Airbnb is a company that operates internationally and deals with accommodation services in 190 countries (Airbnb Inc., n.d.). The business attracts many people in the respective countries and introduces them to the business venture of sharing their houses with guests for a given period for a fee. The company uses its website to make the guest and the host acquainted with each other. It is a new invention in the hospitality industry. The founders of the organization are Brian Chesky, Joe Gebbia and Nathan Blecharczyk (Helm, 2015). The founders are very knowledgeable in their business because, in 2014, they managed to have 10 million transactions. The implications of this figure are that the prominent hospitality institutions like the Intercontinental Hotel Group and the Hilton Worldwide might lose their business to this company. The Airbnb brought changes to the travel and tourism industry raking in billions of money to the directors as well as the other homeowners. The success of the company is very dangerous to the traditional hospitality industry because of the ease and flexibility of acquiring accommodation as well as the lower fee compared to the hotels, which means that this is a more convenient alternative to various tourist accommodations. The company and the volunteer owners of homes have in some instances brushed shoulders with the law of the various jurisdictions due to the issue of legality. The current essay seeks to examine how the company utilizes the 7Ps in the market mix as well as the reasons why the hotel industry is in danger.
Incorporation of the 7Ps in the Operations of the Firm
Place New Order
The process is widely discussed in the service provision industry as it sets the guidelines for the steps and speed of delivering the product to the customer (Bhasin, n.d.). The traditional hospitality industry subjected the customers to early and hectic reservations due to the shortage of rooms. However, the Airbnb Company made the process easy and increased the speed of availability of accommodation to the clients by pooling large numbers of hosts to offer adequate accommodation to the tourists (Helm, 2015), and thus allowing them to book accommodation at their pace. Additionally, the customer can quickly access accommodation over the internet through mail exchanges with the hosts.
The service products in the accommodation industry are intangible and thus the physical evidence is necessary to improve the customer experience in the host institution (Bhasin, n.d.). Airbnb values the physical evidence to meet the customers needs, and this is achieved through the creation of a serene environment, well-furnished offices, accommodation and conference facilities and by means of encouraging the hosts to make their houses decent and attractive to improve the aesthetic value of customer's satisfaction. The company dedicates a space of 170,000 square feet to its head offices and photographic works to please the visitors and sell the place (Helm, 2015).
The promotion of service products is essential as the brand must distinguish itself from others to win the support of the majority customers and this involves intensive advertisements (Bhasin, n.d.). Airbnb is engaged in in the promotion of the service products through advertising and in doing so, the company emphasizes on the narrative of the humble beginning although the directors had challenges in paying their rent, and they started the business with only three air mattresses (Helm, 2015). The business was launched at the time when Gebbia and Chesky were fresh graduates sharing a house. They took advantage of a conference near their residence where they laid three mattresses on the floor and charged visitors a fee to spend the night in their house. From that time, they developed a website to attract guests and hosts and to create a connection with them. They took advantage of several other events to attract clients and hosts through emails and the Facebook application, and their business quickly gained recognition in several cities and countries. This was the beginning of their success (Helm, 2015). They also beseeched the organizers to send emails to the guests notifying them of the new accommodation options. The group also took photos of the host apartments and posted them on the website to attract customers, which convinced them that the houses were safe for accommodation as an alternative to the hotels.
Pricing is a crucial element in the production service industry that depends on the labor, material costs, as well as the indirect/overhead costs such as the playing of music or the live bands (Bhasin, n.d.). However, these costs may drive the prices of services high and, therefore, discourage the customers. However, the Airbnb has an advantage of the minimization of costs as the customers share the facilities and everything in the house with the host thus minimizing costs. This benefit enables the company to keep the prices low compared to the hotel industry and thus attracting more clients. For instance, in San Francisco, accommodation in a hosts house is as low as $150 while in the traditional hotel industry, it is as high as $400 per night (Helm, 2015).
People matter in the service provision sectors as they are the ones who define the service offered. The employees can, therefore, make or ruin the business and thus it is important to consider who is fit for this or that job (Bhasin, n.d.). Regarding the issue, Airbnb visits homes of the hosts to learn about their culture as well as their way of life to ascertain whether they are fit to accommodate customers and offer them quality services in their houses. The company also trains its workers to acquaint them with the required procedure of providing services to customers (Helm, 2015). The firm also includes holders of Masters and Doctors degrees in its workforce to improve customer experience by providing high-quality services.
