Hbr airbnb

December 2015

This case was prepared by Professor Mario Capizzani, and Tommy Kim and Stefan Obersriebnig, MBA 2015, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. December 2015.

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Last edited: 1/11/16 1

Airbnb: What's Next? Prioritizing opportunities in Southern Europe

Introduction

It was a sunny Sunday morning in late November 2014 when Jeroen Merchiers, general manager of Airbnb for Northern, Eastern and Southern Europe, was jogging along the beach in the Barcelona neighborhood of La Barceloneta and reflecting about the future of his business.

Shortly before, Merchiers had been promoted from country manager of Airbnb for Spain and Portugal. He reflected on the region’s tremendous growth, how Barcelona had established itself quickly as one of Airbnb’s top five cities in the world based on the volume of annual travelers who used the company (about 900,000 since 2008), and on the city’s bright prospects for the future.

Despite all the success, Merchiers had some concerns. How could Airbnb sustain its recent success? The company had been valued most recently at $13 billion. Now the company needed to prove its potential and demonstrate its capacity to grow further. Brian Chesky, CEO of Airbnb, was considering several growth options: dedicating more resources to expansion in Asia; targeting the premium hospitality segment and focusing on creating “better travel experiences”; and possibly developing vacation rental properties. As someone whose opinion the CEO valued highly, Merchiers needed to be prepared to discuss these options in terms of what was best for Airbnb in Southern Europe as well as worldwide.

Besides weighing the different strategies that would help Airbnb to sustain its growth, Merchiers also needed to evaluate how to mitigate some key risks that had surfaced. Uber, a ride-sharing service platform founded in 2009, had been plagued by negative press coverage recently. As an example, Uber’s drivers, who by the company’s design operated as individuals, had begun grouping together in some cities to petition for higher wages. Given that Airbnb and Uber were both poster children for the “sharing economy,” Merchiers felt that

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2 IESE Business School-University of Navarra

Airbnb: What's Next? M-1339-E

it was important to think of how best to avoid or mitigate similar “unionization” problems and how best to ensure that both hosts and guests would remain happy endorsers of the platform. What would be the right measures to achieve that goal?

Lastly, much like in other countries, Airbnb Spain had been accused recently of failing to comply with the state’s regulatory framework, given that hosts were not officially regulated lodging providers (and hence were not paying any hospitality tax). He needed to prepare for how Airbnb Spain should position itself regarding these legal discussions and determine possible outcomes. Could he afford to ignore the pressure generated by the press or does he need to take action – and, if so, what action should he take first? The company had reached agreements to collect city taxes in Portland, Oregon, and in its hometown of San Francisco, California. Several other European cities, such as Paris, were considering similar agreements.

Company Background

Airbnb had become an alternative solution for short-term home renters and providers worldwide. Since its inception in 2008, Airbnb had become the leading marketplace offering a variety of accommodation around the world (see Exhibits 1 and 2 for Airbnb’s early user growth rates.) By the end of 2014 it had more than 25 million guests and more than 900,000 listings in 34,000 cities and 190 countries – almost every nation in the world except for the likes of North Korea, Iran, Syria, Cuba and the Vatican City State.