Case Study Analysis: Airbnb – Going For Gold – Tokyo 2020
Executive Summary
This report provides an analysis and evaluation of Airbnb entering the Japanese market in time for the 2020 Tokyo Olympics. The analysis has explored the best way to drive growth in Japan in order to provide a market for the thousands of tourists that will be visiting Japan during the time of the 2020 Olympics. Airbnb has a growth strategy to localise in each market they enter, however entering the market of Japan raised implications for the company. One of the primary issues Airbnb faced is the expansion of their market in Japan and to the Japanese community. It was found that Japan has to ease on regulations with the implementation of the National Strategic Special Zones. These zones allow for the deregulation of laws making it a favourable business environment for new markets wanting to test if their market would be successful in Japan. It is recommended that Japan partner with the Japanese government to be regulated as this will help revitalise the Japanese economy by bringing lots of tourist attention in time for the 2020 Tokyo Olympic Games. As Airbnb is already at a competitive advantage to hotels it is recommended that Airbnb partner with boutique and luxe hotels in order to create more listings and provide more luxury and authentic listings for travellers. As Japan is a high context culture is it on uttermost importance that Airbnb brand themselves through interactive events and meet ups that allow for the interaction of hosts and in order to recruit new ones. It can be recommended that Airbnb propose initiatives, support services and partnerships for growth and educational purposes.
Introduction
The Tokyo 2020 Olympics is only two years away and Airbnb is still yet to figure out how to drive its growth in Japan. In order to have a large enough market for the thousands of tourists who will be visiting for the duration of the games and to position its brand favourably in the appealing market, Airbnb has implemented a growth strategy to increase the number of listings it receives. This growth strategy has been to localise in each market it enters. As seen in the case study for Airbnb, regulation battles with governments and cultural regulation has been a key global marketing issue. Complying with government regulation is key in order to have a successful market and relationship with consumers in any country. Every country has its own political climate with different structures and policies. Depending on the political situation it can either provide more opportunities or challenges to a market. As for cultural regulation, each country also has its own culture and traditions that can impose a significant problem to marketing and selling product. In terms of the case study, Japan’s cultural situation is an issue as the country is divided into a traditional Eastern country mixed with Westernisation which may affect consumers. The purpose of this essay is to critically analyse the strategy of Airbnb expanding its market to Japan and if Airbnb should partner with the Japanese government in order for favourable regulation and positioning in the market. This paper will argue that effective strategies such as market segmentation, market selection, integrated marketing communication and having an appropriate global marketing strategy (GMS) are key factors for success in global marketing.
This analysis of Airbnb in the Japanese market is achieved by answering four focus questions.
- Should Airbnb partner with the government to be regulated?
- Should Airbnb partner with its competitors?
- How should Airbnb brand itself in Japan?
- How can Airbnb educate the Japanese about its services and increase its listings?
These focus questions will include recommendations for Airbnb entering the Japanese market in time for the Tokyo 2020 Olympics. The focus questions will be followed by a conclusion of the overall research conducted for the purpose of this report.
Focus Question One: Should Airbnb partner with the government to be regulated?
It is strongly recommended that Airbnb partner with the government to be regulated. Due to an extensive recession Japan accumulated a gross government debt of 226 percent of its GDP in 2014. This number is set to rise if the economy isn’t revitalised. In Japan a “three arrow” policy was released which includes bold monetary policy, flexible fiscal policy and a growth strategy to slow deflation. Japan has introduced a law for National Strategic Special Zones that allow for free trade and relaxed regulations in Fukuka, Kita Kyushu, Hiroshima, Imabari, Yabu, Kansai Area, Aichi, Tokyo Area, Niigata, Semboku and Sendai. The goal of the National Strategic Special Zones is to accumulate capital whilst boosting international competitiveness. The National Strategic Special Zones allowed for law deregulation, in particular the deregulation of the hotel business. The National Strategic Special Zones and the deregulations allowed for early market entry for businesses thus causing a favourable business environment.
