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Marketing Management Marketing Audit of Airbnb BulgariaBy: Lora AleksandrovaDate: January 25th 2018Executive SummaryAirbnb is a network hospitality company that builds a community between guests and locals. Globally the company is a true industry game changer. With current market valuation of $31billion (Thomas, 2017) and projected revenue of $2.8billion in 2017 (Gallagher, 2017) Airbnb is can firmly challenge even the biggest hotel groups (see Appendix 4). In the context of Bulgaria Airbnb is the biggest tourism accommodation provider with over 3 times more beds that the biggest hotel group in the country. Tourism is the fastest and most steady growing industry in Bulgaria with forecasted contribution of BGN18,344.7mn (USD10,395.7mn), representing 16.7% of GDP by 2027 (see Appendix 1 and 2). This would allow Airbnb to grow sustainably and keep its current position as the market leader. The biggest threat to the company’s success is new local legislations that could oblige Airbnb hosts to list their properties as tourist accommodation under the Tourism Act, which will lead to additional taxes and potential penalties for those not registered. As 95% of its listing are not legally registered, Airbnb must take a proactive approach and work with the state administration in order to ensure the lawfulness of its listings. If such actions are not taken, Airbnb Bulgaria may see history repeating itself, commencing legal battles with local authorities and city councils about the ‘legality’ of their business (Burgen, 2017; Burrows-Taylor, 2017; Coldwell. 2014).Hosts are the most crucial resource of Airbnb, as they are vital to providing supply for the seemingly never-ending demand for Airbnb. If negative media coverage and public opinion or law suits become reoccurring events, this will not only decrease the number of host willing to operate under Airbnb, but it will hurt the overall development of the platform in the country. To avoid that, Airbnb must work on its publicity and support to hosts and guests within the territory of Bulgaria. It must also do so, by optimising some of its services for the Bulgarian market and that way ensuring the satisfaction of its customers. Airbnb can not only sustain its market share and position, but also acquire new markets by focusing at the business traveller segment, as well as SPA, cultural and health tourism in rural areas.Table of Contents TOC \o "1-3" \h \z \u Introduction to marketing audit report PAGEREF _Toc378493396 \h 1Background to chosen company/brand PAGEREF _Toc378493397 \h 1Company’s mission PAGEREF _Toc378493398 \h 1Macro Analysis – PESTLE PAGEREF _Toc378493399 \h 2Political PAGEREF _Toc378493400 \h 2Economic PAGEREF _Toc378493401 \h 2Social PAGEREF _Toc378493402 \h 3Technological PAGEREF _Toc378493403 \h 3Legal PAGEREF _Toc378493404 \h 3Environmental PAGEREF _Toc378493405 \h 4Micro Analysis PAGEREF _Toc378493406 \h 5The Market PAGEREF _Toc378493407 \h 5The Company PAGEREF _Toc378493408 \h 5The Customers PAGEREF _Toc378493409 \h 6Guests PAGEREF _Toc378493410 \h 6Hosts PAGEREF _Toc378493411 \h 6The Competition PAGEREF _Toc378493412 \h 7SWOT Analysis PAGEREF _Toc378493413 \h 9Strengths PAGEREF _Toc378493414 \h 9Weaknesses PAGEREF _Toc378493415 \h 9Opportunities PAGEREF _Toc378493416 \h 9Threats PAGEREF _Toc378493417 \h 9Strategic Imperatives PAGEREF _Toc378493418 \h 11References PAGEREF _Toc378493419 \h 13Appendices PAGEREF _Toc378493420 \h 18Appendix 1 PAGEREF _Toc378493421 \h 18Appendix 2 PAGEREF _Toc378493422 \h 19Appendix 3 PAGEREF _Toc378493423 \h 20Appendix 4 PAGEREF _Toc378493424 \h 21Appendix 5 PAGEREF _Toc378493425 \h 22Appendix 7 PAGEREF _Toc378493426 \h 24Appendix 8 PAGEREF _Toc378493427 \h 26Appendix 9 PAGEREF _Toc378493428 \h 27Introduction to marketing audit report This marketing audit report focuses on the operations of Airbnb in Bulgaria. It consists of five main sections. The first part the report describes briefly the company’s background and mission statement. The second part consists of analysis of the macro (external) and micro- environments, followed by a SWOT analysis. The report ends with strategic recommendations for Airbnb Bulgaria. Background to Airbnb Founded in 2008 in San Francisco, California by Brian Chesky, Joe Gebbia and Nathan Blecharczyk, Airbnb is a true game changer for the travelling industry. With 200,000,000+ guests, 65,000+ cities in 191+ countries (Airbnb, 2018a), Airbnb have disrupted the travelling industry like no one before. With forecasted revenue of USD2.8billion in 2017 (Gallagher, 2017), Airbnb will far outperform any competitors. Airbnb is so popular that every two seconds someone books an Airbnb (Salter, 2012). Less