Memo Airbnb assessment PDF

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This is a memo to a firm that contains Consulting standard information....

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Team 9: Aaditya Srivastava, Adam Theis, Vishal Panjwani, Shawna Ohumay and Maria Carolina Queijo

Subject: Initiation Memo Team 9 - Airbnb

Background: Airbnb, the tech travel company founded in 2007 that allows individuals to rent out their homes, was hit hard by the initial onset of the Covid-19 pandemic. Within a span of 8 weeks during the first quarter of 2020 they lost 80% of their business. This crisis moment led founder and CEO Brian Chesky to completely transform the organizational efforts of the company. He laid off 20% of their workforce, which led to an additional loss of 20% of employees who left on their own. He also underwent a total reorganization of the company that saw a reconsolidation of decision making to the CEO and top management positions. As the pandemic carried on for longer than many anticipated the demand for airbnb stays surprisingly grew, due to the safety this type of accommodations offered the customers. Airbnb has certainly bounced back from their low point in March of 2020. By doubling down on their strategy of long term stays they have slowly gained revenue to the point where they had their most profitable quarter ever in Q3 of 2021. Problem and Complications: 1) 25% of revenue is from stays that are longer than 1 month. Plus long term stays is Airbnb’s fastest growing segment. Airbnb is changing their strategy to incorporate the new work from home revolution, but there is a significant chance that businesses will allow their workers to work from home. For example many organizations are opting for ⅖ days remote compared to 100% of their times remote. This has the potential to threaten a significant amount of Airbnb's revenue moving forward. 2) Disrupted travel has forced property owners to look for other income avenues. The number of listings on Airbnb has gone down from 7M in 2019 to 5.6M in 2021. As travel is coming back this supply crunch combined with higher

opportunity cost due to rising rents has caused the Average Daily Rate (ADR) to shoot up from 113 in Q4 2019 to 150 in Q4 2021. 3) Average Cancellation rate is higher than ever. Flexible bookings option has forced property owners to pay back the customers and concessions being offered from Airbnb are miniscale. It is forcing hosts to lose trust on the platform and diversify by listing their property on other platforms. Solutions/ Approach:

In order to resolve the above-mentioned problems, we analyzed the situation based on three criteria: 1) Travel and tourism market: customer preferences, competition, disruptions, alternatives, regulations 2) Airbnb: current revenue and costs, brand, customers, differentiation, channels, capabilities 3) Feasibility: opportunity costs, risks (operational, financial), strategy (organic vs inorganic) Our critical analysis enables us to recommend the following solutions:

1) Flexible pricing model to accommodate last minute bookings and cancellations 2) Target new customer segment with flexible date requirements: 40% of the recent 500 million searches had flexible dates requirements 3) Provide destination stay options and accommodation in near urban city locations to actively overcome shortage of listings 4) Use of technology to actively monitor and adapt change in booking trends and make property listing and selection easier 5) Partner with governments and local authorities to find new avenues of travel revenue streams 6) Partner with healthcare and other ancillary service providers to develop a safer and more hygienic stay alternative....