Airbnb PESTEL Analysis

Airbnb PESTEL stands for political, economic, social, technological, environmental and legal factors effecting the peer-to-peer lodging company. It is an important analytic tool used to analyse external factors affecting businesses for strategy development.

 

Political Factors in Airbnb PESTEL Analysis

There are some political factors at the local and global scales that affect Airbnb revenues in direct and indirect manners. Issues with governments over the taxes and opposition from local governments and residents are the most important political factors for the peer-to-peer lodging company.

 

Issues with governments over the taxes

In the US, there is a dispute between a number of local governments and Airbnb over the allocation of responsibility to collect and pay occupancy taxes. A number of local and foreign governments have criticised Airbnb for not paying housing and/or other relevant taxes and they have been trying to take action with varying levels of success. It has been noted that in the US, “from Nashville to New Orleans to Honolulu, Airbnb is battling local officials over requests to collect occupancy taxes and ensure that the properties listed on its site comply with zoning and safety rules.”[1]

The company lobbies its interest hiring firms such as KDCR Partners and Fulcrum Public Affairs in attempt to decrease government oppositions to the business. As illustrated in figure  below, Airbnb annual lobbying budget is not massive though, compared to other multinational companies and in 2018 it amounted to USD 540,000.00.

Airbnb PESTEL Analysis

Annual Lobbying by Airbnb

 

Opposition from local governments and residents

Airbnb has faced opposition from local governments and protests from local residents due to perceived negative impact of the global hospitality service brokerage company to neighbourhoods. One of the major points of concerns in local communities relates to negative impact of the travel industry disruptor on local housing prices. There are evidences to support this viewpoint.

For example, a study conducted in Los Angeles found that in 2014, “almost half of Airbnb listings were clustered in seven neighbourhoods, where rents increased a third more quickly than the city average. The wider US study suggested a 10% increase in Airbnb listings led to a 0.42% increase in rents and a 0.76% increase in house prices.”[2]

Another cause of opposition from local governments and residents towards Airbnb relates to a phenomenon known as overtourism. Overtourism is associated with a situation whereby too many tourists visit a particular place and Airbnb is often criticized for causing overtourism via decreasing the overall costs of tourism.  Specifically, it has been noted that with the increasing popularity of peer-to-peer lodging, “thousands of beds have suddenly been made available to the tourism market in towns and cities around the world, without being subject to any kind of planning, permits or – in many cases – taxes.”[3]

 

Economic Factors in Airbnb PESTEL Analysis

The peer-to-peer lodging industry is affected by a wide range of economic factors directly, as well as, indirectly. Range of economic factors affecting the travel industry disruptor includes the overall macroeconomic climate in the country, inflation and interest rates, currency exchange rates and tax rates. Moreover, unemployment rate, availability of credit, cost of labour and changes in disposable incomes of consumers also represent important economic factors for Airbnb. Particularly, the importance of changes in currency exchange rates and availability of credit for the global lodging company is paramount.

 

Changes in currency exchange rates          

Airbnb has more than 6 million listings in more than 191 countries and regions worldwide.[4] There are about 100000 cities with Airbnb listings and 500 million Airbnb guest arrivals all-time.[5] Due to the international scope of its business operations Airbnb is affected by changes in currency exchange rate to a great extent. Starting from early 2015, the peer-to-peer lodging company started charging a 3% currency conversion fee for bookings made on its platform. This move is intended to hedge against earnings being negatively impacted by changes in currency exchange rates to a certain extent.

 

Availability of credit

Availability of credit to potential and existing hosts is another economic factor that affects the bottom line of the global hospitality service brokerage company directly. Specifically, availability of mortgages to finance properties to let on Airbnb can be specified as external economic factor that is important for the rental platform.  For example, in the UK established mortgage lenders such as Barclays, HSBC, Nationwide and Yorkshire Building Society will refuse to finance properties that are planned to be made available for Airbnb. At the same time, nowadays specialist lenders are emerging to purchase or remortgage of short-term letting properties, with loan-to-value starting at 65%.[6]

Airbnb Inc. Report contains a full version of Airbnb PESTEL analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Airbnb. Moreover, the report contains analyses of Airbnb business strategy, leadership, organizational structure and organizational culture. The report also comprises discussions of Airbnb marketing strategy, ecosystem and addresses issues of corporate social responsibility.

Airbnb Inc. Report (2019)

[1] Martineau, P. (2019) “INSIDE AIRBNB’S ‘GUERRILLA WAR’ AGAINST LOCAL GOVERNMENTS” Wired, Available at: https://www.wired.com/story/inside-airbnbs-guerrilla-war-against-local-governments/

[2] Guttentag, D. (2018) “What Airbnb really does to a neighbourhood” BBC, Available at: https://www.bbc.com/news/business-45083954

[3] Leve (2019) Available at: http://leve-global.com/is-airbnb-to-blame-for-overtourism

[4] Fast Facts (2019) Airbnb Press Room, Available at: https://press.airbnb.com/fast-facts/

[5] Fast Facts (2019) Airbnb Press Room, Available at: https://press.airbnb.com/fast-facts/

[6] HOW TO GET AIRBNB BUY TO LET MORTGAGE FINANCE (2019) Clifton Private Finance, Available at: https://www.cliftonpf.co.uk/blog/22052019194140-how-to-get-airbnb-buy-to-let-mortgage-finance/