than a decade since the launch, the company is valued at USD31billion (Thomas, 2017) and is performing better that many of the world’s hotel groups (see Appendix 4) (Forbes, 2017). Airbnb has managed to acquire 17 companies (Crunchbase, 2018) and have registered their first year of profit in 2016 (Thomas, 2017). Currently Airbnb offers over 10,000 homes in Bulgaria (Airbnb Bulgaria, 2018), which makes it the major player of the hospitality industry in the country. Company’s missionIn 2013 Airbnb decided their company mission would be: to make people around the world feel like they could “belong anywhere”. “Belong anywhere” is also the current company tagline. Airbnb introduced the rebrand in 2014. (Gallagher, 2017, p.64)Macro Analysis – PESTLEPolitical According to the biggest economic publication in the country, over 95% of the properties listed on Airbnb in Bulgaria are not registered under the Tourism Act (Capital.bg, 2017). With Airbnb considerably growing in the past few years, it is only time until the government frames legally such hospitality activities. Legislations will most likely oblige Airbnb hosts to register their properties as Class B tourist accommodation, also may lead to additional taxes and penalties for those not registered under the Tourism Act. This will cause a substantial decrease in supply of listed properties. Such decrease will have severe consequences for Airbnb’s operations in Bulgaria.The political situation in Bulgaria can also affect Airbnb’s operations in the country (Neumayer, 2004; Clements and Georgiou, 1998; Causevic and Lynch, 2013). However, this is rather unlikely, as the political environment is quite steady and expected to stay that way (The Global , 2015) (see Appendix 6).Economic Tourism and travel is the fastest growing industry in Bulgaria, currently making a total contribution to GDP of BGN11,617.8mn (USD6,582.7mn) making 12.8% of GDP in 2016 (WTTC, 2017). The WTTC Report 2017 is forecasting a steady raise up to BGN18,344.7mn (USD10,395.7mn), 16.7% of GDP in 2027 (see Appendix 1 and 2). AirDNA (2018) provides data for over 3,800 listings in 6 Bulgarian cities (see Appendix 3). With over 10,000 listings in Bulgaria (Airbnb Bulgaria, 2018) and an average of 4.3 guests per listing (see Appendix 3), this makes approximately 43,000 beds. Out of 328,264 beds in the country (NSI, 2017a), Airbnb holds over 13% of the total tourism accommodation, which is over 3 times more than the biggest hotel group in Bulgaria currently operating just over 13,000 beds (Victoria Group, 2018). This makes Airbnb possibly the most important supplier of tourism accommodation and related services in the fastest growing economic sector in the country. SocialAirbnb is an online community marketplace relying on collaborative consumption (M?hlmann, 2015). With millennials being the main target market for Airbnb (Lenoir, 2014; Santos and ?guas, 2016), social media sharing has a massive role in the company’s success. According to Gallup International (2016) Generation Y are hyper connected, with 71% using the Internet as a primary source of information and to manage their social lives. One the main things for them is having an active community and to consume in a sustainable, socially responsible way. Therefore, Airbnb is required to keep supporting the community on which depends its success with programs, such as its Airbnb ‘Belonging’ campaign, sharing their Airbnb Community Stories and Airbnb community initiatives (Airbnb Citizen, 2018), also help for both hosts and travellers page and blog (Airbnb, 2018b). TechnologicalWith the changing economical environment of Bulgaria (European Commission, 2017) and millennials gaining more buying power (McGee, 2017; Ellyatt, 2015; Schroeder, 2017) worldwide, Airbnb is well suited to satisfy the needs and demands of these tech savvy, collaborative, multi-tasking consumers (Loretto, 2017). Being a tech company under the concept of shared economy, Airbnb allows “collaborative consumption” with reduced transaction cost (The Economist, 2013; M?hlmann, 2015), which gives it a massive advantage over more traditional forms of renting tourism accommodation.LegalAs mentioned above 95% of the Airbnb properties in Bulgaria are not registered as tourism accommodation (Capital.bg, 2017). Currently, there is no legislation that covers rentals, such as Airbnb. The current options for hosts are to register their property as a rental contract (long or short term), or to register it as a touristic accommodation. According to article 237 from the Law on Obligations and Contracts, every rental contract, regardless long or short term must be registered with the corresponding Municipality Property Register (LawsBG, 2018). The other option is to register the property under the Tourism Act (Republic of Bulgaria Ministry of Tourism, 2011). According to Section III, article 45 of the Tourism Act ‘to practice hoteliery, a person must be a merchant within the meaning given by the Commerce Act or a legal person entitled to carry out economic activity by virtue of another law’ (Republic of Bulgaria Ministry of Tourism, 2011) and is liable for operational practices, taxes and administration under the Tourism Act and Trade Law of Republic of Bulgaria. As Airnbnb has a history with local authorities and city councils about the ‘legality’ of its business (Burgen, 2017; Burrows-Taylor, 2017; Coldwell. 