Case 1 Teaching Note
Airbnb in 2022
Overview
Airbnb was launched in 2007 when Brian Chesky and a friend decided to rent their apartment to
guests for a local convention. To accommodate the guests, they used air mattresses and referred to it
as the ―Air Bed & Breakfast.‖ It was that weekend when the idea—and the potential viability—of a
peer-to-peer room-sharing business model was born. During its 15-year existence, Airbnb had
experienced immense growth and had successfully launched an IPO in 2020. By 2021, Airbnb had
entered over 220 countries with more than 5 million locationsi
. In 2022, Airbnb seemed positioned to
continue revolutionizing the hotel and tourism industry through its business model that allowed hosts
to offer spare rooms or entire homes to potential guests in a peer-reviewed digital marketplace.
Airbnb‘s business model had been successful by leveraging what is known as the sharing economy.
As it grew, however, Airbnb‘s business model was met with resistance. City officials and owners and
operators of hotels, motels, and bed and breakfasts complained that, unlike traditional brick-andmortar establishments that were subject to regulations and taxation, Airbnb hosts were able to
circumvent and avoid such liabilities due to participation in Airbnb‘s digital marketplace. In other
instances, Airbnb hosts had encountered legal issues due to city and state ordinances governing hotels
and apartment leases. Then, in 2020, the spread of COVID-19 and the global pandemic posed an
existential crisis for Airbnb and other business such as hotels operating in the travel and
accommodation market. Many Airbnb hosts were using their hosting revenue to subsidize their
mortgage payments while other hosts had purchased properties that depended solely on the revenue
driven through booked Airbnb accommodations. In the early part of the pandemic during 2020, travel
restrictions and shelter in-place orders to mitigate the spread of COVID-19 significantly impacted
travel.
As vaccines were distributed during 2021 and many countries had reopened their economies, Airbnb‘s
bookings and revenues grew to more than 300 million and nearly $6 billion—see Exhibit 1. However,
at the start of 2022, the company had yet to have a profitable year with some suggesting that the
company needed radical changes in elements of its business model to justify its lofty stock price. The
company‘s $114 billion market capitalization indicated that investors continued to believe in Airbnb‘s
potential, but excuses for continuing losses were becoming more difficult as the company had
achieved sufficient scale to become profitable.
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* This teaching note primarily reflects the thinking and analysis of Professor John D. Varlaro, Johnson
& Wales University. We are most grateful for his insight, analysis and contributions to how the case
can be taught successfully