Business model of Airbnb, emergence in Malaysia, opportunities and challenges in the hospitality industry in Malaysia

1. 4/29/2017
Global Business Issues (GBI795)

2. Airbed and breakfast, or in short Airbnb, was founded in 2008 by two
design graduates from the Rhode Island School of Design
They created a temporary website called airbedandbreakfast.com and
rented out their extra space to strangers they had just met online.
Joe, who is one of the co-founders, came up with a brilliant idea to
make use of the airbeds, which he used during his last camping trip for
their guests charged it US$80 a night.
This was how the name of the company Airbed and breakfast was
incepted
In December 2013, Airbnb was first introduced in Malaysia to cater to
the needs for the Visit Malaysia event in 2014.
4/29/2017

3. AirBedAndBreakfast was founded in August of 2008 and based in San Francisco,
California, then subsequently called Airbnb in 2009.
Based on trusted community marketplace for people with homes and spare space to
list, discover, and book unique accommodations around the world via online or from a
mobile phone or tablet.
Travellers can book an apartment for a night, a castle for a week, or a villa for a month
Connects people to unique travel experiences, at any price point, in more than 65,000
cities and 192 countries worldwide including Malaysia
4/29/2017

4. Hosts create profiles for themselves and their property, choose their own price and
availability, and set guidelines for guests.
Hosts and guests learn about each other through past reviews and personal
communication through the Airbnb platform.
Guests and hosts use Airbnb to confirm travel dates and expectations, and make and
receive payments.
After the stay, both hosts and guests leave reviews for one another, which is made
public for all future hosts and guests to read
4/29/2017

5. 4/29/2017

6. Airbnb earns its revenue by charging the guest between 6% and 12% of the total
booking
97% percent of the reservation subtotals are returned back to the hosts
Airbnb charge hosts 3% of the rental
4/29/2017

7. 4/29/2017

8. 4/29/2017

9. AIRBNB is not a registered entity in Malaysia
There are no straight forward strategies or clear cut rules and regulations of handling
such home-sharing concept due to technology disruption
Local issues which has been voiced out:
1. Additional Charges imposed by Host
the process of getting services in Airbnb is quite tricky. While searching Airbnb
properties, the travellers can only view the basic price. Once the properties are
selected and confirmed, travellers will be shown extra charges, such as Airbnb
service fee, cleaning fee (as specified by the host) and sometimes tax.
2. Misleading Ads and Description of Rented Premises
Airbnb cannot be held responsible or dictate how the host maintain their
properties. Some of the host rented their home only for fun. Thus, they may not
take any serious action to keep their properties as what is stated in the web.
4/29/2017

10. 3. Tax & Legal Issue on Rent-Sharing Premises
Government has approved Tourism Tax Bill 2017, which will enforce tourists to pay
extra for room stay.
It will allow the government to impose a levy on tourists staying at all types of
premises used as accommodation, including unlicensed ones and Airbnb
Homestay and local ‘Kampung Stay’ registered under the MOT, premises managed
by institutions (education), premises used for training purposes and religious
institutions where such facilities are not used for commercial purposes are excluded
from the tax.
Rapid growth of Airbnb makes it clear that its Internet platform has benefitted its
guests, its hosts, as well as their local communities.
4/29/2017

11.  In Johor, the Malaysian Budget Hotel Association is filing complaints on the unfair
treatment between them and illegal accommodation provider like homestay and
Airbnb.
 The budget hoteliers insist on government intervention to protect their industry.
 Tourism Ministry recognises homestays but not “house-stays” but they still fail to
elaborate on the distinction of this two and claimed that enforcement agencies still
have no access to the latter category.
 Local councils confirmed that, no application of license is required for a house-owner
to rent out their property because this so called “house-stay” which will fall under the
concept of tenancy deal.
 There are also no clear rules within local councils that forbid a landlord to rent out their
house, but if they are running a business such as a restaurant or a sundry store from
their home, then that is consider illegal as this will cause trouble among the
neighbours. 4/29/2017

12. Penang state government and Penang Island City Council have issued summonses
on houses that were let for short-term stays, but with no explanation of which law had
been broken.
Apart from the current Tourism Tax Bill 2017, the Penang Island City Council currently
charged a Local Government Fee of RM3 per room per night for four- and five-star
hotels, and RM2 per room per night for three-star hotels and below, including
dormitories, budget hotels, hostels and guesthouses.
4/29/2017

13.  Renting out the apartment or flat must look into the agreement signed by the landlords
 The Residents Management Company and the Landlord should be clear on what
have been written in the agreement.
 Renting out space/apartment to Airbnb, have implications on lease agreement that
might have a provision saying “Tenant shall not sublet all or any part of the premises
without Landlord’s prior written consent”.
 “Sublet” means to rent out all or partly of your premises and if caught red handed the
landlord may use this to evict the tenant.
 Rules and regulations by the management of apartment/condominiums in which
tenants have to follow and other issues that may arise such as illegal and misuse of
rented premises to travellers e.g. drugs activities, organized immoral party and other
illegal activities.
4/29/2017

14.  There are both positive and negative reviews by both hosts and guests.
 Failure to comply to the rules and regulations will cause the hosts be banned from
Airbnb as both parties can complain and make a report to Airbnb.
 There is privacy issue of the residential premises and few complaints had been
lodged to the local council but there are currently no laws prohibiting individuals
from renting out their units for any length of time.
4/29/2017

15.  A recent report shows that Airbnb in Malaysia has vast growth potential with
government support and collaboration with Airbnb to help homestay, supplement
income for community, and boost tourism and economy.
 Even with Airbnb, its other competitors are still doing well too with growth in
occupancy and room rates.
 Few unique features that distinguish Airbnb with its competitors are:
i. No limitation on room availability with increasing hosts. Airbnb can meet the
demand of guest within short period.
ii. Wide choice & flexibility in selecting types of rental space compared to hotels.
4/29/2017

16.  AIRBNB in Malaysia is still at an infancy stage but has command growing popularity
in the new age of technology disruption.
 AIRBNB has strong potential business opportunity to grow in Malaysia with expected
number of tourist arrival at 28.6 million in 2017.
 But Airbnb continues to face increasing challenges on issues such as trust, legal
implications, insured safety and management of hosts.
 Competition remain rife with the need for Airbnb to adapt to local government and
host requirements.
4/29/2017