Marketing Management

Marketing Audit of Airbnb Bulgaria

By: Lora Aleksandrova

Date: January 25th 2018

EXECUTIVE SUMMARY

Airbnb is a network hospitality company that builds a community between guests and locals. Globally the company is a true industry game changer.

With current market valuation of $31billion (Thomas, 2017) and projected revenue of $2.8billion in 2017 (Gallagher, 2017) Airbnb is can firmly challenge even the biggest hotel groups (see Appendix 4). In the context of Bulgaria Airbnb is the biggest tourism accommodation provider with over 3 times more beds that the biggest hotel group in the country.

Tourism is the fastest and most steady growing industry in Bulgaria with forecasted contribution of BGN18,344.7mn (USD10,395.7mn), representing 16.7% of GDP by 2027 (see Appendix 1 and 2). This would allow Airbnb to grow sustainably and keep its current position as the market leader.

The biggest threat to the company’s success is new local legislations that could oblige Airbnb hosts to list their properties as tourist accommodation under the Tourism Act, which will lead to additional taxes and potential penalties for those not registered. As 95% of its listing are not legally registered, Airbnb must take a proactive approach and work with the state administration in order to ensure the lawfulness of its listings. If such actions are not taken, Airbnb Bulgaria may see history repeating itself, commencing legal battles with local authorities and city councils about the ‘legality’ of their business (Burgen, 2017; Burrows-Taylor, 2017; Coldwell. 2014).

Hosts are the most crucial resource of Airbnb, as they are vital to providing supply for the seemingly never-ending demand for Airbnb. If negative media coverage and public opinion or law suits become reoccurring events, this will not only decrease the number of host willing to operate under Airbnb, but it will hurt the overall development of the platform in the country. To avoid that, Airbnb must work on its publicity and support to hosts and guests within the territory of Bulgaria.

It must also do so, by optimising some of its services for the Bulgarian market and that way ensuring the satisfaction of its customers.

Airbnb can not only sustain its market share and position, but also acquire new markets by focusing at the business traveller segment, as well as SPA, cultural and health tourism in rural areas.

TABLE OF CONTENTS

Introduction to marketing audit report..............................................................................1

Background to chosen company/brand..............................................................................1

Company’s mission............................................................................................................1

Macro Analysis – PESTLE....................................................................................................2

Political..........................................................................................................................2

Economic.......................................................................................................................2

Social.............................................................................................................................3

Technological.................................................................................................................3

Legal..............................................................................................................................3

Environmental...............................................................................................................4

Micro Analysis....................................................................................................................5

The Market....................................................................................................................5

The Company.................................................................................................................5

The Customers...............................................................................................................6

Guests..............................................................................................................................6

Hosts................................................................................................................................6

The Competition............................................................................................................7

SWOT Analysis...................................................................................................................9

Strengths.......................................................................................................................9

Weaknesses...................................................................................................................9

Opportunities................................................................................................................9

Threats..........................................................................................................................9

Strategic Imperatives.......................................................................................................11

References.......................................................................................................................13

Appendices......................................................................................................................18

Appendix 1...................................................................................................................18

Appendix 2...................................................................................................................19

Appendix 3...................................................................................................................20

Appendix 4...................................................................................................................21

Appendix 5...................................................................................................................22

Appendix 7...................................................................................................................24

Appendix 8...................................................................................................................26

Appendix 9...................................................................................................................27

INTRODUCTION TO MARKETING AUDIT REPORT

This marketing audit report focuses on the operations of Airbnb in Bulgaria. It

consists of five main sections. The first part the report describes briefly the

company’s background and mission statement. The second part consists of analysis

of the macro (external) and micro- environments, followed by a SWOT analysis. The

report ends with strategic recommendations for Airbnb Bulgaria.

BACKGROUND TO AIRBNB

Founded in 2008 in San Francisco, California by Brian Chesky, Joe Gebbia and Nathan

Blecharczyk, Airbnb is a true game changer for the travelling industry. With

200,000,000+ guests, 65,000+ cities in 191+ countries (Airbnb, 2018a), Airbnb have

disrupted the travelling industry like no one before. With forecasted revenue of

USD2.8billion in 2017 (Gallagher, 2017), Airbnb will far outperform any competitors.

Airbnb is so popular that every two seconds someone books an Airbnb (Salter, 2012).

Less than a decade since the launch, the company is valued at USD31billion (Thomas,

2017) and is performing better that many of the world’s hotel groups (see Appendix

4) (Forbes, 2017). Airbnb has managed to acquire 17 companies (Crunchbase, 2018)

and have registered their first year of profit in 2016 (Thomas, 2017). Currently

Airbnb offers over 10,000 homes in Bulgaria (Airbnb Bulgaria, 2018), which makes it

the major player of the hospitality industry in the country.

COMPANY’S MISSION

In 2013 Airbnb decided their company mission would be: to make people around the

world feel like they could “belong anywhere”. “Belong anywhere” is also the current

company tagline. Airbnb introduced the rebrand in 2014. (Gallagher, 2017, p.64)

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MACRO ANALYSIS – PESTLE

POLITICAL

According to the biggest economic publication in the country, over 95% of the

properties listed on Airbnb in Bulgaria are not registered under the Tourism Act

(Capital.bg, 2017). With Airbnb considerably growing in the past few years, it is only

time until the government frames legally such hospitality activities. Legislations will

most likely oblige Airbnb hosts to register their properties as Class B tourist

accommodation, also may lead to additional taxes and penalties for those not

registered under the Tourism Act. This will cause a substantial decrease in supply of

listed properties. Such decrease will have severe consequences for Airbnb’s

operations in Bulgaria.

The political situation in Bulgaria can also affect Airbnb’s operations in the country

(Neumayer, 2004; Clements and Georgiou, 1998; Causevic and Lynch, 2013).

However, this is rather unlikely, as the political environment is quite steady and

expected to stay that way (The Global Economy.com, 2015) (see Appendix 6).

ECONOMIC

Tourism and travel is the fastest growing industry in Bulgaria, currently making a

total contribution to GDP of BGN11,617.8mn (USD6,582.7mn) making 12.8% of GDP

in 2016 (WTTC, 2017). The WTTC Report 2017 is forecasting a steady raise up to

BGN18,344.7mn (USD10,395.7mn), 16.7% of GDP in 2027 (see Appendix 1 and 2).

AirDNA (2018) provides data for over 3,800 listings in 6 Bulgarian cities (see

Appendix 3). With over 10,000 listings in Bulgaria (Airbnb Bulgaria, 2018) and an

average of 4.3 guests per listing (see Appendix 3), this makes approximately 43,000

beds. Out of 328,264 beds in the country (NSI, 2017a), Airbnb holds over 13% of the

total tourism accommodation, which is over 3 times more than the biggest hotel

group in Bulgaria currently operating just over 13,000 beds (Victoria Group, 2018).

This makes Airbnb possibly the most important supplier of tourism accommodation

and related services in the fastest growing economic sector in the country.

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SOCIAL

Airbnb is an online community marketplace relying on collaborative consumption

(Möhlmann, 2015). With millennials being the main target market for Airbnb (Lenoir,

2014; Santos and Águas, 2016), social media sharing has a massive role in the

company’s success. According to Gallup International (2016) Generation Y are hyper

connected, with 71% using the Internet as a primary source of information and to

manage their social lives. One the main things for them is having an active

community and to consume in a sustainable, socially responsible way. Therefore,

Airbnb is required to keep supporting the community on which depends its success

with programs, such as its Airbnb ‘Belonging’ campaign, sharing their Airbnb

Community Stories and Airbnb community initiatives (Airbnb Citizen, 2018), also help

for both hosts and travellers page and blog (Airbnb, 2018b).

TECHNOLOGICAL

With the changing economical environment of Bulgaria (European Commission,

2017) and millennials gaining more buying power (McGee, 2017; Ellyatt, 2015;

Schroeder, 2017) worldwide, Airbnb is well suited to satisfy the needs and demands

of these tech savvy, collaborative, multi-tasking consumers (Loretto, 2017). Being a

tech company under the concept of shared economy, Airbnb allows “collaborative

consumption” with reduced transaction cost (The Economist, 2013; Möhlmann,

2015), which gives it a massive advantage over more traditional forms of renting

tourism accommodation.

LEGAL

As mentioned above 95% of the Airbnb properties in Bulgaria are not registered as

tourism accommodation (Capital.bg, 2017). Currently, there is no legislation that

covers rentals, such as Airbnb. The current options for hosts are to register their

property as a rental contract (long or short term), or to register it as a touristic

accommodation. According to article 237 from the Law on Obligations and Contracts,

every rental contract, regardless long or short term must be registered with the

corresponding Municipality Property Register (LawsBG, 2018). The other option is to

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register the property under the Tourism Act (Republic of Bulgaria Ministry of

Tourism, 2011). According to Section III, article 45 of the Tourism Act ‘to practice

hoteliery, a person must be a merchant within the meaning given by the Commerce

Act or a legal person entitled to carry out economic activity by virtue of another law’

(Republic of Bulgaria Ministry of Tourism, 2011) and is liable for operational

practices, taxes and administration under the Tourism Act and Trade Law of Republic

of Bulgaria. As Airnbnb has a history with local authorities and city councils about the

‘legality’ of its business (Burgen, 2017; Burrows-Taylor, 2017; Coldwell. 2014), a

similar scenario may occur in Bulgaria. This has the potential to be a huge legal

liability for the company in the future.

ENVIRONMENTAL

Pollution in rural areas of Bulgaria may lead to decrease of tourism demands in those

regions (Cvijanović et al., 2017), which can negatively affect the overall tourism

demand for nature and cultural tourism. Such negative impact will have effect on

Airbnb’s operation, as well. However, such threat is not immediate and will affect

proportionally all hospitality companies in Bulgaria. The government is working on

plenty of initiatives to preserve the environment and sustain opportunities for rural

and eco tourism (Republic of Bulgaria Ministry of Tourism News, 2015).

4

MICRO ANALYSIS

THE MARKET

The accommodation market is well developed in the capital and the seaside and

mountain ski resorts (IBM Research, 2016). Bulgaria positions itself as a year-round

accommodation and has well developed sea and ski industries and a growing

international interest for SPA, health and cultural tourism. With record number of

international tourists in 2016 (Republic of Bulgaria Ministry of Tourism, 2017) of over

8.2million arrivals, tourism is the fastest growing industry in the country. The main

portion of those arrivals comes from EU and other European countries (NSI, 2017b).

The revenue from tourism reached BGN11,617.8mn (USD6,582.7mn) in 2016 (WTTC,

2017). With projected steady growth (see Appendix 7) and highest tourism

expenditure for accommodation (NSI, 2017d; Marrocu et al.,2015; Turner and

Reisinger, 2001) Bulgaria is a market with immense potential for Airbnb, regardless

of its smaller scale. Clearly international tourists are of a greater interest as of their

superior buying power, however according to the BMI Research Report (2016) most

of Bulgarians travel domestically, and the domestic market ‘will continue to

constitute a key share of the national tourism industry’ (see Appendix 8). In 2016

international visitors have purchased 16,150,666 room nights (NSI, 2017e). With

Airbnb currently holding about 13% (and growing) of the tourism accommodation in

the country, it opens up a substantial opportunity of capturing market share of the

rapidly growing ‘pie’, also generate a record high turnover for the country.

THE COMPANY

Airbnb is currently the largest hospitality operator in Bulgaria with over 10,000

listings around the country. Airbnb is a network hospitality company that builds a

community between guests and locals (Oskam and Boswijk, 2016). As of the nature

of Airbnb (being online based), the company neither has an office in Bulgaria, nor

offers any customised services for this market. Information about the regional

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Airbnb operations can only be drawn from indirect resources or from the global

company’s presence.

THE CUSTOMERS

As Airbnb is a two-way platform, both guests and hosts are considered customers of

the company. As the needs, wants and expectations of those differ, they will be

assessed separately.

GUESTS

Even that Airbnb is trying to diversify their products and by that to attract travellers

from different markets, millennials are still the main clientele of the platform (Lenoir,

2014; Santos and Águas, 2016). Generation Y consumers are looking for convenience

and flexibility (McGee, 2017) and personalised experiences (McGee, 2017; James,

2017). They value authenticity (James, 2017; Schawbel, 2015) and want to buy from

companies with strong social purpose or mission (Nielsen, 2017). They like to stay

hyper connected (Gallup International, 2016; Nielsen, 2017), but aren’t influenced by

advertising (Schawbel, 2015). Price is important, but brands matter (James, 2017)

and they like to review the Internet before making a purchase (Gallup International,

2016; Schawbel, 2015). Last, but not least, they value experiences way more than

physical goods (McGee, 2017; James, 2017).

HOSTS

The main challenge for Airbnb has always been to get enough hosts on the platform

to satisfy the demand of its customers (Fortune, 2016).

One of the main concerns of Airbnb users is safety (Lieber, 2015a; Lieber, 2015b;

Oskam and Boswijk, 2016). This would be a major concern for Bulgarian hosts, as the

USD1million Host Protection Insurance does not apply to Bulgaria (Airbnb, 2018c).

Hosts expect an easy posting of their property, easy and secure payment, and for

Airbnb to ensure the guests’ profiles are legitimate. Host often worry about theft and

damage of property (Airbnb, 2018d), also false negative comments, complaints from

guests, and last minute cancellations (AirbnbHell, n.d.).

6

THE COMPETITION

Traditional tourist accommodations, such as hotels, hostels and guesthouses, as well

as platforms such as couchsurfing.com, are also competitors of Airbnb. However, for

the purpose of this report a comparative analysis will be done only against direct

competitors. Founder and CEO of AirDNA Scott Shatford (2014, p13) points out a few

competitors to Airbnb globally (see Appendix 5). For Bulgaria, two major competitors

have been identified - Home Away and Trip Advisor Rentals. A quick comparison was

done on the following criteria: number of listings for Bulgaria, ease of listing a

property, ease of booking a property, fees taken from hosts and travellers, additional

services and support offered (see Appendix 9).

From the comparison done the following conclusions can be drawn:

1. In terms of ease of listing a property Home Away and Airbnb offer a much

easier process. With great suggestions generator, easy and quick upload of

pictures and options to do offers for your guests while creating the listing,

Home Away and Airbnb are definitely superior to Trip Advisor Rentals.

2. When it comes to booking a property all platforms offer special services and

lag in certain features. Airbnb has the best map feature for viewing

properties, while Home Away offers pet friendly properties and Trip Advisor

offers easy to navigate map, rental information and currency exchange

information. On the negative side, it is difficult to check availability on the

Airbnb site, while Home Away asks for a deposit, and prices are presented in

local currency.

3. In terms of fees Trip Advisor Rentals offers by far the most competitive

pricing for their services. With 3% host fee and guest fees determined by

individual host, it outperforms significantly its competitors.

4. All companies offer plenty of assistance, information and additional services

for both travellers and hosts. However, Trip Advisor Rentals offers to its

customers the opportunity to be part of the oldest and largest travel

community with all its additional services.

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To conclude, even that Airbnb and Home Away have been each other’s main

competitors for years, Trip Advisor Rentals offers great value and highly competitive

pricing for its customers. Both ‘Home Away and Airbnb would be wise to keep one

eye looking over their shoulders. And not just at each other’(Taylor, 2016).

8

SWOT ANALYSIS

STRENGTHS

Does not own accommodation assets, but facilitates value creation in a network

economy– two sided market (Rochet and Tirole, 2003)

Offers countless opportunities for hosts with its 150million users (Smith, 2017)

Self – developing system that gets stronger as the numbers of connections grow.

