1. Using Porter's Generic Strategies categorize Airbnb's original offering (spare rooms), Experiences offering, and Airbnb plus. Support your answer with data from the case.
2. Using the Value Disciplines Model categorize Airbnb's original offering (spare rooms), Experiences offering, and Airbnb plus. Support your answer with data from the case.
3. Given Airbnb's two new offerings (Experiences and Airbnb plus) add to or detract from Airbnb's strategy? Why?USE QUOTES FROM CASE PLEASE

Today, Airbnb is the largest global hospitality plararm. Brian Chesky finished his final strokes with his paintbrush. He lifted the shoe up to the light, dipped his brush into the gray paint, and added another window to the Empire State Building depicted on the side of the shoe. Chesky's two hosts, Mary and Vasu, graduate students of the nearby Fashion Institute of Technology (FIT), offered instructions on letting the paint dry on the shoes before wearing them. Chesky thanked them for the sneaker-painting experience, made a note on his phone to send a thank-you gift to the hosts, then he was on his way to Airbnb's next experiencea photo session on the Brooklyn Bridge. These past few days, Chesky traveled to New York to test the newly launched Airbnb Experiences, in which hosts provide unique and authentic travel adventures, all the while interacting with locals. At the same time, Chesky worried about Airbnb's prospects. Growth was slowing as regulators in the United States and abroad outlawed certain instances of short-term rentals, subjecting viola- tors to steep fines. In Paris, Airbnb's largest market with over 65,000 homes listed, the city council demanded that Airbnb take down over 1,000 listings lacking official registrations in a bid to reign in the home-rental business.1 In New York, law enforcement issued citations to more than 25 residents who were illegally renting their apartments in one luxury Manhattan condominium.2 In early 2019, the city of New York filed a lawsuit claiming that Airbnb had been used illegally in an organized $20 million short-term rental scheme.3 Many local governments, including those of Paris, Berlin, and New York, claimed that Airbnb has driven up rental prices and had other negative impacts on neighborhoods. In addition, Airbnb's newly introduced Experiences required a new level of quality control that the startup had yet to master, especially at a larger scale. In 2019, Airbnb had 5 million listings in over 81,000 cities in 190 countries, ranging from spare rooms to castle villas, or even entire islands. Airbnb offered more accommodations than the three biggest hotel chains combined: Marriott, Hilton, and InterContinental. In the same year, Airbnb was valued at $31 billion, making it the third most valuable private company in the world, behind Uber ($72 billion) and Didi Chuxing, a Chinese ride-hailing service, ($56 billion).4 Even more stunning, Airbnb's $31 billion valuation was just shy of that of Marriott, the world's largest hotel chain, valued at $37 billion (in early 2019). Although still privately held, Airbnb's revenues were reached $4 bil- lion (in 2018), while being profitable for the past few years.5 Although feeling more pressure to take Airbnb public, Chesky has shown reluctance: \"I think com- panies should go public when it's right time, when it's the best thing for the mission . . . which is to build an end-to-end travel app for a global travel community.\" 7 Many others, including analysts, some of Airbnb's investors, former executives, and even many current employees have disagreed with Chesky's assessment and timing, and have put more and more pressure on a reluctant Airbnb CEO to file for an initial public offering (IPO). Chesky wondered how to address all of these pressing issues as he hailed an Uber ride. . . Brief History of Airbnb Brian Chesky and Joe Gebbia were former classmates from the Rhode Island School of Design, and both landed in California after graduation. In 2007, Gebbia convinced Chesky to move to San Francisco to pursue entrepreneurial endeavors together. Shortly after both had quit their jobs, Gebbia received notice that the rent for their apartment in San Francisco would be raised by 25 percent.8 Inspired by a previous experience of hosting a complete stranger on an airbed, Gebbia designed a way to make some quick cash. In a now famous e-mail to Chesky, he shared that he wanted to offer their place as a \"designer's bed and breakfast\" during an upcoming industrial design conference in San Francisco that had sold out of accommodations. Soon thereafter, they sent an e-mail to the distribution list for the conference: \"If you're heading out to the [industrial design conference] in San Francisco next week and have yet to make accom- modations, well, consider networking in your jam-jams. That's right. For an affordable alternative to hotels in the city, imagine yourself in a fellow design-industry person's home, fresh awake from a snooze on the 01' air mattress, chatting about the day's upcoming events over Pop Tarts and OJ.