Opportunities for Airbnb Services in Spain, Europe.
Airbnb was established in 2008 in San Francisco, United States. The company has become a global player in the peer-to-peer online marketplace. In the homestay market, the company enables customers to rent or list periodical lodgings in residential properties in the destination countries, with the property owners setting accommodation prices (Abelsohn 24). Consequently, the company makes income through commissions from the property owners and the customers served. Since its establishment, the company has expanded its operations to over 191 countries and has listings in the most popular cities (Soto-Acosta, Simona and Daniel 3). The company has been widely appreciated for connecting vendors or homeowners with the users seeking to hire the facilities through the company’s website (Abelsohn 24).
In fact, it is considered to have introduced a new economic paradigm by which millions of investors are transformed into entrepreneurs (Stors and Andreas 17). However, as the company’s relevance and local impacts are increasingly felt, the need for such services in the tourism industry keeps surging. Consequently, the company has had to expand operations into other areas worldwide. The popularity of the services on online media has dramatically influenced the company’s performance at the international level (Albalate, Germà and Xavier 80).
Nevertheless, the company has had to engage in a qualitative assessment of the alternative markets in the foreign markets before extending operations. Among other factors to consider in the market assessment are the size of the market, the competition levels, and the legal and political factors. Again, social-cultural factors, relative wage rates, access to research and development, logistical requirements, customer needs, and infrastructures are essential factors that the company must evaluate in deciding to venture into the new markets. Therefore, this paper evaluates these factors’ influence on the entry of Airbnb Company to Spain in the European region.
A Brief Background of Spain
Tourism in Spain is a highly esteemed industry as it contributes significantly to its national economic life. Indeed, the country generates as much as 11% of the national GDP from the sector annually. The summer holidays attract the highest number of tourists from the UK, Germany, France, and Italy, among other countries (Bujosa and Jaume 363). Consequently, Spain boasts of the second biggest tourism industry in the world, and in 2015, the country was ranked the third most visited country. The country’s national airline is called Iberia and facilitates local and international transport. Spain has a well-developed transport infrastructure with highly developed road and rail networks.
Besides, the country is easily accessible through waterways. Tourists, therefore, enjoy the advantage of improved efficiency in movement through high-speed trains and road systems (Nessfield 1). Local destinations and hotels also offer special transport for tourists to and from the country’s many summer beaches and resorts. In addition to the country’s tourist attraction sites and features, cultural tourism and business tourism thrive. Thousands of people visit the country for educational programs, festivals, and religious purposes (Nessfield 1).
Well-developed villas and residential quarters across the country provide visitors with adequate and comfortable living through rental services. Although locating some of the villas and the residential quarters could be argued to be easy in some of the regions could be considered easy, the process could be challenging in some other areas. Other important tourism features in the country are the attractive nightlife in the country’s cities, such as Barcelona and Madrid (Frías-Jamilena et al., 294). Finally, the country’s mountainous regions are great attractions for winter tourism. Accordingly, one can observe that the tourism industry thrives throughout the year.
Any company intending to invest in trade in Spain is required to appreciate various factors. First, one appreciates that the country is experiencing strategic uncertainty because of the European crisis in Brexit. The influence of the forces of Brexit could be blamed for causing economic uncertainty. Again one could appreciate the influence of the country’s crisis in the globalization of the markets, good business strategies, and well-developed infrastructures. Lack of investment in research and development could also be blamed for the low inflexibility in the job markets (Rivera 1). Again, the country ranks poorly in the development and adoption of technology compared to other countries. However, the general analysis confirms that an international investor like Airbnb could benefit from various favorable factors for business, including:
- Favorable income tax in the country: Spain currently runs a regime of income tax that favors international and local investors. In fact, special beneficial income tax rates are designed to favor the companies entering the market. For example, the current legislation stipulates that SMEs and new businesses with total revenue of about EUR 8 million can effectively apply for a reduction of income tax by five percent (Nessfield 1). The country also introduced an incentive to prevent workers’ layoffs in all companies in 2009. Similarly, companies that do not lay off employees in challenging economic times during the financial crisis could be enabled to apply for a reduction in the tax rates by up to five percent.
