Impacts of Airbnb on Hospitality and Tourism in New Zealand
706RTH - Research Paper – Assessment Three
IMPACTS OF AIRBNB ON HOSPITALITY AND TOURISM IN NEW ZEALAND
Airbnb is an online marketplace that provides hospitality service to travellers via its mobile application and websites. It is a privately held company, headquartered in San Francisco, having operations across the global platform (Airbnb Citizen, 2018). The company provides an online platform that helps connect travellers or guests with hosts. Hosts enlist their unused places on the website of the company and mention the price, for which guests can use the place for a particular time.
The purpose of the assignment is to develop an investigation of how the emergence of Airbnb in New Zealand influences the tourism and hospitality industry. Within a small period of its emergence in New Zealand, Airbnb has largely influenced the national and local economy, as the company has triggered a job boom in the domestic market (Zodiak Airbnb Management, 2018). The researcher has developed two research questions, which focus on evaluating the contribution Airbnb has made in the hospitality sector of New Zealand and finding the ways through which the company has increased competition level in the tourism and hospitality sector.
The researcher used secondary data qualitative research method. Qualitative research data were accumulated from reliable and valid sources. Qualitative data were analyzed through the evaluation of the common pattern of data.
2. Literature Review
Airbnb offers a peer-to-peer platform for people to book accommodation in their favourite places around the world. In New Zealand, Airbnb provides access to 225 locations to guests to book accommodations for short-term stays. The company makes huge contributions to the tourism industry of New Zealand by facilitating accommodation bookings with a number of local hosts. In 2017, around 578,000 stays were booked through Airbnb’s online service in New Zealand, with 1.4 million accommodations for guests for over 1.5 million nights in cities and towns (Deloitte New Zealand, 2018). Auckland, Queenstown, Christchurch and Wellington are the top four destinations in New Zealand, wherein the booking rate has been very impressive. Therefore, it can be assessed that the popularity of Airbnb hospitality services in New Zealand has been striking and the business performance of the company in recent times has been extraordinary. Airbnb largely contributes to the national economy of New Zealand, in terms of generating a number of job vacancy for local inhabitants and collecting high-profit revenues in business. The particular accommodation website made a contribution of $660 million to the New Zealand economy in 2017, which was very impressive.
Research questions of the research are stated below:
- How will Airbnb facilitate the hospitality sector in New Zealand in future?
- How did Airbnb increase competition level in the hospitality sector?
One of the main reasons for selecting these research questions is that it will contribute to the knowledge domain of the researcher to identify the significant contribution of Airbnb in New Zealand hospitality sector. Besides shedding light on the possible contribution of Airbnb in the hospitality sector in New Zealand in future, the research questions also facilitate researcher analyze how the particular company has increased competition in the New Zealand hospitality industry.
Influence on the International Hospitality industry
Airbnb is a privately held company that provides online access to guests or travellers for selecting accommodation and other hospitality and tourism products. The company collected a total revenue of $2.6 billion in 2017, with a total operating income of $450 million (Airbnb bookings New Zealand, 2018). Since the emergence of the company in the New Zealand hospitality industry, Airbnb has created a huge impact on the particular sector in terms of increased competition and better profitability. Airbnb largely influences the international hospitality sector, as the hotels are forced to cut down their price in order to deliver more service at the same price. After the emergence of Airbnb online hospitality services, the majority of the hotels and lodges have focused and become more conscious of delivering homely feelings to the guests or travellers, instead of maintaining hotel environment. Airbnb encounters tough competition with the luxury and budget hotels in the international platform.
There are some ethical issues surrounding the products and service offerings of Airbnb. For example, lack of policies or regulatory frameworks for any damages caused by guests to the hosts’ properties. It is significant for the company to develop policies in line with the government’s regulatory frameworks regarding hospitality service offerings in order to overcome such issues surrounding property damages caused by guests (Junn et al., 2018). The policies regarding the cancellation of services need to be implemented appropriately since the guests and hosts should be aware of the process of cancelling of services. Sometimes, cancellation policies for reservation are not addressed properly on the websites and mobile applications, which often create a barrier to the guests to get access to transparent service descriptions.
In future, Airbnb is likely to explore more business opportunities in order to expand the business across the global platform. The company has planned to be associated with diverse sources of revenues, including Uber, aeroplanes and rental cars, for the expansion of the business. With the implementation of advanced and emerging technologies in the business, Airbnb would gain huge business opportunities, which could help them to expand business across the new marketplaces and gain profit revenues. The company has also planned to include new cleaning service, “Master Host”, which would diversify the product portfolio (Mao & Lyu, 2017). Airbnb also plans to open a tour and travel company, which guests can book through its official website and mobile applications. The company also focuses on investing in new companies to grow business in the competitive marketplace.