\" By renting out three airbeds in their apartment to host design conference attendees for $80 a night, they made some quick cash to subsidize their rent payments. But they had also made a discovery; they could make friends while making rent.9 Exhibit 1 shows Airbnb's timeline. After talking with friends and family about their own experience as hosts, they realized they had stumbled upon a new business idea: help people rent out their spare rooms.10 By helping others rent out their spare rooms, they facilitated an exchange via the sharing economy. The sharing economy is a peer-to-peer business model that provides access to resources that would otherwise be too expen- sive to buy or are underused in exchange for a feein this case underutilized space in apartments and homes.11 Determined to turn things around, Airbnb built online payments into the booking process. The addition was partly driven by Chesky's own experience with the cumbersome and uncomfortable in-person payment process as a guest at South by Southwest. This also provided the basis for their business model to charge transaction fees by serving as a platform for hosts and guests. Based on customer feedback, Airbnb also soon shifted from event-based listings to general listings. They had reacted to the valuable lessons learned at SXSW; the exchange of money within a person's home was an awkward experience and people were interested in this type of accommodation to travel to places generally, not just to conferences.13 Ready for a larger stage, Airbnb planned on garnering publicity in the summer of 2008 at the Democratic National Convention (DNC) in Denver, Colorado. Through media releases and blogs, Airbnb earned coverage in The New York Times and The Wall Street Journal. The lack of hotel space and increased publicity of the DNC served as the catalyst for their relaunch; approximately 100 rentals were facilitated during the event. Unfortunately, soon afterwards the listings dropped back down, hovering just above zero. To stretch the funds of Airbnb, Chesky and Gebbia leveraged their design backgrounds to create limited editions of politically themed cereals: 500 boxes of \"Obama-O's: The breakfast of change,\" and 500 boxes of \"Cap'n McCains: A maverick in every bite.\" They designed the presidential images onto the boxes and sent samples to the press for media coverage. CNN featured the cereal, and even at $40 a box, the custom political cereals sold out quickly, enabling Airbnb to stay afloat for a few more months. This round of post-DNC funding was necessary to offset the plunge in website traffic that followed the DNC. The other funding source at the time for Airbnb was maxed-out credit cards. Indeed, they used so many different credit cards that the founders kept them in plastic binders ordi- narily used to collect baseball cards (Exhibit 2).14 The fledgling venture's breakthrough came in 2009 when it was accepted into a program run by Y Combinator, a start-up incubator that has spawned famous tech companies such as Dropbox, Reddit, Stripe, and Twitch.tv. In exchange for equity in the new venture, these start-up accelerators provide a small investment fund, office space, mentoring, and networking opportunities with venture capital- ists looking to fund the next \"big thing.\" This funding and support allowed Airbnb to concentrate on refining their product offering. Empowered by their investors, the co-founders began to make frequent trips to New York City to learn directly from their hosts who were early adopters of their service.15 After seeing the inferior cell phone quality (low resolution) photographs of the rooms, Chesky rented a professional camera and took pictures himself. Later, Airbnb hired professional photographers to take pictures of the visitors in New York City enabled this model to quickly take off around the world.\" By 2010, for- tunes had turned, and Airbnb had investors knocking on its doors. Sequoia Capital, a prestigious venture capital firm in Silicon Valley that had previously invested in Apple, Google, Oracle, PayPal, You'I'ube, and WhatsApp, approached Airbnb to invest. Airbnb was taking a cut of some 10 percent on each transaction on their platform, which now contained professional photos and allowed for a seamless experience between hosts and guests. With the global financial crisis in full swing (by 2010), timing was now much more fortuitous. People were looking for low-cost accommodations While hosts were trying to pay rent or mortgages to keep their homes. In 2017, CFO Laurence Tosi led the acquisition of Luxury Retreats for Airbnb, a high-end rental site for $300 million. Following disagreements between Chesky and Tosi over Airbnb's growth tra- jectory, however, Airbnb announced in