2014), a similar scenario may occur in Bulgaria. This has the potential to be a huge legal liability for the company in the future. Environmental Pollution in rural areas of Bulgaria may lead to decrease of tourism demands in those regions (Cvijanovi? et al., 2017), which can negatively affect the overall tourism demand for nature and cultural tourism. Such negative impact will have effect on Airbnb’s operation, as well. However, such threat is not immediate and will affect proportionally all hospitality companies in Bulgaria. The government is working on plenty of initiatives to preserve the environment and sustain opportunities for rural and eco tourism (Republic of Bulgaria Ministry of Tourism News, 2015). Micro AnalysisThe Market The accommodation market is well developed in the capital and the seaside and mountain ski resorts (IBM Research, 2016). Bulgaria positions itself as a year-round accommodation and has well developed sea and ski industries and a growing international interest for SPA, health and cultural tourism. With record number of international tourists in 2016 (Republic of Bulgaria Ministry of Tourism, 2017) of over 8.2million arrivals, tourism is the fastest growing industry in the country. The main portion of those arrivals comes from EU and other European countries (NSI, 2017b). The revenue from tourism reached BGN11,617.8mn (USD6,582.7mn) in 2016 (WTTC, 2017). With projected steady growth (see Appendix 7) and highest tourism expenditure for accommodation (NSI, 2017d; Marrocu et al.,2015; Turner and Reisinger, 2001) Bulgaria is a market with immense potential for Airbnb, regardless of its smaller scale. Clearly international tourists are of a greater interest as of their superior buying power, however according to the BMI Research Report (2016) most of Bulgarians travel domestically, and the domestic market ‘will continue to constitute a key share of the national tourism industry’ (see Appendix 8). In 2016 international visitors have purchased 16,150,666 room nights (NSI, 2017e). With Airbnb currently holding about 13% (and growing) of the tourism accommodation in the country, it opens up a substantial opportunity of capturing market share of the rapidly growing ‘pie’, also generate a record high turnover for the country. The Company Airbnb is currently the largest hospitality operator in Bulgaria with over 10,000 listings around the country. Airbnb is a network hospitality company that builds a community between guests and locals (Oskam and Boswijk, 2016). As of the nature of Airbnb (being online based), the company neither has an office in Bulgaria, nor offers any customised services for this market. Information about the regional Airbnb operations can only be drawn from indirect resources or from the global company’s presence. The Customers As Airbnb is a two-way platform, both guests and hosts are considered customers of the company. As the needs, wants and expectations of those differ, they will be assessed separately.GuestsEven that Airbnb is trying to diversify their products and by that to attract travellers from different markets, millennials are still the main clientele of the platform (Lenoir, 2014; Santos and ?guas, 2016). Generation Y consumers are looking for convenience and flexibility (McGee, 2017) and personalised experiences (McGee, 2017; James, 2017). They value authenticity (James, 2017; Schawbel, 2015) and want to buy from companies with strong social purpose or mission (Nielsen, 2017). They like to stay hyper connected (Gallup International, 2016; Nielsen, 2017), but aren’t influenced by advertising (Schawbel, 2015). Price is important, but brands matter (James, 2017) and they like to review the Internet before making a purchase (Gallup International, 2016; Schawbel, 2015). Last, but not least, they value experiences way more than physical goods (McGee, 2017; James, 2017). Hosts The main challenge for Airbnb has always been to get enough hosts on the platform to satisfy the demand of its customers (Fortune, 2016). One of the main concerns of Airbnb