Gaps in Literature:
During the execution of the research, the researcher finds a lack of research conducted on the impact of Airbnb on the New Zealand economy. Another gap existed in the research is that the lack of analysis of the positive and negative experiences of guests or travellers, who booked accommodation service through Airbnb’s websites or mobile applications. It is significant to analyze tourists’ experiences of using Airbnb’s service to identify the effectiveness of the service offering of the company.
Data collection technique can be divided into two parts, including primary and secondary data. For this research, the researcher has used the secondary data sources that provide evidence of how Airbnb influences the hospitality industry in New Zealand. When collecting data, the researcher has used all reliable and valid resources. The researcher has used conclusive research design for providing answers to the evolved research questions in a structured way.
In this research study, the researcher has used secondary qualitative data to analyze the selected research topic about the impact of Airbnb on New Zealand hospitality sector. The qualitative research technique has been used since it contributes to the evolvement of analysis with a detailed and rich image that can evaluate how people’s common behaviour and feelings contribute to the attainment of individual objectives (Kothari, 2004). On the other hand, quantitative data would provide access to the researcher to use the numeric information implying Airbnb’s huge contribution in the hospitality industry in New Zealand. By using secondary qualitative data, the researcher has effectively evolved knowledge and understanding of the common pattern of how people react, think and feel about a particular incident.
Qualitative data provides an open-ended approach, which facilitates the researcher to change or adopt subjects during the execution of research. According to Kumar & Phrommathed (2005), secondary qualitative data enhances the quality of the analyses in an effective way. A significant reason why secondary sources of data have been used in this research is that it a number of research on the selected topic has already been evolved. Moreover, the secondary data collection is time-efficient and cost-effective. The particular research demands an in-depth analysis of how Airbnb persuades the hospitality sector in New Zealand and how the company has successfully managed to raise the competition level among the existing hospitality service providers in New Zealand. Therefore, qualitative research method is the best possible approach to analyze in a detailed way.
The collected data have been analyzed through the evaluation of common patterns as well as controversies surrounding the particular research topic. For achieving the research questions, the researcher has also used critical analysis of the gathered information besides evaluating the common pattern. The researcher has used the graphical presentation of data in order to analyze the research topic in a detailed manner. Moreover, the researcher has conducted evidence-based data analysis.
During the execution of the research, the researcher has followed some ethical aspect. The researcher used reliable and valid sources of data for analyzing the research topic. Any information collected from the secondary sources has not been manipulated for the attainment of the research objectives (Neuman, 2013). While conducting the data for this research, the researcher never has tried to use any misleading information about the topic in order to maintain the reliability of the information. Another significant ethical aspect, which has been taken into consideration, is to maintain the high level of objectivity during the research analysis and discussion. The researcher has also recognized the enormous contributions made by authors in their research studies based on the relevant research topic. ]
5. Data analysis and Findings:
How Airbnb has become a significant driver of tourism in New Zealand
According to Deloitte report, Airbnb successfully managed to contribute around $650 million o the New Zealand economy in 2017, which denotes how the particular company has become a significant driving force for the tourism sector in New Zealand. A total number of 578,000 stays were booked in New Zealand through Airbnb hospitality service (Airbnb bookings | New Zealand, 2018). It has been identified that the international visitors, the majority of which were from Australia, USA and China, executed about two-third accommodation bookings on Airbnb New Zealand. Consequently, it can be identified that the popularity of Airbnb across the international platform indeed facilitates the company to attract international visitors to New Zealand. Most of the international visitors in New Zealand cannot have access to other accommodation service providers since they are not globally operated companies (Lalicic & Weismayer, 2017). As a result, it appears to be advantageous for Airbnb to gain huge business opportunities and become a significant driving force in New Zealand.
How Airbnb increased competition level in the hospitality sector in New Zealand
One of the main reasons why Airbnb has increased its popularity since its emergence in the New Zealand tourism market is that the other online accommodation booking service providers, including Bookabach and holiday houses, do not operate their business across the international market, due to which they cannot draw the attention of overseas travellers, unlikely executed by Airbnb. The particular company also has a wide range of destinations and hosts, who want to provide their unused accommodations to the guest for short-term stays. Unlike other small-scale accommodation service providers in New Zealand, Airbnb has a significant amount of financial resources that certainly facilitates the company to promote their services to the targeted guests (Oskam & Boswijk, 2016). Moreover, Airbnb has capitalized the power of sales promotion by giving promotional offers and discounted accommodation services to the guests to attract new customers across the domestic and international market. The hosts also want to be associated with the company like Airbnb that possesses a strong brand reputation in the global platform in order to get all sorts of facilities and a wide pool of travellers and guests across the international market.
