The Process Selection and Design in Airbnb

Subject: Company Analysis
Pages: 12
Words: 3271
Reading time:
12 min
Study level: Master

Introduction

Organizational management is an area of ​​management; its primary goal is to form an organization as a system designed to implement its intended purpose. The key figure in this type of management is the manager, who constructs a business system from many disparate elements – personnel, finance, technology. In this process, the main emphasis is on setting and decomposing goals, choosing performers and distributing responsibility. Thus, the main difference between organizational management and other types of management is its complexity, while financial, personnel and different types of management are more narrowly focused and function within the framework of a previously built and configured organizational system.

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The resort aims at exploring the process selection and design on the example of the company called Airbnb, providing services for travelers. It analyzes the company’s performance at present and factors that influence service process design. The second part of the assignment discusses the five performance objectives, how they are achieved, and some recommendations according to the recent events or expected tendencies. The conclusion consists of a summary of theoretical approaches concerning the service sector and an overview of the company’s perspectives.

Airbnb Overview

Airbnb is a two-way, community-based online marketplace that helps connect travelers with local hosts. After more people started using the service, the company improved the website. Click-through rates also improved as rented space images continued to improve. These days, Airbnb has a presence in over 34,000 cities and more than 190 countries (Oskam, 2019). The company has 1.5 million listings, served over 35 million guests to date (Oskam, 2019). Airbnb sees 140,000+ people staying at home every day. In 2012, it overtook Hilton Hotels for the number of booked nights (Oskam, 2019). In March 2017, the company was valued at $ 31 billion, and the personal fortune of its founders, Brian Chesky, Nathan Blecharczyk, and Joe Gebbia, was $ 1 billion each (Oskam, 2019). Airbnb headquarters is located in San Francisco, California, USA.

Service Process Design

At present, the role of organizational management is constantly growing. The fact is that due to high competition, enterprises are forced to promptly bring new products to the market, which requires constant readiness for organizational changes. Modern technologies of corporate management are based on business modeling using modern information technologies. These models are designed to describe as accurately as possible all the key aspects of the enterprise. With their help, the unity of the strategic and tactical control loops is ensured, and structures and processes are optimized.

A service is a product of labor, acting not in the form of a material product but in work itself, performing certain functional operations in modern society. A service is a process carried out to provide convenience or assistance to meet the consumer’s needs (Harmsen, de Haan, and Swinkels, 2018). It results from direct interaction between the producer and the consumer in the form of the contractor’s activities to meet the buyer’s needs. Service quality is usually assessed through customer loyalty.

Concerning the service business, it is a field of activity whose primary purpose is to provide customers with a specific service or set of services in interaction with them and their direct participation. Within the security service framework, two types of service are distinguished: service in the environment of the service enterprise and service in the client’s environment (Harmsen, de Haan, and Swinkels, 2018). Internal service provides all departments and services within an organization with the services necessary to support the organization’s growth.

Factors that Influence Service Process Design

Process design aims at a continual relationship between required output and the intermediate processes. Regarding Airbnb, one of the most critical challenges facing the hospitality business is developing a flexible organizational structure designed to improve guest experience, financial performance and competitive advantage. Thus, the effectiveness of process design decisions depends on several factors that operation managers should take into account. These are the nature of demand, flexibility, technological capacity, and quality of customer contacts. The factors also include market competition, capital security, and social responsibility.

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Nature of Demand

The nature of demand shows the degree of popularity of the service, its acceptability for the consumer and commitment to the product, and the frequency of use. Airbnb is a large company with a presence in almost every country. Its unique operation model has proven reliable, as people prefer the service over hotels for affordable and comfortable living in new places (Suess et al., 2020). For instance, even in large cities, there are hotels only in some areas; in some, they do not exist at all (Suess et al., 2020). In contrast, Airbnb is there wherever there is demand. The service is popular, regardless of season, as Airbnb uses technology to make excess capacity available in places where it used to provide inferior services.

Flexibility

The second factor is the company’s flexibility, in other words, its response to changes in demand. It has become the most important aspect determining the company’s level of competitiveness due to the constant growth in the rate of change in consumer preferences. Due to the COVID-19 pandemic outbreak, travelers are increasingly interested in housing close to home. Those planning a trip after a while need more flexibility in modifying or canceling reservations. In 2020, to help tourists plan their trips with confidence, Airbnb has made search and booking more flexible (Nhamo, Dube, and Chikodzi, 2020). The company has added a filter for accommodations with more convenient cancellation policies to make finding suitable accommodations easier (Nhamo, Dube, and Chikodzi, 2020). Relaxing the rules will help attract guests during this challenging time. However, the policy may change depending on the decisions of the local community and authorities.

Organizational Advantages

The way a business is organized has a significant impact on production costs and on a company’s ability to offer a differentiated product or service. This factor includes controls such as structure, processes and systems. The most successful Internet companies take on the role of a networking platform and make money on two-way trading platforms connecting producers and consumers. These companies include eBay, Seek, Uber, Booking.com, and Airbnb.

Compared to competitors – traditional hotels – Airbnb can offer customers both its price advantages and a higher quality of service. Typically, Airbnb will have cheaper, more spacious accommodations and possibly additional amenities such as a kitchen or laundry (Oskam, 2019). The company has managed to network service providers who, from time to time, willingly rent out their properties and at a price much lower than hotel rooms (Oskam, 2019). The explanation is simple: it is both an opportunity for owners to generate income from an asset that would otherwise remain unused, for example, a guest room, and an alternative to self-renting a home for a long time (Oskam, 2019). In the second case, Airbnb is a profitable marketing channel that provides access to rental options for everyone.

This leads to the fact that Airbnb has a competitive advantage; its consumers visit the site because they know they can find suitable accommodations for them, and service providers understand that this is where potential customers are located (Oskam, 2019). This self-sustaining circle of opportunity is called the network effect (Oskam, 2019). It makes the two-way network sites attractive and profitable monopolies – as soon as the firm becomes the leader in its category.

Customer Contacts

Regarding customer loyalty, the process of providing a service is presented in the form of various encounters of clients with a service organization. It may be performed in person, by phone, or by mail. The term customer service encounter refers to the customer’s presence in the system, and service process refers to the workflow used to deliver the service (Lee and Lee, 2020). The degree of encounters is defined as the percentage of the time that the customer must be in the system to the total time that the entire process of servicing takes (Lee and Lee, 2020). Depending on the degree of contact, two extreme positions are highlighted: high customer contact and low customer contact. In systems of the first type, the client, taking part in providing the service, strongly influences the duration of the service, the composition of the service and its actual or expected quality.

People can provide their available space on the platform and earn extra money for rental housing. As a platform, it also allows travelers to connect with local hosts and book apartments or houses instead of expensive hotels, saving them money and allowing them to live like a local (Oskam, 2019). Personal profiles and rating/review systems help travelers make informed decisions about hosts and their offerings. Hosts can also choose who to lease their space. It helps build trust and reputation in the community (Oskam, 2019). In addition to travelers and hosts, Airbnb’s business model also includes a massive network of freelance photographers in every major city in the world (Oskam, 2019). They visit the property and receive high-definition photographs. These high-definition photos will improve ad ranking and help hosts get more reviews. Airbnb pays these photographers directly.

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Market Competition and Capital Security

While Airbnb started as a real estate network that individuals mainly offered, today, almost 40% of Airbnb property is being provided by hosts who own more than one apartment (Oskam, 2019). It does not operate with a linear business model like traditional hotel chains like Marriott, Hilton. The conventional hospitality business must invest millions to build and maintain its facilities. The key Airbnb resources are people, so they do not need to do any of this. This allows it to grow incredibly fast at zero marginal cost. In 2020, Airbnb was preparing to conduct an IPO (Nhamo, Dube, and Chikodzi, 2020). Before entering the stock exchange, the company is intensively expanding the base of objects available to users, including in the luxury segment (Nhamo, Dube, and Chikodzi, 2020). The growing demand from Airbnb is no longer only boosting small businesses for homeowners but also giving new impetus to large professional real estate projects.

Corporate Responsibility

Discounts on a product or donating can empower nonprofits and foundations to do their jobs even better. In turn, it will lead to more remarkable results than simply donating an equivalent amount of money. For example, Airbnb responded to the disaster by developing Disaster Response (Host a Stay, n.d.). The project allowed 1,400 apartment owners to open their doors to people whose homes were destroyed or flooded during Hurricane Sandy (Host a Stay, n.d.). This portal is still used during other natural disasters.

Performance Objectives

Quality

The most crucial point in the level of quality in the service industry is the ability of management to respond quickly to travel inquiries and keep the accommodation clean. Due to increased demand, it can be difficult for hospitality entrepreneurs to keep track of minor details. Therefore, achieving higher quality requires dealing with the flow of travelers with well-coordinated interaction between the reception team members. Airbnb may conduct consumer research to identify some common characteristics of their target audience to implement such an objective. This information can be used to offer services directly to similar consumers through Facebook or Google.

Moreover, the company should also provide promotions for hosts, giving them a 25% bonus for every customer they accept over several months or diminishing fees for the first three customers they host. Concerning the hosts, people are hesitant to accept tourists because of the uncertainty. If Airbnb reduces implementation costs, provides incentives for hosts, and educates potential hosts about the consistent success of the service, the company can create some long-term use of the service. In the current situation, one example would be getting a college audience to accept service. College graduates will have higher incomes than the rest of the population and, due to their education, are likely to feel comfortable using this service.

Another aspect of service quality is Data Quality, which has been set as an organizational and technical objective. In 2019, Airbnb started a large-scale project to reorganize the corporate data warehouse using new processes and technologies (Cheng and Jin, 2019). Within developing a comprehensive strategy for improving data quality, several goals were set (Cheng and Jin, 2019). They include ensuring ownership of all critical datasets, making sure that essential data always comply with Service Level Agreement (SLA) (Cheng and Jin, 2019). The latter is the most important indicator of the quality of service delivery to a consumer external to the process (Cheng and Jin, 2019). Other vital elements are DataOps practices and modern technical means; necessary data is trustworthy and reviewed regularly, and the data should be well documented and easily discoverable (Cheng and Jin, 2019). Thus, the quality performance objective consists of the customer and host loyalty, accompanied by Data Quality.

Speed

Airbnb is innovating to improve the experience for its hosts and guests, making the company more accessible and attractive to new hosts and guests, and increasing the engagement and loyalty of its existing community. Airbnb has pledged to double its customer support staff to achieve greater productivity and create a dedicated Trust and Safety Division (Reinhold and Dolnicar, 2018). The company is recommended to develop its service design as it helps to improve the business performance of a company of any direction and size. The managers of Airbnb come with a specific request to identify and solve the particular problem in operation management.

The second reason to turn to service designers is to add something new to business processes. For example, a company has decided to move to remote work and build a convenient system with high employee productivity (Joly et al., 2019). The third reason is the understanding that design thinking helps to respond flexibly to unexpected changes and changing trends, no matter what happens inside and outside the company. The effect of service design can be seen in specific metrics. The quality of customer support and their satisfaction are improving Net Promoter Score (NPS), Customer Satisfaction Index (CSI), Customer Effort Score (CES) (Joly et al., 2019). Furthermore, the cost of attracting new customers and retaining old ones will be reduced.

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Dependability

Dependability is considered a product or service characteristic. Functional instability can significantly reduce the implicit reliability characteristics of a product. Therefore, setting up operations to maintain service reliability is the most important target component of operational management characteristics. Regarding Airbnb, the company created a Host Learning Center with security recommendations for hosts, developed an improved user profile verification system, and facilitated closer communication between guests (Reinhold and Dolnicar, 2018). The main objective is that Airbnb should protect both hosts and renters.

Travelers and their hosts may be wary of sharing their living space with strangers. First of all, all potential hosts should check with their city authorities to make sure they can even list their properties on Airbnb (Oskam, 2019). Airbnb protects hosts and renters; both parties may be wary of sharing their living space with strangers. First of all, all potential hosts should check with their city authorities to make sure they can even list their properties on Airbnb. The problem of ensuring the owner’s safety arises when the latter lets strangers into his/her homes. It is a significant concern as there have been several reported cases of theft or robbery on Airbnb. First of all, hosts must ask travelers for a verified ID before booking accommodation (Oskam, 2019). It includes a driver’s license or passport, connecting an Airbnb account to a visitor’s Facebook or Google profile. It is also required to upload a profile photo with a phone number and email address.

There is also the possibility that the travelers could damage the home during their stay. Hosts might have legal consequences if the traveler is injured during the visit. Airbnb is trying to address these issues with its Host Protection Program, covering up to $ 1 million in damages or personal injury claims to hosts (Oskam, 2019). However, Host Protection has its cautions; while Airbnb does not have protections that mimic travel insurance, it does have specific provisions designed to keep guests safe and satisfied (Oskam, 2019). Before renting an Airbnb property, customers need to read reviews and ratings (Oskam, 2019). Airbnb offers 24/7 customer support for customers who have a dispute with the service. As the quality of the hosts is based on their feedback, guests are advised to only book with highly recommended suppliers.