users is safety (Lieber, 2015a; Lieber, 2015b; Oskam and Boswijk, 2016). This would be a major concern for Bulgarian hosts, as the USD1million Host Protection Insurance does not apply to Bulgaria (Airbnb, 2018c). Hosts expect an easy posting of their property, easy and secure payment, and for Airbnb to ensure the guests’ profiles are legitimate. Host often worry about theft and damage of property (Airbnb, 2018d), also false negative comments, complaints from guests, and last minute cancellations (AirbnbHell, n.d.).The Competition Traditional tourist accommodations, such as hotels, hostels and guesthouses, as well as platforms such as , are also competitors of Airbnb. However, for the purpose of this report a comparative analysis will be done only against direct competitors. Founder and CEO of AirDNA Scott Shatford (2014, p13) points out a few competitors to Airbnb globally (see Appendix 5). For Bulgaria, two major competitors have been identified - Home Away and Trip Advisor Rentals. A quick comparison was done on the following criteria: number of listings for Bulgaria, ease of listing a property, ease of booking a property, fees taken from hosts and travellers, additional services and support offered (see Appendix 9). From the comparison done the following conclusions can be drawn:In terms of ease of listing a property Home Away and Airbnb offer a much easier process. With great suggestions generator, easy and quick upload of pictures and options to do offers for your guests while creating the listing, Home Away and Airbnb are definitely superior to Trip Advisor Rentals.When it comes to booking a property all platforms offer special services and lag in certain features. Airbnb has the best map feature for viewing properties, while Home Away offers pet friendly properties and Trip Advisor offers easy to navigate map, rental information and currency exchange information. On the negative side, it is difficult to check availability on the Airbnb site, while Home Away asks for a deposit, and prices are presented in local currency.In terms of fees Trip Advisor Rentals offers by far the most competitive pricing for their services. With 3% host fee and guest fees determined by individual host, it outperforms significantly its competitors. All companies offer plenty of assistance, information and additional services for both travellers and hosts. However, Trip Advisor Rentals offers to its customers the opportunity to be part of the oldest and largest travel community with all its additional services. To conclude, even that Airbnb and Home Away have been each other’s main competitors for years, Trip Advisor Rentals offers great value and highly competitive pricing for its customers. Both ‘Home Away and Airbnb would be wise to keep one eye looking over their shoulders. And not just at each other’(Taylor, 2016).SWOT Analysis Strengths Does not own accommodation assets, but facilitates value creation in a network economy– two sided market (Rochet and Tirole, 2003)Offers countless opportunities for hosts with its 150million users (Smith, 2017)Self – developing system that gets stronger as the numbers of connections grow. Also, word of mouth marketing. Economy of scale – the power of the network (Oskam and Boswijk, 2016)Lower prices than traditional hotel accommodation (Xie and Kwok, 2017) Greater experiential value (Brochado at al., 2017; Poon and Huang, 2017)Trusted marketplace (Oskam and Boswijk, 2016)Diverse and highly customised product (Santos and ?guas, 2016; Oskam and Boswijk, 2016)Weaknesses Developed primarily in the larger cities, but poor coverage in rural areas where SPA and nature tourism is on offer Less additional services in comparison to traditional hotels Opportunities Has the potential to grow immense number of beds in more locations that any other tourism operator in the countryThe state of the Bulgarian economy (European Commission, 2017) makes renting your home on short-term basis a great financial opportunity to many peopleStable and fast growing stream of international tourist arrivals (BMI Research, 2016; Republic of Bulgaria Ministry of Tourism, 2017)ThreatsGovernment legislation prohibiting operation unless the properties are registered under the Tourism Act – regulatory issues (Roberts, 2017)Security and safety of travellers (Lieber, 2015a; Lieber, 2015b; Oskam and Boswijk, 2016)Negative coverage in the mediaHotels and guest houses customising accommodation to give it a more ‘home-like’ feelCouch surfing () as a free substituteComplaints and law suits from the community around the Airbnb properties (Williams, 2016; CBC News, 2016; Gallagher, 2017)Strategic ImperativesAirbnb has a clearly very strong position within the tourism accommodation