Key contributions of Airbnb to the New Zealand economy
In 2017, Airbnb made a huge contribution to the New Zealand economy, with $659.5 million in value-added and 6,006 numbers of full-time jobs produced across the nation (Deloitte New Zealand, 2018). Airbnb guests spent in diverse areas of tourism services, including accommodation, food service, groceries, shopping, transportation and other leisure activities. Among all these services, the most used service was accommodation service, accounting 26% of the total tourism expenditure made by Airbnb guests in New Zealand in 2017. Tourism expenditure on other services is depicted through the below-provided graph.
Figure: Tourism Expenditure of Airbnb guests in New Zealand in 2017
(Source: Deloitte New Zealand, 2018)
In 2017, the economic contribution of tourism expenditure was very high in four regions of New Zealand, including Auckland, Wellington, Queenstown, and Christchurch. The most amount of tourism expenditure was made in Auckland, with $200.6 million total contributions, and 1,976 total jobs produced (Airbnb Citizen, 2018). Therefore, the contribution of Airbnb to the regional and national economy of New Zealand in 2017 was impressive.
How Airbnb could support tourism in New Zealand in future
Tourism is one of the most important sectors in New Zealand, contributing around $25 billion to the gross domestic product (GDP) in 2016 – 2017 (Deloitte New Zealand, 2018). The government of New Zealand has recognized the potential of the tourism industry and set objectives and targets to expand the growth of the visitor economy. In future, Airbnb could assist government to attain targets and objectives by increasing their room supply and providing an excellent visitor experience. Airbnb could facilitate the government to tap the international visitor market to grow the tourism industry in an effective way (Tussyadiah & Pesonen, 2016). As discussed in the literature review section, Airbnb has some new service offerings in their pipeline, which could also make a major contribution to boosting the tourism industry in New Zealand in future. The company can introduce cleaning service, or develop its tour and travel company to engage a huge number of international visitors and enhance the profitability of the tourism industry in New Zealand.
One of the purposes of this research is to identify the process through which Airbnb increased the competition level in New Zealand hospitality sector. The research outcomes discuss that the strong possession over the international hospitality market is one of the key reasons why Airbnb has become a very popular accommodation service provider in New Zealand. Unlike other locally based hospitality service providers, including Bookabach and holiday houses, Airbnb could easily draw the attention of overseas travellers with its strong brand image across the global platform.
In the literature review section, it has been identified that around 578,000 stays were booked in New Zealand in 2017 through Airbnb’s online service, with 1.4 million accommodations for guests for over 1.5 million nights in cities and towns. Most numbers of guests were from Australia, the USA and China. Consequently, it can be assessed that the high standard service facility, incredible global reach, and homely accommodation are some of the key factors influencing the growth of Airbnb in New Zealand hospitality sector.
The research is also purposed to evolve an analysis of how Airbnb could facilitate the hospitality industry in New Zealand in future. The researcher finds that the company could work collaboratively with the local governments to enhance the hospitality sector of the country within a small period. As mentioned in the previous research study that the company can extend its service offering, such as launch cleaning service or set up its tours and travel business, to attract more international visitors, leading to the attainment of government’s target of enhancing New Zealand tourism sector.
7. Conclusion and Recommendations
Through the lens of previous research data, this assessment has developed a detail discussion of the impact of Airbnb on the hospitality sector in New Zealand. This research identifies that Airbnb made a huge contribution to the national economy in the last year, with its highly engaged customer bases across the global market. Within a few years of its emergence in New Zealand, Airbnb has become a driving force in the tourism industry. Unlike other small-scale accommodation service providers in New Zealand, Airbnb has significant global reach and utilize a huge amount of financial resources to promote their services to the targeted guests. In future, Airbnb could support the government to achieve targets and objectives by increasing their room supply and providing an excellent visitor experience. With the introduction of new services, it would be easier for Airbnb to increase its economic contribution to the hospitality sector in New Zealand.
The key limitation of this research is that the study is entirely based on secondary data, which has created issues for the researcher to identify the current scenario of the market, wherein Airbnb executes its operation. Another limitation of the research is that it is not based on the statistical analysis since secondary qualitative technique has been used. In future, the research would focus on analyzing the challenges encountered by Airbnb in conducting business in New Zealand. Moreover, future research could be based on the legal boundaries affecting Airbnb’s accommodation service facilities in New Zealand.