CASE STUDY: Please read the following case study about AIRBNB, the American company that operates an online marketplace for lodging, primarily homestays for vacation rentals and answer ALL of the questions that come after. Airbnb is a community-based online platform for listing and renting local homes. The platform is accessible via mobile app and website (the latter seen in the picture above). When first established in 2008, Airbnb caused a paradigm shift that shook the tourism industry and challenged big name hotels. Airbnb achieved this by cultivating a sharing-economy and allowing everyday people to rent out their own flats to guests. Airbnb represented a huge competition to the traditional hotel industry because it offered a similar service while enduring a much lower risk. Indeed, Airbnb does not own any of the properties it lists; instead, it profits by receiving commission from each booking. In the first 11 years of its operations, Airbnb listed more than six million rooms, flats, and houses in more than 81,000 cities across the globe. On average, two million people rest their heads in an Airbnb-listed property each night. In 2018, Forbes estimated the business to be worth $31bn.

However, during the last 3 years, Airbnb saw a sharp decline in profits culminating with it losing $352 million earlier this year. This decline can be partially attributed to the effects of the COVID-19 pandemic and the resulting restrictions on travel and tourism. Still, Airbnb has been facing many serious issues when it comes to the experiences it provides to its customers which prompted a mass exodus from the platform. For starters, as the properties that Airbnb offers to rent are not formal hotels, guests do not have the flexibility to amend or change their check-in and check-out times which can cause problems when the guests airplanes or trains get delayed. Moreover, there is no formal help desk to aid the guests in checking-in and out or in the case of an emergency (e.g., getting locked out of the room). Additionally, many guests have took to social media to complain about their hosts (landlords) cancelling their reservations last minute, leaving them stranded in foreign cities without a place to stay. Those guests also reported either not being able to reach Airbnbs help line or not receiving a prompt and satisfying solution to their problems from the company, despite Airbnb advertising otherwise on their official websites and social media.

Other guest who rented properties through Airbnb realized that they were mostly at the mercy of their hosts. For example, if something stops working in the rented room or flat (like the heat or water), the only way to solve the problem is to talk to the host. But since the hosts are under no obligation to reply to their guests around the clock, many times the guest will be left to fend for themselves and hence, very frustrated. Other guests have unfortunately also experienced rude, unempathetic, and sometimes even violent hosts. Another widely discussed problem with Airbnb is bait-and-switch scams, in which flats are advertised to look a certain way on the platform, but when customers arrive to the property, they find that it looks nothing like the advertised photos; unclean, with old furniture, and in run-down buildings, which can be horrifying to say the least.

How did Airbnb succeed at the start of its conception but not anymore, you might ask? One explanation for this is that 11 years ago, customers had different value propositions. They wanted cheap lodging alternatives in busy cities. However, nowadays, millennials and generation Zs are more concerned about their own safety, comfort, and the smoothness of their trips. The leaders of Airbnb have to understand this shift in customers priorities if they are to ever to regain their position in the market.

PART A (23 marks)

1. This case study addresses several dimensions of the service quality model. a) Highlight 4 of them, b) explaining each, and (c) giving examples to each dimension from the case (8 marks)

Service Quality Dimension Explanation Example from the case

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2. This case study highlights several service gaps that Airbnb have fallen into. a) Highlight 3 of them, b) explaining each, (c) giving examples from the case to each gap, and (d) suggesting strategies for Airbnb to solve each of the gaps (6 marks)

Service Gap Explanation Example from the case Solution to the gap

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3. As a way of correcting their current situation, Airbnb is advised to carry out q benchmarking strategy. a) Suggest the exact type of benchmarking that Airbnb should carry out to fix its situation, (b) justifying your choice, and (c) outlining the expected benefits of such benchmarking strategy (3 marks).

Type of benchmarking

Justification

Benefits

4. Apply the benchmarking methodology on your chosen benchmarking type, (a) explaining each stage (b) with examples that are specific to Airbnb (4 marks).

5. (a) Explain what stretch goals are, (b) Suggesting a stretch goal that Airbnb can undertake to elevate its performance (2 marks).

What are stretch goals?

Example