Flexibility

After the COVID-19 pandemic outbreak, Airbnb bookings decreased significantly. As a result, there was a risk of failure along with many other companies relying on tourism and travel. Concerning the objectives, the founders made a number of quick decisions to keep the business – a quarter of the company’s staff was cut, as were advertising and marketing costs (Nhamo, Dube, and Chikodzi, 2020). The company also applied for additional financing and received about $ 2 billion in loans (Nhamo, Dube, and Chikodzi, 2020). The service has gone through another change; the company’s focus has changed from tourist points and large cities to remote and isolated private homes (Nhamo, Dube, and Chikodzi, 2020). Reservations were made close to the guests’ residence, and travel distances were significantly reduced.

The website has been reconfigured in such a way as to show users precisely these housing options in the first place – housing not far from the search, as well as opportunities for isolated housing in nature. Airbnb also added a new service – online experiences that allow clients to immerse themselves in a different culture, considering the comfort of their culture. Unique events from experts include various masterclasses, for instance, pasta making from Italian grandmothers and chefs to origami folding from masters in Japan (Nhamo, Dube, and Chikodzi, 2020). Airbnb used a zoom-out pivot, expanding and changing the service’s functionality at a time when the time required it.

Cost

The total cost for a reservation on Airbnb is based on the price per night and additional fees set by the host or platform. Pricing includes an Airbnb service fee that keeps the platform running smoothly and provides 24/7 customer support, cleaning fees, for example, the one-time fee charged by some hosts for cleaning their homes (Oskam, 2019). In addition, the price includes a surcharge for additional guests, which some hosts collect for each guest in excess of the limit (Oskam, 2019). A property deposit is required for some bookings. It can be set by the host or Airbnb, and there is the value-added tax (VAT) on guests in certain countries (Oskam, 2019). Local taxes are charged by the authorities of the region where the housing is located.

Conclusion

The service industry poses many problems for the operations manager that are either too difficult to solve or are insignificant in production activities. These problems are mainly associated with the presence of the customer in the operational process. An important characteristic feature of the service sector is the intangible nature of the result of functioning. Thus, in the service sector, there is a coincidence of the processes of production and consumption in time. The service industry is characterized by a high degree of interaction with the consumer. In addition, the services are provided in the client’s presence, who can instantly adjust it in accordance with his/her needs.

Therefore, Airbnb remains the world’s most popular online apartment search platform due to its ability to manage operations effectively. Airbnb is an aggregator of the community of property owners and their tenants under the general slogan”live like a local. Users can post ads, find and book accommodation all over the world. Airbnb’s success comes from creating an intuitive and visually understandable platform that connects consumers and sellers of services – in this case, short-term rentals and thus getting them on attractive terms.

Reference List

Cheng, M. and Jin, X. (2019) ‘What do Airbnb users care about? An analysis of online review comments’, International Journal of Hospitality Management, 76, pp. 58-70.

Cui, T., Wang, Y. and Namih, B. (2019) ‘Build an intelligent online marketing system: An overview’, IEEE Internet Computing, 23(4), pp. 53-60.

Harmsen, J., de Haan, A.B. and Swinkels, P.L. (2018) Product and Process Design. Berlin: De Gruyter.

Host a stay (n.d.) Web.

Joly, M.P., Teixeira, J.G., Patrício, L. and Sangiorgi, D. (2019) ‘Leveraging service design as a multidisciplinary approach to service innovation’, Journal of Service Management, 30(6),

Lee, S.M. and Lee, D. (2020) ‘Untact: A new customer service strategy in the digital age’, Service Business, 14(1), pp. 1-22.

Nhamo, G., Dube, K. and Chikodzi, D., 2020. Impacts and implications of COVID-19 on the global hotel industry and Airbnb. In Counting the Cost of COVID-19 on the global tourism industry, Cham: Springer, pp. 183-204.

Oskam, J.A. (2019) The future of Airbnb and the ‘sharing economy. Bristol: Channel View Publications. pp. 681-715.

Reinhold, S. and Dolnicar, S. (2018) ‘How Airbnb creates value’, in Dolnicar, S. (ed.) Peer-to-Peer Accommodation Networks, Oxford: Goodfellow Publishers Limited, pp. 39-53.

Suess, C., Mody, M., Bulut, U. and Sirakaya-Turk, E. (2020) ‘What caused the rise of Airbnb? An examination of key macroeconomic factors’, Tourism Management, 81, pp. 1-9.