The hospitality industry has high barriers to entry due to the need for considerable capital investment and dominant industry leaders such as Hilton taking advantage of economies of scale. Nevertheless, AirBnB is emerging as a notable competitor through disruptive innovation. The “online community marketplace” appeals to the low-end market by making travel more affordable while creating value for local home owners with unoccupied living space. AirBnB has grown rapidly in the last few years and boasts users from across the globe. 
AirBnB’s value proposition: A simple online platform which allows “hosts” to offer idle housing for short-term rent to discount-seeking travellers looking to minimize their travel costs.
Its only revenue stream is commision from both parties, and it is able to offer its value proposition by keeping margins low and sacrificing the quality of service which accompanies a traditional hotel chain.
My PEST analysis reveals the vulnerability of AirBnB in the future.
Recently, AirBnB received a $10 billion valuation from it’s latest round of funding. However, I would abstain from labelling it an industry leader just yet. While the business model is disruptive, it is also vulnerable compared to the traditional hotel chains, as depicted through the external threats in my PEST analysis above. Before AirBnB can progress, the company must conduct extensive market research to answer questions such as What level of quality are the discount-seeking travelers in our customer segment willing to sacrifice for the lower prices? and How can we ensure that hosts are responsible and abiding by local law?
Additional Sources: “AirBnB’s legal troubles: what are the issues?”
Image Sources: AirBnB Website and My Own PEST Analysis
There are a few big risks in Air BnB’s business like the one you cited regarding the locals abiding to law. Some time ago a report regarding irresponsibility of guests was also published. Compare it with Uber and you can see Uber’s growth has been rapid and stronger. For Air BnB there are still some major barriers. Uber’s task has proved relatively easier. However, both are a part of the sharing economy.
Sorry! Just wanted to make a small correction in the first line of my comment- “one you cited regarding the guests abiding to local laws.”
Over time things have changed a lot. While I would not compare Air BnB with Uber, but it has done well despite the challenges.
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