Introduction

The sharing economy encompasses the socioeconomic ecosystem, which allows individuals to share their physical and human resources with strangers. This process is often enhanced by the digital platform of a third party. Moreover, the emergence of sharing economy has propelled the collaborative use of under-utilized inventory through a mechanism such as fee-based sharing.[1] Currently, two of the largest organizations in the sharing economy include Uber and Airbnb. With Airbnb, the company offers consumers with a community marketplace where they can list, discover and book unique accommodations. The company operates in more than 34,000 cities and 190 countries. In the case of Uber, the ridesharing app enables riders to connect to private cars and taxis from their phones. Technological innovations have arguably enabled the rapid growth of sharing economy.[2] The journals I used for this research are those that talk about Airbnb and the hotel industry, the rise of sharing economy and opportunities of digital sharing economy. The paper will explain the impact of a digital platform on the sharing economy precisely the Airbnb.

The Impact of Digital Platform on the Sharing Economy

Different theoretical fields have provided diverse meaning to the concept of platforms. [3]Various authors indicate that the word platform entails a common design pattern that allows a set of stable components to support the ability of the system to adapt. Platforms describe the production of software, distribution and the changing paradigms of the industry that utilizes the platform.[4] In technology, the concept of modularity is perceived as a technique that involves describing and innovating complex systems that include product design. Moreover, the term modularity encompasses a description of how a business must structure its boundaries. The boundaries include measurability, specifiability, and predictability. Modularity tries to give insights into the services that the company wants to make available to the consumers.[5] Airbnb is one of the leaders in modularity. Modules use platforms and markets to operate. The three concepts of modularity include the following.

First, a technical system has a modular structure that depends on the choices made by the system architects. The decision on the modular structure is constrained by the limits of the knowledge and skills of the architects and the physics law.[6] Moreover, the architects can decide to design systems that are more or less modular by considering the location of boundaries between modules. Second, the modularization technique entails splitting design decisions into distinct subsets and developing standards that would define the working together of the resultant modules. In the situation when the designer separates the modules properly, the decision on one module would have an adverse effect in the other modules. Therefore, the architects can decide to locate design tasks to different firms.

The third concept states that knowledge about modules can be separated. The only requirement for designers is to have access to the design rules. When designing modules, the designer of module A do not need to possess the specific skills and knowledge about the internal structure of module B. On the other hand, designers need to share knowledge of a module, or they might risk the success of their activities.

Modularity has enabled firms such as Airbnb to profit from innovation and Internet Protocol (IP). A Firm uses knowledge to gain profits and competitive advantage.[7] However, firms should only use knowledge so long as rivals cannot imitate or substitute. In a situation when a company like Airbnb manages its knowledge resources properly, it will generate profits that will enhance its growth. Moreover, the impact of modularity is more than accelerating change or heightening competition in the industry. Module designers in the hospitality industry have moved in and embraced technology alliances and employee agreement as they compete to innovate. Firms such as Airbnb generate a lot of revenue and profits in such market.

Additionally, the emergence of digital technologies has boosted sharing by lowering costs involved in various transactions. Currently, with the existence of the sharing economy, communities can share their resources by making a decision rather than out of necessity.[8] Airbnb uses information technology that is available through a web-based platform to facilitate peer to peer transaction. Moreover, Airbnb controls the quality of services it offers to the customers by depending on the user-based rating system. Similarly, the system builds trust between the service provider and customers who are new in the market.

Another impact of modularity is that it seed the cloud. When making software decisions, designers often tend to consider options such as a virtual server, public cloud, physical servers or private could that will offer the best platform for an upgraded application. Therefore, modularity is significant since it plays a role in the allocation of specific functions away from the facility. Currently, Airbnb is exploring cloud approaches as they try to determine platform options that will help the company to reduce costs and increase agility.

How Platform Owners Execute Control over the Platform

Many individuals keep on contemplating about the ownership and control of the convenient apps and websites that allow us to rent apartments. The slogans of the marketers in the sharing economy is that the sharing will get rid of the need for owning.[9] It is possible for people to share cars, labor, and houses by trusting the platforms such as Airbnb and Uber to provide. Given all that it is clear that ownership in the sharing economy matters a lot. The owner of the platform such as Airbnb that helps people to share has the power to decide on those that will accumulate wealth and the approaches they will use to accumulate such wealth. The perception that ownership matters is a focus in the cooperative model.[10] With cooperatives, the platforms are owned and controlled by the people. Members of the cooperative benefit from the profits or returns. In the case of Airbnb, the company does not have co-ownership that will make choices for the business. Members of the Airbnb have to answer to the investor of the company.