The Japanese government has situated tourism at the forefront of Japan’s regional revitalization and economic growth strategy with the intention of increasing the annual number of foreign tourists to 30 million. Whilst working with national government would be beneficial for Airbnb so would working with local government. According to Nakamura, Elder and Mori (2011) the role of national government is set to decrease in the future due to an aging society and a maturing economy. Partnering with government allows for businesses to gain access to political resources and helps create a market for developed innovations. In 2014, the Ministry of Health, Labour and Welfare of Japan released a statement that if a business obtains a permit as an accommodation provider for foreign visitors only within the National Strategic Special Zone, it will be exempt from hotel permission requirement of the Hotel Business Law. However, a business will still need to meet certain requirements such as the length of the stay needing to be 7 to 10 days or more and the area of the rooms need to be 25 square metres or more. It is recommended that Airbnb collaborate with the Japanese government and like the 2016 Olympics in Brazil come up with a signed agreement between the Japanese government and Olympic committee to be the official alternative accommodation services supplier. It is also recommended that the agreement be under the conditions similar to those to the National Strategic Special Zones but for the whole of Japan for the duration of the Olympics as a trial to see if the market could potentially take off.
Focus Question Two: Should Airbnb partner with its competitors?
The competition between Airbnb and hotels has been no secret as Airbnb has been considered a cheaper and perhaps a more comfortable alternative to hotels. As Airbnb is a service that allows people to rent their residency to tourists, it has become a hot topic in the hospitality sector. According to Chafkin and Newcomer (2016), the service has shown rapid growth since its launch in 2008, with over 100 million guests having stayed in accommodation provided by Airbnb by the end of 2016. The company also has a global inventory of over two million listings. As of 2013, Airbnb hired the founder Chip Conley of a major boutique hotel company Joie De Vivre as its Head of Global Hospitality & Strategy, in order to promote key standards of cleanliness, host response times and accuracy of listing descriptions. With the introduction of Conley, it could be recommended that Airbnb partner with boutique and luxury hotels as this would expand the number of listings on Airbnb, provide more options in terms of luxe accommodation to customers at a cheaper rate, as well as attracting more clientele to the luxury and boutique hotels Airbnb partners with. It can also be said that Airbnb partnering with its competitors can be good for attracting more tourism as there will be more accommodation for visitors. In a case study on Airbnb in Jamaica in relation to tourism performed by Johnson and Neuhofer (2017), it was found that with the use of Airbnb there was widespread interest in hospitality and tourism with over 1, 500 listings. It was also found that the listings in local communities allow for tourists to interact with the original and authentic traits of the country.
Airbnb has emerged as one of the most successful platforms of its kind within the tourism and hospitality industry. It is recommended that Airbnb partner with its competitors in a country like Japan that is not so tourist-intensive country could help reshape their economy and create more tourist interest in time for the 2020 Olympics.
Focus Question Three: How Should Airbnb Brand Itself in Japan?
In the 21st century we are living in a world influenced by technology, innovation, instant connectivity and social media platforms. Due to the way we live the marketing mix of a business evolves at a fast pace. According to Bergh and Behrer (2016) the elements of a marketing mix in the 21st century is now: a product or service becomes an experience, brand communication becomes a brand conversation, and a message becomes a story, prices are instantly comparable and therefore transparent and distribution or the middlemen are under pressure and become brands of their own. The development of internet technology has already started the promotion of the sharing economy. It can also be said that sharing behaviour has become a phenomenon due to change in values, concerns about the environment and an increase of sense of community.
Price: In terms of price, Airbnb is at a competitive advantage as it is able to offer a price-competitive accommodation alternative to travellers. Prices are based off per room instead of per person. Airbnb allows hosts to pick their price and also recommends pricing according to other rentals in the area. It also suggests prices according to amenities that are offered. In addition, start-ups such as Beyond Pricing and Price-Labs offer tools that bring dynamic pricing into the Airbnb realm of rentals. These companies adjust pricing according to supply, demand and other variables that affect the market through algorithms that are predictive and reactive.
