Airbnb Porter’s Five Forces Analysis

By John Dudovskiy
September 15, 2019


Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape an overall extent of competition in the industry. Airbnb Porter’s Five Forces Analysis are illustrated in Figure 1 below:

Airbnb Porter’s Five Forces Analysis

Figure 1 Airbnb Porter’s Five Forces

1. Threat of new entrants in Airbnb Porter’s Five Forces Analysis

The threat of new entrants into pear-to-pear lodging industry is low. Theoretically, setting up a website should suffice to enter the industry. However, in practice there is a number of barriers to potential new entrants into peer-to-peer lodging industry. These include the following:

1. The time of entry. In e-commerce the role of the first mover advantage is usually paramount and it is usually very difficult if at all possible for the followers to even get close to the market disruptor. Once their business model proved to be viable, internet-based market disruptors such as Amazon, Facebook and Uber were able to gain large market share in the global marketplace in a short amount of time. Funding from investors, word-of-mouth, effective management and hype usually play an instrumental role in assisting e-commerce disruptors to secure their niche and strengthen their position in international markets.

This was the case with Airbnb as well. Founded in 2008, the company became a leading global hospitality service brokerage company within a matter of a few years. As of summer 2019, Airbnb boasts More than 6 million listings in more than 191 countries and regions worldwide.[2] The word Airbnb became a synonym for peer-to-peer lodging, leaving little room and market for potential new entrants.

Nevertheless, it would be naive to claim that the threat of new entrants does not exist. There is no limit on the numbers of times that a market can be disrupted and as such, any new company with another innovative idea can re-organize the market, given the idea resonates with the wants and needs of the target customer segment.

2. Capital requirements. Ability to raise capital is critical success factor for a start up such as rental and experiences platforms. After raising the first USD 20,000 capital from Y Combinator in 2009, the founders were able to raise USD 600,000 from Sequoia in 2009, USD 119,20 million from various early investors in 2010 and USD 450 million from TPG Capital in 2014. This was followed by raising more than 2,5 billion during the next few years. Since its founding in 2008, the company attracted the total funds of [3] more than USD billion.

While it can be easy for any company or even individual to build a website to start a peer-to-peer lodging business, it will be extremely difficult to secure funding from investors. In this case, investor scepticism would be totally understandable, because the niche is already taken by Airbnb.

3. Legal and regulatory barriers. Airbnb is consistently facing various legal and regulatory restrictions in international business because of the disruptive nature of its business. Some cities have laws that restrict hosting of paying guests for short periods and in other cities people must register, get a permit, or obtain a license before they can list their property or accept guests.

Airbnb works with governments around the world to clarify these rules so that everyone has a clear understanding of what the laws are. In some cities such as Los Angeles, New York City, Santa Monica, Las Vegas and San Francisco the services of Airbnb is still illegal[4]. While Airbnb has resources and experience to deal with a wide range of legal matters, new market entrants will be limited in both, resources and experience and this can serve as a significant entry barrier.


2. Rivalry among existing firms in Airbnb Porter’s Five Forces Analysis

Rivalry among existing firms in peer-to-peer lodging industry is fierce. The following set of factors fuel rivalry among existing firms in this industry:

1. Rate of growth of the industry. Airbnb has enjoyed global compound growth rate of 153% since 2009. The projected number of Airbnb users in Europe by 2020 is 24 million.[5]

As it has been illustrated in Figure 2 below, the numbers of sharing economy users have been consistently increasing in the US to reach 73,7 million in 2019 and this tendency is forecasted to continue. Not only in the US, the popularity of sharing economy is on the rise in the global scale. Impressive rate of growth in the industry is going to attract new market players, further intensifying rivalry among existing firms.

Airbnb Porter's Five Forces Analysis

Figure 2 Number of sharing economy users in the United States from 2016 to 2021 (in millions)[6]

2. Diversity of competitors. Following the popularity of Airbnb, a wide range of competitors emerged positioning themselves as niche service providers in the industry pioneered by Airbnb. For example, Flipkey focuses on group bookings in popular tourist destinations, another competitor, TurnKey offers freedom to busy travellers by giving them door code instead of a key, meaning that travellers can rock up and leave whenever they want.

Similarly, HomeAway positions itself as a more refined and more polished competitor to Airbnb, targeting a slightly older crowd, whereas Vrbo is for kid-friendly vacations with listings that are bigger and have backyards. It is important to note that while Airbnb is an undisputed global leader in peer-to-peer lodging industry, niche competitors such as the ones mentioned above present increasing threat to the lodging colossus.

3. The role of brand equity. The role of brand equity in the global rental and experiences industry is paramount. Brand equity can be defined as “a brand’s power derived from the goodwill and name recognition that it has earned over time, which translates into higher sales volume and higher profit margins against competing brands.”[7] Airbnb has been privately valued at USD 35 billion[8] and such a high level of equity is a clear indication of the brand as the leading lodging colossus at the global scale.


3. Bargaining power of buyers in Airbnb Porter’s Five Forces Analysis

Bargaining power of buyers in the lodging and experiences industry is moderate. The following factors play significant role in limiting buyer bargaining power:

1. No direct substitution. Although, there is a indirect substitution such as traditional hotels and hostels for global rental and experiences platform, there is no direct substitution for peer-to-peer lodging services. In other words, peer-to-peer lodging services offer a wide range of advantages such as having kitchens and amenities, location in neighbourhoods and more space for less price. Traditional hotels and hostels are not able to match these advantages, and therefore, they cannot be substitute for those travellers for whom these advantages are important.

2. Size and concentration of buyers compared to suppliers. There are hundreds of millions of travellers around the world, but only a few dozen global hospitality service brokerage companies that are trusted by both, hosts and guests. Therefore, it can be argued that the size of buyers is significantly greater compared to the size of supplier and such a situation imposes certain limits on buyer bargaining power.

3. Buyer’s propensity to go for substitute products and services. As mentioned above, the advantages of peer-to-peer lodging include having kitchens and amenities, location in neighbourhoods and more space for less price. Substitute services such as traditional hotels and hostels do not offer these advantages, and therefore, buyers’ propensity to go for substitute services may be limited.

Airbnb Inc. Report contains a full analysis of Airbnb Porter’s Five Forces Analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on Airbnb. Moreover, the report contains analyses of Airbnb leadership, business strategy, 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] Porter, M. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review

[2] Fast Facts (2019) Airbnb Press Room, Available at:

[3] Dealroom.Co (2019) Airbnb. Available at:

[4] Hamed, E. (2019) “5 CITIES WHERE AIRBNB IS ILLEGAL IN 2019” Mashvisor, Available at:

[5] Airbnb Statistics (2019) Property Management, Available at:

[6] Statista (2019) Available at:

[7] Brand Equity (2019) Business Dictionary, Available at:

[8] Schleifer, T. (2019) “Airbnb sold some common stock at a $35 billion valuation, but what is the company really worth?” Recode, Available at: