement their incomes or to generate some revenue from their
investments, other factors homeowners list on Airbnb are to meet different
people, be a part of a global community.

There are also certain individuals who lease accommodation
space/s like apartments, villas etc. on long term rent and give out a room or
the entire space on short term rent. Factors to list on Airbnb and share could
be to help in paying rent, supplementing income etc.

 

2.    
Property Managers

Property managers are mostly commercial hospitality partners.
These hosts generally do not own the accommodation rented out to guests but
they either/and lease, manage sales and operations and market the accommodation
space.

Some Property managers lease accommodation spaces like apartments,
villas etc. solely for commercial purposes. on long term rent and give them out
on short term rent using multiple marketing techniques with Airbnb being one of
them.

Some Property managers provide services to homeowners by
managing all aspects of the marketing, sales and operations of running the
homestay/B&B/ Accommodation service. They typically charge a fee for
services rendered or work on revenue sharing. Based on requirements such
property managers will list the space on multiple platforms, advertise through
their networks. They will look into getting the rooms ready, welcoming the
guests, check out and overall satisfaction of the guest during their stay.

There also exist property managers who are a combination of the
above two.

3.    
Traders / Agents

Traders and Agents list freely on Airbnb due to its free to list
policy. They do not own, lease, manage the listed property but are merely
agents/brokers for the same. Traders meet homeowners, property managers and
parties letting out spaces for short term rent and agree on specific rates for
the various tourist seasons. On Airbnb, these traders then mark-up afore
mentioned rates with their rate and list the accommodation spaces. It’s a very
lucrative job as the agent does not have any costs, overheads or issues wrt
guests but makes his income solely on a commission/ mark up.

 

 

Some hosts in Goa

Anjana

Anjana is a homemaker based in Calangute Goa. Her husband is a
real estate agent. Together they own and rent multiple homes in Goa on short
and long-term basis. Homes given on long term rent range from anything above a
few months to 11 months renewable contract whereas short term renting follows
the sharing economy model and is for a few days to weeks. Through the years Anjana
has, with her husband built, an offline network and base of prospective guests
through agents, friends, past guest references etc. looking at alternative
accommodations whilst staying in Goa. However, Anjana was unable to achieve the
desired scale of bookings with abysmal bookings coming through her networks
limited only to certain Indian states. Also some of her guests seemed to lack
trust with her and the accommodation she was selling due to lack of mechanisms
like reviews or low resolution photographs etc. Anjana had a big pain point with
payments. Some guests refused to pay the full amount or didn’t pay at all.
Generally an advance amount is

 When Anjana joined Airbnb
in 2016 she received a significant boost in nights booked and revenue. Her
listings were pushed by Airbnb through their marketing efforts, to all
operating countries thus reaching a much larger audience. Anjana and her guests
could take advantage of a host of Airbnb features like Host/guest Guarantees (Airbnb 2017c) and
Host/Guest protection (Airbnb
2017d) given by Airbnb to bolster Trust and safety. Her guests could see
her listings, read reviews left by other guests and interact with Anjana at the
comfort of their homes. Her guests could trust the photographs of the listings
as they were clicked by Airbnb photographers and rely on the various trust and
safety facilities such as 24/7 customer care, guest guarantees/ protection
provided by Airbnb (Airbnb 2017 d). Trust between Anjana and her guests of
course bolstered by Airbnb’s policies resulted in a 100% growth in revenue and a 20% QoQ growth in revenue
in 2017.

 

Gitane Dsouza

Gitane was a Sales Manager for South India and Sri Lanka for the
Intercontinental Group of Hotels in Bengaluru. She owned a 5-bedroom villa in
Baga Goa and wanted to start a family back in her hometown of Goa. Belonging to
the hospitality industry herself setting up a boutique Bed and Breakfast
(registered as a guesthouse) was not very difficult for Gitane. Without a
steady job and source of income, Gitane was majorly reliant on the income
generated from her bed and breakfast. Gitane signed up with Airbnb in October
2015 listing individual rooms from her Villa. She also constructed 2 cottages
in her garden increasing her inventory.

Today Gitane is one of the most successful hosts in Goa, a
superhost since 2017 and has over 300 reviews for 8 listings (Illustration Image).
Gitane swears by Airbnb and uses it exclusively to get bookings from guests.
She also routes bookings from offline sources to Airbnb for all the security
features it offers wrt payments, support and host guarantee. In addition to
factors favouring Anjana and her guests, Gitane loves the fact that she gets to
see, vet and choose her own guests. When listings are kept on request to book mode,
guests have to send a request to book her place, based on availability,
willingness to comply with her house rules and other factors like fit etc
Gitane has an option of choosing who stays with her. She can read reviews left
by other hosts for the prospective guests, message them to find out their
requirements and if she can comply with them also likewise if they will comply
with her requirements and rules. This additional flexibility is not provided on
online travel portals and is one of the main factors in additional to other
security features that casual(non-commercial) 
homeowners join Airbnb. Gitane also tries to route all her offline
bookings through Airbnb because of the security of payments, Host protection
and guarantees, customer care and that she can see, chat and vet her
prospective guests prior accepting the bookings. 

 

Pritam Singh

Mr Pritam Singh is a Real estate agent, tour operator and
short-term rental trader based in Calangute Goa. He s main source of income is
commissions/brokerage from real estate sales like apartments, villas, office
spaces and short-term rentals. Mr Pritam also hosts on Airbnb. Whilst not
owning, renting or sub-letting any of the homes, Pritam has listed homes of
other homeowners and property managers (themselves not on Airbnb) on Airbnb.
Pritam negotiates room tariffs with the home owners / Property managers, on
Airbnb he marks aforementioned tariffs up anywhere between 10 – 50%. i.e. Ex.
Pritam will negotiate the per night room tariff as Rs 8000 per night for a 3-bedroom
Villa with the homeowner. On Airbnb, he will mark it up to anywhere between
9000 – 15000 Rs. He also sells these spaces through to his vast offline network
built through the years. Pritam benefits largely from a host of factors
mentioned in the above two cases such as Airbnbs marketing prowess and network,
host guarantees/protection, Payment securirty, reviews etc he also benefits
from Airbnb’s Free to list policy where anyone can put up a listing provided
you comply with legal and Airbnb’s requirements. You need not be an owner or
tenant to give out your property on Airbnb provided you satisfy the
requirements. Working exactly as a middle man Pritam is not the real “Host” .
After a booking is complete he routes the guest to the respective listing owner/manager,
pocketing his commission. Thus Airbnb is a great platform for Pritam to
supplement his revenue.

 

 

Questions
and learning points

 

Role of
Airbnb?

 

Sharing
economy and its advantages for casual hosts?

 

Role of
technology?

 

 

References

 

Statista 1 https://www.statista.com/statistics/233223/travel-and-tourism–total-economic-contribution-worldwide/

 

Statista
2 https://www.statista.com/statistics/247264/total-revenue-of-the-global-hotel-industry/

 

Airbnb 2017b https://press.atairbnb.com/fast-facts/

 

Airbnb
2017d https://www.airbnb.co.in/trust

 

 

 

https://www.ibef.org/industry/indian-tourism-and-hospitality-industry-analysis-presentation

 

Goa Tourism
2015 http://www.goatourism.gov.in/statistics/230