Promotion: As Japan is a high context culture, face-to-face communication is paramount. Airbnb has been holding events in Tokyo to connect hosts and guests. These events help educate early adopters and help spread the word about Airbnb. However, as of recently the Japanese government has started to promote the “Cool Japan Initiative” in order to increase the economic value of the elements of Japanese culture. The use of the “Cool Japan imitative” is to promote open innovation, experienced based promotions and royalty-free strategies to well-loved characters of Japan such as: Duffy, Hello Kitty and Kumamon to promote products. It is recommended that perhaps Airbnb partner with influential characters as a form of promotion.
Product: Airbnb products include: listings, online platforms and communication services between hosts and guests. As the Japanese are concerned about safety and opening their door to strangers is a difficult mannerism for the Japanese to adopt, Airbnb has introduced new safety measures and services. Airbnb has introduced a number of identity verification tools such as providing an official form of legal photo identification and the linking of Airbnb accounts to Facebook and LinkedIn. Another service Airbnb started to provide as of 2011 is the use of free professional photographers whose pictures are verified with an Airbnb watermark. They also introduced a hotline available 24 hours of the day. More recently, Airbnb has also offered free smoke alarms and carbon monoxide defectors to hosts. They also introduced a “Superhost” status for active and well-reviewed hosts. Airbnb also has modified their reviewing procedures in order to encourage more honest reviews.
Place: Airbnb has created a website called “Neighbourhoods” for Japan that is a city guide containing real pictures of the area. The website presents key words, pictures and must sees that are well summarized. If the consumer like the district they can click a button called “see places to stay” in order to find rooms in that area. There is no limitation on where listings are located with some outside the National Strategic Special Zone.
Focus Question Four: How can Airbnb educate the Japanese about its services and increase its listings?
As Japan is a high context culture, it is recommended that Airbnb hold educational meet ups and events all around Japan in order to help educate existing hosts and recruit new ones. These meetings should allow the opportunity for host to receive help in personalising their listing and be a learning opportunity to understand the benefits of being a host on a local and international scale. It can also be recommended that Airbnb also host support services. Airbnb should partner up with various firms in Japan in order to give hosts guidance, legal advice and other services needed to complete registration and allow for the sharing of their space with travellers. Airbnb could also partner with Real-Estates that deal with vacation homes / rental properties that are vacant for weeks or months. The partnership with Real-Estate companies will ensure that the properties are used more frequently. As Japan is an aging population many homes around the country are becoming empty. Airbnb could introduce an empty homes initiative where travellers are able to use these homes in order to create memories and allow for a unique and authentic accommodation. The money made from this initiative can go back into government funding to help support the aging population. Airbnb has been investing in rural Japan. In 2017, Airbnb helped Yoshino Cedar House in Nara which become the first hybrid community centre and Airbnb listing. Projects in rural Japan are important in order to support communities suffering from population declines. Airbnb has also teamed up with Kamaishi City to help sustain the city’s tourism as they rebuild from the 2011 tsunami. It is recommended that Airbnb continues to work will rural areas across Japan.
Conclusion
Making a successful entry into the Japanese market is not easy due to cultural and regulatory setting. With Airbnb’s experience with the London and Brazil Olympics it is possible for Airbnb to come up with a sufficient marketing and regulatory approach for the 2020 Olympics in Tokyo. As seen from the research conducted above it is paramount for the revitalisation of the Japanese economy that Japan partners with Airbnb. The partnering with Airbnb will allow for more tourist attention towards Japan in time for the Olympics and also will solve a lot of economic issues that Japan is currently facing. It would be extremely favourable for Airbnb to brand itself through events, support services, partnerships and initiatives in Japan in order to spread awareness and educate consumers, as well increase its listings. As the new concept of a “shared economy” is on the rise and will become a very important part of international trade in the future. It is also important that Airbnb cracks into the Japanese market as it is already at a competitive advantage and in order to obtain sustainability.
