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Airbnb: The Popular Home Away From Home Service

A Product Evaluation Story

Arif Islam

Background

Airbnb wants to be the one stop shop for booking vacation getaways from a

peer-to-peer economy⁠

based model also knows as a

sharing economy⁠

. This allows for fast and convenient getaways for travelers for various vacation reasons and even business travel.

Renters can rent a vacation home from Homeowners easily, and in general, for a much more affordable price for both vacation getaways and business travel when compared to popular digital travel agencies like

Orbitz.com⁠

Expedia.com⁠

Product Evaluation

Before we dive into areas of improvements and possible solutions, it’ll be important to evaluate the product in various categories in order to get a sense of strengths and weaknesses:

Product Evaluation Scorecard

Product Evaluation Scorecard

Customer

Meaningful Problem To Solve? Absolutely, disrupting the vacation industry from a peer-peer economic- based model is makes it appealing to any adult traveler

Product

Differentiators? Offers ‘Experiences’ both online and in-person to help expand upon the ‘Places to Stay’ area for which Airbnb is known for

Finances and Revenue

Total Funding: 1 billion

Market Share

Estimated Market Share of Vacation Rentals: ~20%

Competition

Booking.com: Recently released a ‘Homestays’ section

Partnerships

Local States & Government: Partners with states and local governments to help promote tourism recovery from the COIVD-19 pandemic

Improvement Areas

Transportation: Non-existent which is a key component for any vacation or business trip

Area

Customer

Criterion 1

Meaningful Problem To Solve? Absolutely, disrupting the vacation industry from a peer-peer economic- based model is makes it appealing to any adult traveler

Criterion 2

Segmentable Market? Yes, whether it be by demographic, age or traveling trends. 60% of bookings in 2020 were from millennials, just as an example. Most of the Renters on Airbnb, are young millennials that usually travel in pairs of 2-4 person groups.

Criterion 3

Customer Accessibility: Any customer can easily sign-up as a renter and begin to search for their getaway. Furthermore, the homeowner signup process to induce an easy-to-setup peer-peer model can be done within minutes as well

Criterion 4

Customer Loyalty: 32 NPS via https://www.comparably.com/brands/airbnb#nps

Overall Score

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Resources

⁠

Airbnb Fourth Quarter and Full Year 2020 Financial Results⁠

⁠

Airbnb - Crunchbase Company Profile & Funding⁠

⁠

Airbnb (ABNB) Stock / Share Price, Revenue and Financial Statements | Craft.co⁠

⁠

Airbnb Competitors: an Overview of the Rental Market | Smartbnb⁠

⁠

68 Airbnb Statistics: 2020/2021 Market Share Analysis & Industry Growth | CompareCamp.com⁠

⁠

Acquisitions by Airbnb⁠

⁠

Summary

Overall the takeaways from Airbnb are that it is a strong product and has an extremely large presence, as well as market share, of the vacation housing rental. Though there aren’t noticeable large problems within the business itself, there are some shorter-term strategies that could be applied, which we will dive into below.

⁠

Problem Areas

A Key Part of The Renter Journey That Needs to Be Addressed

As the infamous 2020 COVID-19 Pandemic comes to a close, one of the key areas that people around the world are starting to see a spike in, is travel. As the #1 home rental platform, Airbnb’s traffic and home rentals are beginning to rise again, which reintroduces a common vision that has yet to be solved for the business:

‘When going on vacation, Airbnb Renters shouldn’t have to worry about transportation, so that they can enjoy their vacation knowing that they have the means to explore.’

A common misconception is for someone to purchase a rental car, but if you closely look at the journey of renting a car it may seem easy, but in reality, can be a nightmare. Such issues can include:

Long lines

Rental Car unavailability

Limited features

Expensive/Inflated rates

Poor customer service

Additionally, as Airbnb sees heavy utilization into in-person

Experiences⁠

and its offerings, Renters may want to have travel accommodations to those events as well.

Considerations & Questions

Stakeholder Group

Item to Validate

XD/Prod

From a UX perspective, would introducing this experience introduce any friction to the current booking experience?

User research will be needed to validate this is a problem to solve for and the right solution to address it for both renter and homeowner.

Competitively, what to companies like Vacasa or VRBO do to address this potential problem/need?

Engineering

Can we leverage our existing homeowner experience to upload a homeowner’s car and details to reduce effort?

Legal

What legal implications (insurance, liability, ToS) do we have to account for? Is this even doable?

Data Science

How many Airbnb renters purchase experiences driving distance (> 1 mile) with their Airbnb home rental? Where do these purchases occur (city vs rural)?

Product Support

How many of our users ask for this some kind of transportation service as an improvement/enhancement request from both renters and homeowners?

There are no rows in this table

⁠

What Data is Available to Us? What Data Do We Need?

How many Airbnb Homeowners have a personal vehicle?

Where are the top rental car cities/states geographically, in relation to number of Airbnb Rentals?

How many Airbnb renters purchase Experiences that have a driving distance > 1 mile with their Airbnb home rental? Where do these purchases occur (city vs rural)?

What/Where are the largest number of Airbnbs that can only be accessed by car in relation to an airport?

Where are current car rental rates the highest?

What cities offer the most Uber or Lyft

Which cities is Uber struggling the most in comparison to Lyft

Who are our current casual, core, and power users?

What are the top buying/travel behaviors of our Renters and Homeowners?

⁠

Solution Alignment

Key Features

Below, we will outline the high level experiences that we will want to introduce in a phased approach in terms of the ‘Adding a Ride’ initiative. This will be done in phases over a 3-6 month time-boxed period. A key goal here is to maximize our booking/service fee with minimal development costs and amount of effort on our part in order to reduce/maximize the following:

Implementation and associated costs

Improve our reach and impact to renters

Improve our brand with homeowners and renters

Phase 1: Renters can rent a Homeowner's Vehicle for Places to Stay

Phase 1: Renters can rent a Homeowner's Vehicle for Places to Stay

⁠

Phase 2: Uber Integration for Experiences

Phase 2: Uber Integration for Experiences

⁠

Phase 3: Rental Care Integration for Places to Stay

Phase 3: Rental Care Integration for Places to Stay

⁠

Add a Ride Goals

Our goals within the first 3 months for Add a Ride are as follows:

Implement Phase 1 and start build on Phase 2/3 within the first 3 months

Implement Phase 2/3 between 3-6 months

An increase in Airbnb’s monthly MRR by 10%

A Higher NPS for the renter and the owner within 3 months of launch

An increase in the average passive income per homeowner by 5% within 5 months

Metrics for Success

Metric

What does it measure

Related OKR

Increase MRR by 10%

Airbnb’s Monthly Recurring Revenue. By increasing the standard fee rate for both the homeowner and renter by 1.5% we should see enough revenue to hit 10% mark.

Sales:

Objective: Increase MRR for the Airbnb platform

Key Result: Increase the MRR by 10% overall for the Airbnb platform for Q4

At least 20% of Airbnb Homeowners have added a personal vehicle

Feature adoption - we want to make sure the feature is adopted by homeowners, and in turn renters

Product:

Objective: Add more value for homeowners to increase retention

Key Result: Increase Homeowner Activation metric by 3%

There have been at least 1000 Add a Ride add-ons purchased by renters

Feature adoption - measures how many times add-ons were actually purchased in combination with an Airbnb

Product:

Objective: Add more value for Renters to increase retention

Key Result: Increase Renters Activation metric by 5%

Renter NPS increases by 15

Brand/Loyalty

Product:

Objective: Increase Brand and Loyalty to Airbnb for Renters

Key Result: Increase Renter NPS by 20 points by end of year

Homeowner NPS increases by 20

Brand/Loyalty

Product:

Objective: Increase Brand and Loyalty to Airbnb for Homeowners

Key Result: Increase Homeowner NPS by 20 points by end of year

Average increase in passive income for the owner

Brand/Loyalty

Product:

Objective: Increase Brand and Loyalty to Airbnb for Homeowners

Key Result: Increase Homeowner NPS by 20 points by end of year

Support calls around this feature are 10% below the current average

Quality/Support

Support Heroes:

Objective: Reduce the average time to resolution for an open case

Key Result: Increase the time to resolution for open cases by 10% by Q4

# of bugs deemed as severe/critical is below 10, within a month of launch after each major feature

Quality

Engineering:

Objective: Reduce the amount of bugs for net new features introduced

Key Result: Decrease the amount of development allocated of Critical Issues by 10% in Q4

There are no rows in this table

⁠

Key Flows

⁠

Owner flow⁠

⁠

Renter Flow⁠

⁠

Epics Tied to OKRs

Epics Tied to OKRs

Apr 26 - Oct 4

Launch Phase 1 for Add a Ride - Homeowner’s Vehicle

Increase MRR by 10%

Renter can rent vehicle

Closed Beta in select cities

Support Hero Training

GA Launch

1000 Homeowner vehicles have been rented

Updates to payment and confirmation screens

20% of Homeowners have added a vehicle

Homeowner can add a vehicle

Marketing to Homeowners about new feature

Airbnb NPS grows by 10 points

Implement Qualtrics Survey during Beta and GA launch

Launch Phase 2 for Add a Ride - Uber Integration

Launch Phase 3 for Add a Ride - Car Retnals

Apr 26

May 17

Jun 7

Jun 28

Jul 19

Aug 9

Aug 30

Sep 20

Renter can rent vehicle

Closed Beta in select cities

Support Hero Training

GA Launch

Marketing to Homeowners about new feature

Implement Qualtrics Survey during Beta and GA launch

Launch Phase 2 for Add a Ride - Uber Integration

Launch Phase 3 for Add a Ride - Car Retnals

⁠

Strategy and Economics

How does Adding a Vehicle feature improve the Business?

If we were to increase the service for renters by 1.5% on average, then we can improve our MRR from the Renter channel. Currently, there is a non-refundable fee for renters that holds at 14.2%. With the introduction of the vehicle rental, we would increase it to 15.7%

If we were to increase the service fee for homeowners that include a vehicle by 1.5%, then we can improve our MRR from the Owner channel. Currently, there is a 3% charged fee to owners with every booking. With the introduction of the vehicle rental, we would increase it to 4.5% per booking.

If we were to partner with uber and take a share of the booking fee, we could increase our revenue by x%

If we were to partner with different rental car vendors (AVIS, Enterprise etc.) and take a share of the reservation fee, we could increase our revenue by x%.

TL;DR

Airbnb connects travelers seeking affordable lodgings with hosts who offer their properties as short-term rentals.

Renters are charged a nonrefundable service fee of under 14.2% based on the listing. We would increase this rate by at least 1.5% for each booking.

Hosts are also charged a fee of no more than 3% for every completed booking.We would increase this rate by at least 1.5% for each booking.

Cited from:

⁠

Resources:

How Airbnb Makes Money⁠

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Dependencies & Considerations

Technical

Reusable components from Adding a home for renter flow

Additional data tables and endpoints needed from the BE to call for client-side apps:

Owners to add/edit car listings

Renters to be able to modify their listings

Renters to be able to get refunds allocated to car rentals

Legal

What are the potential legal liabilities for both the renter and homeowner

Do we need to partner with any insurance providers in terms of protections

What do we do incase there is an accident? What services do we provide as Airbnb?

What happens if there is a dispute between the renter and owner regarding the vehicle’s condition pre/post stay?

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