Case Study Analysis Of AirBnB In Japan

This case study analysis has been prepared in order to analyse the issues Airbnb has had with fully immersing itself into Japan, with the use of several sections and subsections to illustrate the current state of Airbnb versus Japan. The background analysis gave insight as to where Airbnb currently stands, identified competitors that are already established in the country and don’t have to go through the never-ending process of amending regulations in favour of Airbnb, as well as understanding the target audience and what differentiates them from other consumers. Airbnb has been facing market entry issues in Japan due to new ordinances that took effect in June 2018, limiting the amount of listings on the site, and it leaves competitors with established regulations to take over the industry. Another takeaway is that the Japanese are a high-context culture, as opposed to the U. S. and simply don’t share the same willingness to participate in a shared economy as the U. S. and other westernised cultures have already done. It makes the barriers to market entry significantly harder. After completing a background analysis, how the new housing laws were being enforced versus what their original purpose was and how that can affect Airbnb’s plan for expansion and Japanese’s goal of attracting more tourists were detailed.

The analysis of market opportunities describes some growth opportunities that Airbnb may have in the future based on how the company is currently standing. For example, Airbnb is going to be partnering with a loyalty rewards program company to offer points for guests who stay at an Airbnb. Through recognition of key issues and future potential opportunities, recommendations for Airbnb were created, so they can successfully grow in Japan by the 2020 Tokyo Olympics. These include celebrity endorsements and taking more responsibility for ensuring hosts’ compliance with the new laws.

Introduction

Airbnb is a privately owned company founded by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk and headquartered in San Francisco. The company has experienced a significant amount of growth since 2009 through large investments from capital companies and angel investors. By 2011, the company was offering accommodation options in 89 countries and was valued at over $1 billion U. S. dollars. Now, it is valued at approximately $31 billion.

The company continually faces legal issues in different cities and countries because of the laws that rental homes should be abiding under and has cost Airbnb time and money to rectify these situations. They also update their terms of service on a regular basis to comply with laws of the different governments that allow them to operate there. In mid-2015, Airbnb had about 13, 000 listings in Japan, which is a significant increase from the year before. Two of the company’s co-founders believe that there is still room to grow in Japan, as their goal is to reach 40, 000 listings by 2020. However, Airbnb finds it challenging staying in that market due to regulations that local governments have imposed on hosts and the company itself. Hotel businesses in Japan operate under the Hotel Business Law of 1948, however, Airbnb is not necessarily classified as a hotel business. This has caused a dilemma with the government because they do not know how to enforce the regulations on the company, because if it were to be found as being a hotel “business”, then hosts would be breaking the law since they wouldn’t have an operating license. Therefore, that leaves hosts and Airbnb susceptible to multiple fines and penalties from the government. If Airbnb plans to become the primary accommodation service for the 2020 Tokyo Olympics, they will need to rethink their strategies in order to appease regulations and also attract more users.

Background Analysis

To be able to provide recommendations for the company, a background analysis should be performed beforehand. This tool helps companies and marketers to design a solid marketing tactic and ultimately, a sustainable competitive advantage. For Airbnb to be successful in Japan by the Tokyo Olympics in 2020, they will have to get an understanding of where Airbnb currently stands, who is the competition, and who are the target consumers and more background on their interests and wants.

Company Analysis

Airbnb has succeeded in multiple cities around the world, from Paris to Miami and in between. They rely very heavily on guest’s reviews online for each booking in order to attract more customers, since Airbnb does not manage every property and it is not a standardised operation. The company has been able to grow at an exponential rate due to word-of-mouth due to the pull strategy that they’ve implemented. At its start, they faced many issues with guests arriving at accommodations that were in worse conditions than the pictures posted on the website. To combat this issue, they started a professional photography program that sends a photographer to the proposed listing and take pictures of it to be used online. Currently, Airbnb still go through many legal battles over housing regulations that local governments around the world enforce. Notably, Airbnb has been stifled in Japan by a law enacted on June 15, 2018 which limits how many days in a year that home-sharing is allowed, which is only 180 days and many current hosts see that will be difficult to work with. They believe that it’ll be tough to make a profit. It’s also a large problem for Airbnb because since June, the online listings dropped by 80%.