Property owners benefit from Airbnb through the free listings. The Airbnb allows travelers or any other individual to browse the listed space and choose the one that they think would satisfy their needs. Regarding the Airbnb business model, consumers perform their bookings and engage in the monetary transaction in the platform.[11] The platform allows parties to engage in a rental transaction without owning the place. The Airbnb Company earns its revenue from the following sources. First, property owners are charged 10% commission on every booking that is done on the Airbnb platform. Second, the company charges travelers approximately 3% as transaction fee after their bookings have been confirmed.

Additionally, according to the chief marketing officer of Airbnb, Jonathan Mildenhall, Airbnb is in the category of a hospitality industry but not a hotel chain. With the hotel chain, the owner of the company has control over the customer experience. The company controls close to 100% of its activities and customer experience. Conversely, in the case of Airbnb, the company owns and controls approximately less than 10% of customer experience.[12] The company’s ownership of the customer experience is more affected since it controls less for the property owners. If the company controls 10% of the client’s experience, then the users control the remaining 90% of the platform.

Although hosts of Airbnb have much control over the experience of the brand, the company manages its brand by vetting the hosts. Airbnb vets the hosts so that they can align with the mission of the company and not just for the functional requirement. Also, the company creates a strong incentive for its hosts. The company enables its hosts to provides customers with greater experience by creating financial and social incentives.

The Issue of Sharing on the Airbnb Platform

The sharing platform allows transaction partners to search one another, find what suits them and complete a transaction. A successful platform such as the Airbnb ensures that they reduce the friction that may increase the cost of the transaction or make it more cumbersome thus discouraging potential customers.[13] In the situation when customers have diverse preferences, the platform need to define its services. A narrow definition of the product means that the seller will exclude other products or services that the buyer might consider important.[14] With a broader definition of the product or service, the company offers diverse products that the customer might find easy to choose. In the case of Airbnb, the company enables potential renters to search for many listing. Besides, the platform allows customers to consider a broad array of features before contacting the host. Although Airbnb connects people to rooms, members do not share their equity.

Sharing economy such as Airbnb ensures that the hosts offer consumers with goods and services at lucrative prices because they only use underutilized assets. For instance, renters can decide to list their residence on Airbnb as short-term rentals if they would like to use them more fully.[15] In most cases, since hosts have their residence as key assets, they will require less capital to enter the market thus this lowers the barrier to entry and other operational costs. Also, Airbnb gives hosts the flexibility to choose when to offer their services.[16] Owners can decide to rent their residence on periods when the demand for rooms is high, or they have underutilized time.

Customers for Airbnb are those that add up to the revenue of the company. The customer can be a host who would like to rent his/her residence and list it on the Airbnb platform.[17] Similarly, the customer can be a traveler who wants to book a space via the platform. Airbnb finds its customers through the social media platform, promotional offers, referrals and digital marketing that include using internet adverts. In recent years, Airbnb has invested significantly in developing a community and establishing partnerships with reputable institutions and websites.[18] The company facilitates its platform for knowledge sharing. The host groups are integrated to embed hospitality standards and offer a platform to exchange information. A growing company like Airbnb need to have an environment conducive to everyone and connect members to the shared mission.

Airbnb Company is a purpose-driven brand. The company is not driven by the need to sell products or delivering one specific experience, but the company unites their hosts and customers to ensure that they make travel personal.[19] The company focuses on participating in the sharing economy to help shape the experience of the city. When you can prosper at offering services under your control, and ensure that the incentives you offer to your customers and brand representatives conform to the standards of the company, then a small reduction in the popularity of the brand will still allow you to achieve your goals.

Conclusion

The emergence of networked hospitality businesses in recent years have been propelled by economic benefits that firms may enjoy. Besides, the emergence of sharing economy has been due to the need to meet the various needs of the consumers ranging from accommodation to renting cars. Airbnb is one of the platforms that allows its users to share their underutilized goods and engage in economic transactions. Airbnb offers stiff competition to local hotels regarding prices for the services; however, the platform offers experiential value that most travelers find interesting.[20] The benefits of the company to the consumers includes diverse offers, allowing people to stay within the residential neighborhood and enabling contact with the locals. Due to stiff competition offered by Airbnb to local hotels, the prices in the hospitality industry has reduced, which is good news for travelers. Also, consumers earn additional income by offering goods and services through the sharing economy platform.