February 2018 that the CFO would leave Airbnb (Exhibit 3). The two senior executives clashed about the question of when and the preparation of Airbnb to go public (IPO).13 Chesky favored a longer time to IPO. The CFO departure remained not the only high-profile executive leaving Airbnb. As of the fall of 2018, the position of Chief Marketing Officer also remained vacant.l9 Since March 2018, Greg Greely, former head of Amazon Prime's member- ship unit, has led Airbnb Home, Airbnb's core business. Airbnb Home has since announced options for hotels, luxury properties through Airbnb Plus, and a guest loyalty program called Superguest.20 Airbnb's Business Model To grow, traditional competitors in the hospitality industry, such as Marriott or Hilton, would need to add additional rooms to their existing stock. To add new hotel room inventory to their chains, they would need to find suitable real estate, develop and build a new hotel, furnish all the rooms, and hire and train staff to run the new hotel. This often takes years, not to mention the multimillion-dollar upfront investments required and the risks involved. In contrast, Airbnb faces no such constraints because it does not own any real estate, nor does it manage any hotels (Exhibit 4). Just like Marriott or Hilton, however, it uses sophisticated pricing and booking systems to allow guests to find a large variety of rooms pretty much anywhere in the world to suit their needs. As a digital platform, Airbnb allows ordinary people to offer rooms directly to any consumer looking for accommodations online. In addition to helping hosts with professional photos of their properties and thus marketing, Airbnb also assists hosts in pricing their properties for varying levels of demand and time of year. Airbnb makes money by taking a cut on every rental transaction through its platform. because it does not own any (rental) properties or real estate, unlike the large physical holdings held by traditional hotel chains. To expand capacity, Airbnb is not restricted by the need to build more properties, whereas a hotel must increase its number of beds to meet increased demand. Instead, Airbnb only needs to ensure that its site remains online and available to satisfy the growing number of guests and hosts. Airbnb's number one source of future hosts are its current guests.21 Initially, staying in an Airbnb property meant experiencing a new destination in someone's home, authentically in the way a local would. By offering properties at a cheaper rate per night compared to hotels, both guests and hosts benefited: price-conscious guests found affordable accommoda- tions, while hosts benefited by the extra income earned through renting a spare bedroom. Guests exchanged their generic hotel rooms in tourist areas or suburbia for interactions with local hosts and the opportunity to stay in local spaces and neighborhoods. Soon, properties expanded from spare bedrooms to offerings of entire houses, villas, treehouses, and islands complete with cooking staff. Through the platform, hosts and guests were able to communicate, while both parties were further empowered by the ability to leave reviews. Guests received reviews from hosts that could impact future stays in Airbnb properties; hosts could view the reviews of a potential guest to vet the guest's behavior. Likewise, guests rated and commented on the properties of hosts, allowing potential guests to gauge if they liked the host in addition to the space they might rent. HOSTS Airbnb allows hosts to list their rooms, whole apartments, or their entire property on the Airbnb platform; from simple bedrooms to manors, and even entire islands.22 Airbnb provides hosts with a one-million-dollar guarantee for any damages (akin to a temporary homeowner's insurance). The platform rewards and highlights high-performing hosts who consistently earn a 5-star rating from guests as Superhosts, a designation that a mere 7 percent of hosts achieve.23 Airbnb provides an online marketplace where hosts can list accommodations and guests can browse and book listings. Airbnb aggregates these host listings thereby prompting more users to become guests as they are attracted to the selection and availability of listings. In turn, more hosts list accommodations on Airbnb to gain access to the increasing numbers of guests booking listings. Despite the availability of several other apartment and home online rental platforms such as VRBO, Wimdu, Wunderflats, TempoFLAT, booking.com and so forth, Airbnb hosts are quite loyal. 