Competitor Analysis

Airbnb faces some major competition in Tokyo from partners Able Inc. and Tomareru. They are both huge companies in Japan and have already taken the precautions necessary to regulate their services in compliance with the government. Because they are already established companies, Airbnb feels that it will be harder to become accepted in Japan since they have still not been completely regulated. Another potential, but not confirmed, competitor is Japan’s largest e-retailer, Rakuten. There have been rumours spread that the online retailer will soon expand their services and include an Airbnb-like service in the near future. The CEO of the company, a Harvard business school graduate, is currently the third richest man in the country and has powerful connections to the government, which would significantly reduce the barriers to market entry if the company were to take on the initiative of creating a home-sharing business. Another big competitor for Airbnb is HomeAway and its sub-companies, including VRBO and vacationrentals. com. One major difference between Airbnb and HomeAway is that HomeAway does not assess any booking or service fees to its guests, which can seem like a tempting offer for them. Lastly, FlipKey, who is owned by TripAdvisor, includes many business tools for its hosts to use, not limited to ROI analysis, global exposure, and expert advice.

Consumer Analysis

The hotel industry was disrupted by the introduction of Airbnb and now, westernised cultures have opened themselves up to the concept of a “shared economy”. This, however, is not the case for the Japanese, as they are not used to opening their homes up to complete strangers, only family members, close friends, and neighbours. Japan is high on the uncertainty avoidance scale and low on the indulgence scale, based on Hofstede’s cultural dimensions. They don’t like to be uncertain about future events. Based on the same site, “You could say that in Japan anything you do is prescribed for maximum predictability. From cradle to grave, life is highly ritualised and you have a lot of ceremonies” so to bring in a new concept to an established culture will definitely have some difficulties. As for indulgence, the Japanese are more reserved, personality-wise, than other Asian countries, and they are inclined to be pessimistic and cynical. They also do not much partake much in leisure time because of social norms; they are restrained by them and indulging in a desire is illicit. The Japanese also feel that Airbnb is disrupting the peaceful harmony there by allowing (some) rowdy foreigners to come and go, which is why new regulations have been imposed that negatively impact regulated home-sharing businesses besides Airbnb.

Key Issues With Relation to Japan

Airbnb and Japan have clashed over many years but in June 2018, Japan executed a major law where Airbnb hosts that are unlicensed cannot be listed on Airbnb, which cut the amount of current listings by 80%. The Japanese Tourism Agency (JTA) affirmed their decision to also impose an annual, 180-day maximum for how long hosts can share their homes. Originally, the enactment of the law was meant to allow registered hosts to continue on Airbnb, but the process to become licensed has proven to be much of a nuisance. There are over a dozen different documents that need various approvals from building owners and a confirmation that the home is in compliance with safety standards. Despite the adverse effect that the new law has had on Airbnb listings and Japanese tourism, the JTA defended how the law is put into action and believes that Airbnb had ample time to make arrangements. Airbnb was compelled to collect a $10 million fund for travellers who had last-minute reservations cancelled due to the new law.

Additionally, the Japanese are simply not as keen to open their homes to complete strangers like more Westernised cultures. There was an incident in September of this year with an Airbnb listing in Osaka where three Chinese tourists left rubbish all around the flat and wrote vile messages in the guest book, which is a sign for many Japanese residents that they should not open up their homes to strangers. Based on a survey in 2017 by PwC, only 2. 7% of the population is aware of what a sharing economy means. 7 Analysis of Market Opportunities With the Tokyo Olympics in 2020 getting closer and closer, Japan and Airbnb need to find a middle ground where both parties can benefit; after all, Japan is the most sought out country to stay in compared to the entire Asia-Pacific region. It is quite difficult with the way that the new housing regulations are being enforced, especially with some areas like Kyoto that only have certain seasons in which home-stays are allowed.