 

Bibliography

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Baldwin, Carliss Y., and Joachim Henkel. “The impact of modularity on intellectual property and value appropriation.” Harvard Business School. 2012.

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[1] Koen Frenken and Juliet Schor, “Putting the sharing economy into perspective.” Environmental Innovation and Societal Transitions (2017). http://dx.doi.org/10.1016/j.eist.2017.01.003

[2] Vasilis Kostakis and Michel Bauwens, Network society and future scenarios for a collaborative economy (Springer, 2014), 78.

[3] Susan, McLean. “The rise of the sharing economy.” Computers & Law Magazine of SCL 26, no. 1 (2015): 1

[4] Jeroen, Oskam and Albert Boswijk. “Airbnb: the future of networked hospitality businesses.” Journal of Tourism Futures 2, no. 1 (2016): 22

[5] Ahmed, Nabil Sultan. . “Reaching for the “cloud”: How SMEs can manage.” International journal of information management 31, no. 3 (2011): 273

[6] Carliss Baldwin Y., and Joachim Henkel. “The impact of modularity on intellectual property and value appropriation.” (Harvard Business School, 2012), 1-39.

[7] Carliss Baldwin Y., and Kim Calark. “Managing in the age of modularity.” Harvard Business Review. 1997. Accessed March 15, 2017. https://hbr.org/1997/09/managing-in-an-age-of-modularity

[8]Jingen, Lena Liang, HS Chris Choi, and Marion Joppe.”Understanding repurchase intention of Airbnb consumers: perceived authenticity, electronic word-of-mouth, and price sensitivity.” Journal of Travel & Tourism Marketing (2017): 2.

[9]McLean, Susan. “The rise of the sharing economy.” Computers & Law Magazine of SCL 26, no. 1 (2015): 1

[10] Mark A. Goodburn and Steve Hill, “The cloud transforms business,” Financial Executive 26, no. 10 (2010): 35.

[11]Natalie Stors and Andreas Kagermeier, “Motives for Using Airbnb in Metropolitan Tourism—Why do People Sleep in the Bed of a Stranger?” Regions Magazine 299, no. 1 (2015): 17

[12] Georgios Davide Proserpio Zervas and John W. Byers, “The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry,” Journal of Marketing Research (2014), 10.

[13] Sudheer Thakur, “Airbnb shows its hand. What next?” Hospitalitynet, September 24, 2015, Accessed March 15, 2017, http://www.hospitalitynet.org/news/4071878.html

[14] Dara Kerr, “Airbnb starts collecting taxes in Paris its biggest market,” C/net. August 25, 2015, Accessed March 15, 2017, https://www.cnet.com/news/airbnb-starts-collecting-taxes-in-paris-its-biggest-market/

[15] Venkat Ramaswamy and Francis J. Gouillart, The power of co-creation: Build it with them to boost growth, productivity, and profits, (Simon and Schuster, 2010), 107.

[16] Niam Yaraghi and Shamika Ravi, “The current and future state of the sharing economy,” Brookings, December 29, 2016, Accessed March 15, 2017, https://www.brookings.edu/research/the-current-and-future-state-of-the-sharing-economy/

[17] Sebastian Olma, “Never mind the sharing economy: here is platform capitalism,” Institute of Network Culture, October 16, 2014. Accessed March 15, 2017. http://networkcultures.org/mycreativity/2014/10/16/never-mind-the-sharing-economy-heres-platform-capitalism/

[18]Alex Moazed, “Why companies like Uber, Airbnb, and Slack require unique branding,” Inc.com, January 8, 2016, Accessed March 15, 2017, http://www.inc.com/alex-moazed/why-companies-like-uber-airbnb-and-slack-require-unique-branding.html

[19]Natalia Mona Moufahim Yannopoulou and Xuemei Bian, “User-generated brands and social media: Couchsurfing and Airbnb,” Contemporary Management Research 9, no. 1 (2013): 85.

[20] James Vincent, “Airbnb start collecting tourism tax in Paris, its most popular destination,” The Verge, August 26, 2015, Accessed March 15, 2017, http://www.theverge.com/2015/8/26/9209603/airbnb-tourist-tax-paris

 
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