0f the 5 million homes listed on Airbnb, some 3.5 million (or 70 percent of all hosts) list exclusively on Airbnb, contributing a deep, as well as unique, inventory. While Airbnb hosts offer guests more choices by offering different cancellation plans, fees, ame- nities, and check-in/check-out requirements, a new rewards system is also catering to guests. In 2018, Airbnb introduced the Superguest loyalty program, akin to hotel loyalty programs. Superguest rewards Airbnb guests with free nights or discounts for frequent stays.24 Although this program is still in development and will not be launched until it is differentiated enough, the idea is to include benefits across the Airbnb community including homes, transportation, experiences, and other ser- vices.25 The Superguest program is just one of many ways that Airbnb continually innovates to meet the needs of its consumers and invests in increasing customer loyalty. To develop Superguest, Airbnb's website is asking guests to leave suggestions for desired features. Other improvements include categorizing listings into collections catered to different traveling needs, for example family, honeymoon, or work. Through the Airbnb Plus offering, guests can expect a certain level of high quality in their stays because listed homes are subjected to an in-person 100+ point quality inspec- tion by Airbnb.26 Expanding Airbnb's Features and Offerings SPLIT PAYMENTS In a December 2016 tweet, Chesky asked \"If @Airbnb could launch anything in 2017, what would it be?" In response to top requests, Airbnb launched split payments in November 2017.\" Over 15.5 million groups took trips using Airbnb the past year ending in November 2017, with an average stay of 3.5 nights. With split payments, the trip organizer does not need to front the entire cost of the stay, only their own, and Airbnb allows 72 hours for the other guests of the group to pay their portions. AUGMENTED AND VIRTUAL REALITY In December 2017, Airbnb announced research and prototypes in mobile technology involving virtual reality and augmented reality.28 In their concepts, guests can use virtual reality to explore any listing, and use augmented reality that recognizes surroundings to provide contextual informa- tion, such as translations or thermostat instructions. The idea is to create a virtual \"try before you book\" experience. remain thorny issues to make Experiences the success Airbnb needs and desires. Some instances of high-profile negative occurrences (e.g., \"one Airbnb Experience offer consisted of a person yelling at the guests while they collected trash on the beach\"26), highlight the pressing need to ensure stronger quality control. While this is done currently in person, the question of scaling up using such labor- intensive method remains unanswered. Yet, Airbnb's Experiences is growing ten times faster than Homes, albeit from a much smaller base.32 Notwithstanding some exceptions, Experiences rate on average much higher than Homes, with more than 90 percent of all Experiences receiving a 5-star rating. In 2018, Airbnb announced a $5 million investment into expanding Experiences locations to 200 in the United States, with intentions to develop Experiences in smaller markets domestically. In addition, Airbnb partnered with Resy to allow guests to book reservations at local restaurants, and Airbnb Experiences allows travelers to book a wide range of activities that are a part of their travel plans though Airbnb, such as truffle hunting in Tuscany or learning how to make sushi in Japan. AIRBNB PLUS In 2018, Airbnb launched a new feature called Airbnb Plus, which created a new, luxury tier of properties differentiated with 100 plus features such as design, accessibility, and comfort.33 Over 2,000 of the 5 million properties have been inspected and certified as Airbnb Plus, with a total of 75,000 Airbnb Plus properties planned by the end of 2018, according to Chesky. Hosts will pay $149 for inspection to obtain the Airbnb Plus designation and would, in return, be listed more promi- nently on Airbnb's site. As Airbnb adds to its offerings, it is embracing a segment that was previously distinct by welcom- ing hotels and traditional bed-and-breakfasts to post on its platform. Although some hotels had already used the platform, the new entrant's leadership is now clearly aligning these offerings as part of Airbnb's strategic direction of becoming a full-service travel company. This is an enticing opportunity for hotels, given the lower commission charged by Airbnb compared to online travel agencies. With over 200,000 rooms in this category already listed, Airbnb is curating listings for its \"Boutique\" offering intended to showcase hotel and hotel-like offerings outside of the large corpo- rate hotel chains.34 GROWING PAINS External factors such as regulation are continuing to create major headwinds for the startup.