Also, word of mouth marketing.

Economy of scale – the power of the network (Oskam and Boswijk, 2016)

Lower prices than traditional hotel accommodation (Xie and Kwok, 2017)

Greater experiential value (Brochado at al., 2017; Poon and Huang, 2017)

Trusted marketplace (Oskam and Boswijk, 2016)

Diverse and highly customised product (Santos and Águas, 2016; Oskam and

Boswijk, 2016)

WEAKNESSES

Developed primarily in the larger cities, but poor coverage in rural areas where

SPA and nature tourism is on offer

Less additional services in comparison to traditional hotels

OPPORTUNITIES

Has the potential to grow immense number of beds in more locations that any

other tourism operator in the country

The state of the Bulgarian economy (European Commission, 2017) makes renting

your home on short-term basis a great financial opportunity to many people

Stable and fast growing stream of international tourist arrivals (BMI Research,

2016; Republic of Bulgaria Ministry of Tourism, 2017)

THREATS

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Government legislation prohibiting operation unless the properties are

registered under the Tourism Act – regulatory issues (Roberts, 2017)

Security and safety of travellers (Lieber, 2015a; Lieber, 2015b; Oskam and

Boswijk, 2016)

Negative coverage in the media

Hotels and guest houses customising accommodation to give it a more ‘home-

like’ feel

Couch surfing (couchsurfing.com) as a free substitute

Complaints and law suits from the community around the Airbnb properties

(Williams, 2016; CBC News, 2016; Gallagher, 2017)

10

STRATEGIC IMPERATIVES

Airbnb has a clearly very strong position within the tourism accommodation market

in Bulgaria. However, there are few strategic imperatives to be taken in

consideration by Airbnb, in order to keep its current position, grow in market share

and prevent liabilities.

1. As mentioned above Airbnb is highly dependable on the hosts, as their numbers

and satisfaction with the services is crucial for the success of the platform. In

order to keep its market share and current position as the market leader Airbnb

should consider offering some of its international services to Bulgaria and

working on localising them. These services would be the Host Protection

Insurance and life support in Bulgarian. Unfortunately not all current and

potential hosts are fluent in English, and by offering services in the local language

would raise significantly the satisfaction of the hosts. It would also support the

attraction of more hosts, which will help satisfy the high demand for Airbnb.

2. The ever-growing tourism market in Bulgaria opens up possibilities for new types

of tourism in the less developed areas in the country. Airbnb can gain

competitive advantage using a ‘blue ocean’ strategy by targeting the rural areas

of the country where SPA, cultural and health tourism is offered.

3. According to the National Statistical Institute (NSI, 2017c) over 21% of the

international arrivals are visiting for the purpose of business. Currently the

business market is reserved primarily for the large hotel groups. Targeting this

market will allow Airbnb to acquire a portion of this segment, large enough to

sustain the growth rate of the platform.

4. Even that Airbnb does not use outbound marketing, it may be wise to consider

deploying some PR. Even that Airbnb is gaining popularity fast, it must sustain

the good name of the company in order to ensure sustainable growth. PR

campaigns and content marketing activities dedicated specifically to the

Bulgarian market would have an immense effect on the attraction of new hosts,

also neutralising any negative opinions in the media. This would also have a

positive effect if ever Airbnb faces legal liabilities, similar to the cases of New

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York, Paris or Barcelona (Burgen, 2017; Burrows-Taylor, 2017; Coldwell. 2014). It

must also take the proactive approach and look into ways of collaborating with

the local authorities to ensure the legality of its business.

5. Finally, in order to keep its local competitive advantage over platforms, such as

Trip Advisor Rentals, Airbnb must consider revising its fees scheme. Possible free

trial period for hosts and travellers could be put in place or a lower percentage

fee for the fist year of usage. However, such decision would be a global strategic

initiative and would not be possible solely on a local level.

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REFERENCES

Books

Gallagher L. (2017) The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions…and Created Plenty of Controversy. 1st Ed. New York: Houghton Mifflin Harcourt.