market in Bulgaria. However, there are few strategic imperatives to be taken in consideration by Airbnb, in order to keep its current position, grow in market share and prevent liabilities.As mentioned above Airbnb is highly dependable on the hosts, as their numbers and satisfaction with the services is crucial for the success of the platform. In order to keep its market share and current position as the market leader Airbnb should consider offering some of its international services to Bulgaria and working on localising them. These services would be the Host Protection Insurance and life support in Bulgarian. Unfortunately not all current and potential hosts are fluent in English, and by offering services in the local language would raise significantly the satisfaction of the hosts. It would also support the attraction of more hosts, which will help satisfy the high demand for Airbnb. The ever-growing tourism market in Bulgaria opens up possibilities for new types of tourism in the less developed areas in the country. Airbnb can gain competitive advantage using a ‘blue ocean’ strategy by targeting the rural areas of the country where SPA, cultural and health tourism is offered.According to the National Statistical Institute (NSI, 2017c) over 21% of the international arrivals are visiting for the purpose of business. Currently the business market is reserved primarily for the large hotel groups. Targeting this market will allow Airbnb to acquire a portion of this segment, large enough to sustain the growth rate of the platform. Even that Airbnb does not use outbound marketing, it may be wise to consider deploying some PR. Even that Airbnb is gaining popularity fast, it must sustain the good name of the company in order to ensure sustainable growth. PR campaigns and content marketing activities dedicated specifically to the Bulgarian market would have an immense effect on the attraction of new hosts, also neutralising any negative opinions in the media. This would also have a positive effect if ever Airbnb faces legal liabilities, similar to the cases of New York, Paris or Barcelona (Burgen, 2017; Burrows-Taylor, 2017; Coldwell. 2014). It must also take the proactive approach and look into ways of collaborating with the local authorities to ensure the legality of its business. Finally, in order to keep its local competitive advantage over platforms, such as Trip Advisor Rentals, Airbnb must consider revising its fees scheme. Possible free trial period for hosts and travellers could be put in place or a lower percentage fee for the fist year of usage. However, such decision would be a global strategic initiative and would not be possible solely on a local level. References BooksGallagher L. 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Appendices Appendix 1 Bulgaria Total Contribution of Travel & Tourism to GDP, % of Whole Economy GDP (WTTC, 2017)1143006604000Appendix 2Bulgaria Total Contribution of Travel & Tourism to GDP in BGN millions (WTTC, 2017)-11430011493500Appendix 3Number of beds calculated based on Active Listings and average number of guests per listing (data taken from AirDNA– Jan 11th 2018)CityNumber of Active Listings Guests on AverageTotalSofia203248128Varna9894.44351.6Pomorie3454.21449Bansko 3035.11545.3Ravda1103.9429Primorsko524208Totals:38314.316110.9Appendix 4Adapted from Forbes The World’s Biggest Public Companies (2017 List) Company Country Sales ProfitsAssetsMarket ValueCarnival USA$16.5 B$3 B$38.7 B$42.9 BMarriott International USA$17.1 B$780 M$24.1 B$34.9 BRoyal Caribbean CruisesUSA$8.5 B$1.3 B$22.3 B$20.9 BHiltonUSA$11.7 B$348 M$26.2 B$18.7 BShenzhen OverseasChina$4.3 B$775 M$20.4 B$8.9 BOriental Land Japan$4.3 B$699 M$7.1 B$19.6 BNorwegian Cruise Line HoldingsUSA$4.9 B$633 M$13 B$11 BWyndham Worldwide USA$5.6 B$612 M$9.8 B$8.9 BChongqing New Century Cruise China$267 M $120 M$1.2 B$20 BInterContinental HotelsUK$1.7 B$415 M$2.9 B$9.6 BAccorFrance$1.8 B$252 M $12.5 B$12.1 BAppendix 5Airbnb Competitor List Name of CompanyWebsiteOperate in Bulgaria?No of listings(Jan 11th, 2018)Yes10,NoNAOne Fine NoNAUrban NoNAThe Apartment Yes22Great Rentals*Yes2,500+Holiday Lettings**holidayletting.co.ukYes1,897Online Vacation Yes79Vacation Home Yes0Vilas Yes604FlipKey**Yes1,897Home Yes2,500+VacationRentals*Yes2,500+VRBO*Yes2,500+*Part of the Home Away Family and sharing listings between all platforms**Part of Trip Advisor Rentals and sharing listingsAppendix 6Political Stability IndexAppendix 7 Source: BMI Research (2016) Bulgaria Tourism Report. London: BMI Research.Appendix 8Source: BMI Research (2016) Bulgaria Tourism Report. London: BMI Research.Appendix 9-1365885150558500 ................
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