\" In 2016, the city of New York strengthened legislation first passed in 2010. It is illegal in New York The issue for Airbnb is that about one-third of those listings are from hosts with multiple offerings in the same city. Landlords realized quickly that it is more profitable to convert some apartments into short-term rentals and to offer them via Airbnb than to sign long-term rentals with just one tenant, which often fall under some sort of rent control in New York City. Although this tactic increases the landlord's return on investment and profits, it creates all kinds of negative externali- ties. Neighbors complain about noisy tourists partying all night. Some apartments get ransacked or are used for illegal activities such as drug deals and prostitution. New Yorkers expressed their frustration by scrawling on Airbnb posters: \"The dumbest person in your building is passing out keys to your front door!\" On a more macro level, some argue that Airbnb drives out affordable rental space in many metropolitan cities where apartments are already scarce. Other cities such as Paris, Berlin, and Barcelona face similar problems and passed laws with stiff penalties, fining offenders over $100,000. Hotel chains and resort owners have challenged Airbnb in courts and lobbied local governments, some of which passed regulations to limit or prohibit short-term rentals. Residents in New York, San Francisco, Berlin, Paris, and many other cities are also pressuring local governments to enact more aggressive rules banning short-term rentals because they argue that companies such as Airbnb contribute to a shortage of affordable housing by turning entire apartment complexes into hotels or transforming quiet family neighborhoods into all-night, every-night party hot spots. Airbnb is also accused of contributing to the speed of gentrification in some metropolitan cities. For proponents of affordable housing, Airbnb has come under scrutiny for raising rents, particu- larly in areas already impacted by rising rental prices.3B Airbnb argues that their website enables hosts to earn extra income, in turn making their housing more affordable.39 Research suggests that a 10 percent increase in Airbnb listings leads to a 0.39 percent increase in rents and a 0.64 percent increase in home prices."'0 In 2015, three of the largest landlords in the country entered into discus- sions with Airbnb to allow their apartment tenants to list their rooms on the platform in return for revenue sharing. The three apartment operators own 250,000 units. While many tenants use Airbnb to rent out rooms or entire apartments, most apartment leases prohibit tenants to sublet without permission or at all. In New York City, in particular, Airbnb is blamed for gentrification and rising rent. In a report by the city comptroller's office, Airbnb was blamed for 21.6 percent of the average monthly rent increase from 2009 to 2016. Some argue that the convenience that is provided for renting apart- ments to tourists has resulted in less housing available to the full-time renter's market. Despite the 50,000 apartment listings on Airbnb, making New York City its biggest market, Airbnb only accounts for one percent of the apartments in the city. Although multiple listing operators make up only 6 percent of the market, they account for 37 percent of the revenue.41 Acceptance of housing ment landlord of San Francisco with over 5,000 properties, will be allowing tenants to register their properties on the website in a pilot program. Their listings break from the typical Airbnb listing of new buildings owned by institutional landlords by instead offering rent-controlled housing in older buildings. The Veritas Investments pilot provides security to renters and guests alike through a $1 million insurance policy and partnership with Pillow Residential, a startup management company that arranges cleaning and serves as a point of contact for guests.32 Moreover, in the agreement with the city of San Francisco (and elsewhere), Airbnb collects hotel taxes from each rental and transfers the money to the city. CEO Chesky claims that in 2019 Airbnb is the largest collector of hotel taxes globally. 43 Airbnb in China In 2015, Airbnb announced it was expanding in China, making it potentially the largest market with some 800 million internet users.#* Airbnb also hopes to grow its number of users by targeting Chinese tourists, whose outbound bookings had risen 700 percent during 2014 making them the fast- est growing market of customers booking stays outside of their home country. Airbnb's expansion is aided by Chinese venture capitalists, China Broadband Capital and Sequoia China Consistent with other firms wanting to operate in China, Airbnb must comply with Chinese laws, such as governance mandating that data be stored within China. Airbnb localized the product after discoverability issues due to Chinese government censorship ("the Great Firewall") banning sites such as Google, Facebook, and Twitter. Airbnb started by building a 60-person product team in Beijing and rebranded to "Aibiying" (# 1Xil), meaning "welcome each other with love." Airbnb also launched Trips which offered local experience suggestions and integrated Alipay, Alibaba's online payment platform into Airbnb's