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The place is vital for the service provision industry as it influences the earnings of the firm. Place refers to the location, and it is very critical because a business needs a place that would accommodate many people to attract as many customers as possible (Bhasin, n.d.). The Airbnb used this principle to set accommodation facilities in all places by attracting the members of public to offer their homes as hosts to the tourists. The online platform/website is also a location that is accessible to all people through the internet (Helm, 2015).
Products in a service provision industry are intangible and immeasurable compared to the material consumer goods. Additionally, the products are perishable, and they do not have ownership because the customer pays for the product, after which the production follows and lastly consumption (Bhasin, n.d.). In the Airbnb Company, the customer pays by uploading the credit card number and at the end of the stay the host automatically receives the payment. The management of the company bears in mind that the accommodation services cannot be preserved for the future use, and thus, they take necessary measures to make sure that the hosts are capable of accommodating and offering the best services to the clients. Such efforts include visiting the homes and interviewing the owners in order to identify the level of their competence (Helm, 2015). The firm also employs educated people such as the holders of Masters and the Doctors degrees to improve the workforce quality for the purpose of customer satisfaction.
The Future of the Traditional Hotel Industry
The traditional hotel and accommodation industry is set to lose customers to the Airbnb, and this might lead to losses that are capable of pushing some hotels to closure. One of the reasons for this potential scenario is the lower cost services offered by the hosts. This aspect shows that Airbnb is a cheaper alternative to the tourists; for instance a hotel charging a price as high as $400 in San Francisco for a night is more costly compared to the private apartments costing as low as $150 for a night (Helm, 2015). The fast pace of Airbnb's growth is fascinating as, within less than five years since its foundation, the firm has managed to serve 50 million people. The growth gained more momentum in 2015 as the number of customers reached 30 million, and a fraction of 17 million was registered during the summer season alone (Buhr, 2015). This trend implies that if the numbers keep on swelling like this, the hotel industry might not be able to operate in the free market and thus exit might be the aftermath for some hotels. However, the hotel industry can mitigate such quick development by fine tuning their product services to meet the particular needs of individual customers (Economist Intelligence Unit, 2009). This issue implies that they need to be more flexible in the services they offer to the customers, which means that a client can bargain for a reduction of the charges by choosing what he/she does not want to be included in the service. This move will enable the firms to lower the costs and thus be in a position to lower prices for the customers who request for a discount.
The guests who checked in their accommodations through Airbnb were not from the U.S. alone, but they came from more than 57,000 cities and 150 countries. This data proves that the company is gaining recognition at the global level, and thus, the tourism industry may not have a place for their market (Buhr, 2015). The development is a sign of the current of globalization and the advancement in technology, for instance, the case of Uber Taxis replacing the traditional cabs through price competition; a similar wave will lead to a change in the hospitality industry, and thus the survival of hotels will be at stake. Renewal or improvement of services is an important survival strategy for a turbulent market (Economist Intelligence Unit, 2009). If the traditional hotel industry can find a way of renewing/improving their services while keeping the costs low, then hotels will be in a position to retain customers even in the view of Airbnb growth. Additionally, the management can ensure that the costs of outsourced services reflect the value of what is delivered, and this will keep the costs low (Thornton, n.d.).
The middle-class families that have well-built homes have adopted the Airbnb business idea to supplement their income by renting their private residences for about 66 days in a year, which translates to an additional income of 14%. The invention is likely to attract a large number of people across the globe to rent out their homes, and the company will end up grabbing g a perceptible number of hotel clients to an extent of squeezing the hotel industry to the corner (Buhr, 2015). To ensure that the traditional hospitality industry maintains its competitiveness, hotel managers should ensure that they conduct rigorous advertising as well as refining the processes to promote optimization/reduction of costs as a way of keeping the prices low while maintaining profitability (Economist Intelligence Unit, 2009). Such methods may include the adoption of green energy such as solar and the wind to cut the electricity power costs.
Airbnb is an example of the rapid technological development, which can be explained by the online transactions. The company also signifies the wave of globalization as it has spread to 190 countries all over the world. The company's rapid growth is a reason to worry for the owners of the traditional hospitality facilities as, within four years, the company was able to serve 30 million customers in a year and this means that it averts them from the hotels. The company is also a blessing to the middle-income families as they use the rent to supplement their incomes. The managers of hotels, therefore, need to take steps such as renewal/improvement of services, optimization of processes to cut costs and intensive advertising as a way of securing their businesses.