The company has plans to partner with Culture Convenience Club T Point loyalty program (CCC) and AirTripStay later on this year. Airbnb has seemingly unlimited venture capital fuelling its operations. By creating the partnership with CCC, Japanese residents can earn loyalty points by booking on Airbnb. Additionally, through the partnership with AirTripStay, hosts have access to help with their registered listings, getting professional photographs of the home for the listing, and even cleaning services. Airbnb will also be using a modified version of Airbnb Friendly Buildings, a program where building owners cooperate with hosts to agree upon how home sharing can operate, usually with a couple of constraints or by taking a percentage of profits. The program is being changed to be adaptable in Japan by developing homes in both rural and urban areas where home-sharing would be considered acceptable. 8 Recommendations Being a company that has a hard time establishing itself into Japan, Airbnb should take a proactive step and hire inspection companies in Japan. That way, the government will be able to see that there is some regulation being used in the listing process and that homes are compliant with housing laws and regulations. Secondly, they should run background checks on guests that plan to stay in Japan through Airbnb, as well as use online reviews, to filter out guests who may be considered too unruly to stay in the community. Hosts should be made aware of the $1 million host guarantee, which is a measure that can be used in the case of property destruction by guests.

Additionally, in order to generate more applications for a home-sharing license in Japan, Airbnb should create an advertising campaign that highlights that they are willing to work with hosts to get them registered. Based on their press room website, they have already set up connections with legal teams in Japan to provide advice for hosts, as well as financial support for hosts who make significant expenses due to wanting to be registered. Some hosts feel that due to the 180-day cap for home-sharing, they won’t be able to make much of a profit during the time that they can rent out the property. To counter this, Airbnb should aim to decrease their own profit margins in the region by reducing the percentage taken from each transaction. This’ll allow hosts to make more profit off of the service. Using this strategy will, ultimately, incentivise residents to apply for licensing and become part of Airbnb’s global community. Airbnb knows that the Japanese government needs to make room for tourist accommodation in order to recover from its economic crisis. It has its own reasons to motivate citizens to apply for licenses, and it also has plans to invest in improving tourism.

Airbnb should aim to convince the government to reward successful applicants with tourist packages, especially 9 nearer to the Olympics, so people have more reasons, not just the increased profits from Airbnb, to apply for licenses and this will help improve market share for Airbnb while also encouraging tourism in Japan. With famed athletes like Shinji Kagawa and Homare Sawa planning to participating in the Olympics, upon qualifying to compete, Airbnb has a clear chance of recruiting celebrity athletes to endorse the company. Celebrity endorsements have been used for decades to attract customers to use a product or service because someone prominent is using it, so it’s an indication of high standing and status. The company has never been able to continue a lasting relationship with prior endorsers, but they should begin these advertising efforts starting in the summer of 2019 to slowly but surely generate interest in travelling to Japan. This can also be beneficial to the national government because they want to capitalise on the Olympics as a tourist attraction that will bring in more foreigners than in decades. As for global expansion, they should seek to increase market shares through better marketing efforts, capitalising on the effects of social media. These efforts should have one clear message behind them: Belong Anywhere. The company can shine light on the different types of accommodations offered, from the Flintstones house in California to tree houses in Georgia, to prove that not only are they a quality service, but they have multiple unique listings to fit many needs.

Conclusion

For Airbnb to continue to thrive and expand globally as seamlessly as possible, Airbnb should consider all the housing laws and regulations of the location they want to enter rather than entering the market with unresolved issues. Taking this approach, it would’ve avoided the inconvenience for tourists to find new accommodations because their bookings were cancelled. The company, however, should continue to work with the Japanese government to reach an accord that’ll allow more home-sharing in the country, especially because there needs to be more accommodations sites for tourists that plan to stay to watch the 2020 Tokyo Olympics. With the current implementation of the new law, it seems that unless a new amendment is made to ease the difficulty for owners to attain a license, Japan will be facing a severe shortage of housing in the years to come, despite their efforts to attract more tourism into the country.