platform. By the end of 2017, more than half of Airbnb China's bookings were paid via Alipay, and roughly 8.6 million Chinese guests used Airbnb when traveling outside of China. The number of homes offered in China on the Airbnb platform has increased from 10,000 in 2015 to over 200,000 in 2019; and some 10 million people use Airbnb in China. According to Chesky, "we run our China operations completely decentralized, and are probably one of the most successful U.S. companies in China" and "Millennials will want to go to China, and Airbnb is ready for them." In line with Airbnb's projection of China being their largest origin market by 2020, Airbnb announced $2 million in investment through 2020 for "innovative tourism projects" in the region.*TRADITIONAL HOTELS Airbnb's presence in the travel industry had impacted operations of traditional offerings. In response, hotel deals reached a record high in 2015. With Airbnb accounting for 5.4 percent of total room supply in 2016 in an industry where only five hotel operators have a share of greater than 5 percent, hotel chains turned to consolidation as a way to grow and increase their negotiating power. $3 In 2016, the deals trend of 2015 continued as Marriott acquired Starwood Hotels & Resorts for about $13 billion, thereby creating the largest hotel company with 5,700 hotels with more than 1.1 million rooms in more than 110 countries.* Marriott CEO Arne Sorenson had said, "We think there are real advantages to size." Marriott estimated a synergies savings of $250 million and increased leverage when negotiating with Expedia and other online travel agents. The Marriott International Hotel chain now includes over 30 brands such as luxury hotels: Bulgari Hotels and Resorts, The Ritz-Carlton, St. Regis, and the JW Marriott, while serving the entire price segments in the market with the standard Marriott business hotels, AC Hotels by Marriott, Marriott Courtyard, Marriott Fairfield Inn, and so forth."In 2018, the size and influence of these hotel giants was evident though Marriott's $23 billion, Hilton's $9.70 billion, Hyatt's $4.68 billion, Wyndham $1.7 billion, and IHG's $1.87 billion in revenue. Because this rate of growth is slowing, with an expected growth of only approximately four per- cent through 2023, hotels are focusing on increased spending per guest. Hotels are increasingly attracting guests by offering experiences."Marriott International invested in PlacePass, a tour and activity booking startup. The experiences offered compete with Airbnb's Experiences, offering the opportunity for guests to immerse themselves in local activities. Hotels are moving away from a uniform experience and instead transforming to give travelers a taste of local cuisine, artists, and cultural activities. PlacePass is featured on Marriott's mobile app. Marriott plans to use analytics on their app on customer activity to create better recommendations for PlacePass experiences, even when the user is not staying at a Marriott hotel. Hyatt Hotels Corporation has taken note of Airbnb's home rental approach and partnered with Oasis to provide over 2,000 vetted homes across 20 worldwide destinations, including London (Exhibit 5), Buenos Aires, New York City, and Cartagena, Colombia. Hyatt guests benefit fromChallenges Safety A range of safety concerns impact the operations and reputation of Airbnb. Following the death of a family due to gas asphyxiation in a property rented through Expedia's HomeAway and VRBO rental services, there is increased public interest in the safety of rental sites.65 Airbnb reports on safety protections, and while 80 percent of properties do offer smoke detectors, Airbnb does not set this as a requirement. Hosts must ultimately inform and decide for themselves.\" The blurred line of responsibility between hosts, guests, and the company is also evident in con- troversies involving sexual assault. In July of 2014, when a mother of a 19-year old host reached out to Airbnb after receiving a frantic call from her son about being locked in an apartment and threat- ened into performing sexual acts, Airbnb did not jump to the rescue but instead provided the mother with contact information to the local Madrid police as the proper channel for her concerns.67 In July of 2016, Leslie Lapayowker accused her host of sexual assault, filing a lawsuit against Airbnb for failing to conduct a background check to reveal a previous arrest after another Airbnb guest also claimed that she was sexually assaulted by the same host in his Los Angeles studio apartment.68 Other factors, such as pets, pose an additional threat to guests. In April of 2015, a guest in Salta, Exhibit 2: Airbe Funding History 2009-2017 (in thousands of dollars) $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $475,000 $400,000 $112,000 $200,000 $200,000 $0 Seed Seed Series A Series B Series C Series D Series E Debt Series F