Shatford S. (2014) The Airbnb Expert’s Playbook: Secrets to Making Six-Figures as a Rentalpreneur. 1.3 ed. USA: Scott Shatford.

Journals

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Gardiner C., Crock B., Landau M., Getzie K., Samuelson A., Zigmund A., Fox M., Brutschy C., Perman L., DeBusk C., Sells J., Shatford S., Bellack A., Harris A., Lahlouh C., Fraiman J., Newman J., Swartz T. and Saville T. (2017a) Home Away vs. Airbnb. s.l.: Tripping.com. Available from: https://www.tripping.com/industry/rental-companies/homeaway-vs-airbnb [Accessed on 23.01.2018].

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APPENDICES

APPENDIX 1

Bulgaria Total Contribution of Travel & Tourism to GDP, % of Whole Economy GDP (WTTC, 2017)

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APPENDIX 2

Bulgaria Total Contribution of Travel & Tourism to GDP in BGN millions (WTTC, 2017)

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APPENDIX

3

Number of beds calculated based on Active Listings and average number of guests per listing (data taken from AirDNA– Jan 11th 2018)

CityNumber of Active Listings

Guests on Average

Total

Sofia 2032 4 8128

Varna 989 4.4 4351.6

Pomorie 345 4.2 1449

Bansko 303 5.1 1545.3

Ravda 110 3.9 429

Primorsko 52 4 208

Totals: 3831 4.3 16110.9

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APPENDIX 4

Adapted from Forbes The World’s Biggest Public Companies (2017 List)

Company Country Sales Profits AssetsMarket Value

Carnival USA $16.5 B $3 B $38.7 B $42.9 B

Marriott International USA $17.1 B $780 M $24.1 B $34.9 B

Royal Caribbean Cruises USA $8.5 B $1.3 B $22.3 B $20.9 B

Hilton USA $11.7 B $348 M $26.2 B $18.7 B

Shenzhen Overseas China $4.3 B $775 M $20.4 B $8.9 B

Oriental Land Japan $4.3 B $699 M $7.1 B $19.6 B

Norwegian Cruise Line Holdings USA $4.9 B $633 M $13 B $11 B

Wyndham Worldwide USA $5.6 B $612 M $9.8 B $8.9 B

Chongqing New Century Cruise China $267 M $120 M $1.2 B $20 B

InterContinental Hotels UK $1.7 B $415 M $2.9 B $9.6 B

Accor France $1.8 B $252 M $12.5 B $12.1 B

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APPENDIX 5

Airbnb Competitor List

Name of Company WebsiteOperate in Bulgaria?

No of listings

(Jan 11th, 2018)

Airbnb airbnb.com Yes 10,000

Vacasa vacasa.com No NA

Turnkey turnkeyvr.com No NA

One Fine Stay onefinestay.com No NA

Urban Flats urbanflats.com No NA

The Apartment Service theapartmentservice.com Yes 22

Great Rentals* greatrentals.com Yes 2,500+

Holiday Lettings** holidayletting.co.uk Yes 1,897

Online Vacation Rentals onlinevacationrentals.com No NA

Rentalo rentalo.com Yes 79

Vacation Home Rentals vacationhomerentals.com Yes 0

Vilas International villasitnl.com Yes 1

Skyrun skyrun.com No NA

Windmu windmu.com Yes 604

FlipKey** flipkey.com Yes 1,897

Home Away homeaway.com Yes 2,500+

VacationRentals* vacationrentals.com Yes 2,500+

VRBO* vrbo.com Yes 2,500+

*Part of the Home Away Family and sharing listings between all platforms

**Part of Trip Advisor Rentals and sharing listings

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APPENDIX 6

Political Stability Index

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APPENDIX 7

Source: BMI Research (2016) Bulgaria Tourism Report. London: BMI Research.

24

25

APPENDIX 8

Source: BMI Research (2016) Bulgaria Tourism Report. London: BMI Research.

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APPENDIX 9

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