- A Large market size: A market size in a country is the total amount of potential sales by all the companies in a given market over time. One should appreciate that Spain has a national population of about 46 million, with 12% representing migrants (Nessfield 1). Over the last decade, the country’s large population has presented a stable market size. Nevertheless, the recession of 2008 and the current economic instability after Brexit have significantly impacted the local economy. Brexit and the periodic recession have resulted in the mass exodus of foreigners into other European countries. Consequently, the movement affects the market of local commodities and services adversely. On the other hand, the economic crisis and the exit of the UK from the European Union have been shown to have a minimal effect on the service sectors. For instance, the market for digital media has constantly been rising as the demand for social networking and information rises. In fact, the digital service industry promises the most potential in the country’s future.
- Workforce availability: According to data from the National Statistics Institute, Spain has over four million unemployed people. Recent years have seen the unemployment rate affect nearly all sectors of the country, affecting both males and females of all ages. Among other economic stimulating efforts by the government has been the creation of enabling an environment for investors to establish businesses in the country and hence contribute to the creation of employment opportunities (Nessfield 1). Again, with the surging number of unemployed but skilled personnel, increasing the employment rates could be considered a great potential for improving the economy. Thus the government has shown great commitment to increasing employment opportunities by applying favorable market policies. Accordingly, foreign companies like Airbnb eyeing the market could exploit the great advantage of an inadequate labor supply.
- High quality of life: Spain has been considered among the leading destinations for leisure and work due to the improved quality of life. First, the country prides itself on excellent weather compared to most European countries (Nessfield 1). Nevertheless, the country’s high demand for services and goods has contributed to the rising cost of living. However, although the cost of living could be arguably high, the quality of life has been widely applauded. Better life in the country is observed in the speed and quality of healthcare delivery, leisure activities, and freedoms. Unfortunately, the high population leads to traffic congestion and insufficient housing. Nevertheless, the perceived shortage presents an excellent opportunity for investors in the country’s housing industry and other social amenities.
- Low costs and availability of real estate facilities: The first decade after the millennium saw the cost of real estate rise by about 200% compared to the last years of the 20th century. Nevertheless, the prices have fallen, and relative stability can be confirmed in the country. Consequently, the companies or investors intending to establish operations in the country can now access a wide range of housing facilities across the different cities (Nessfield 1). Again, the increased rate of investment in the housing sector in the recent past has led to the flooding of services in the market, hence the relative fall in the prices. The outcome can be said to be increased opportunities for foreign and local investors. Therefore, the Airbnb Company can exploit an unequaled advantage in the variety of available rental houses. Currently, investors in real estate have resulted in the construction of business and residential premises away from the cities, creating a great opportunity for supporting industries. Among other immediate beneficiaries of the low housing, rates has been the tourism industry. Many people, therefore, travel into the country without fearing the high costs of accommodation services due to the plenty of options. Nevertheless, few travel and hospitality companies have taken a strategic advantage in exploiting the opportunity.
Justification for Venturing into the Spanish Market
From the background analysis of the Airbnb Company, one can establish that the company invests in online platforms for connecting travelers with local service providers in accommodation and temporary rentals. There is great potential if the company wishes to expand its operations and introduce its services in Spain. First, the country is shown to have one of the best economic policies on income tax, especially for start-ups and foreign investors. The company can, therefore, exploit the advantage in establishing its operations under the existing policies. Secondly, the country has a large population of people.
The high population also encompasses many unemployed and highly skilled persons. Thus, by introducing the operations in the country, Airbnb can enjoy great returns in the availability of labor and technical skills. Furthermore, the country also offers huge potential for customers of the company’s services. With the large population, many locals can also be targeted to buy the services provided. Besides, the review illustrates that the country ranks high in the quality of life index. Consequently, many people from across borders could be interested in visiting the country for employment and leisure. In fact, Spain ranks high in tourism returns as the developed industry contributes largely towards the country’s national GDP.
Finally, the country presents immense potential in the real estate industry. Through the years, many people have invested in the sector, hence the availability of affordable housing facilities for holiday rentals and short-term accommodation. This information could be very useful for Airbnb in its intention to introduce services connecting homeowners to potential customers. Other facilitating factors are the country’s legacy as a tourism destination and the potential to exploit the industry’s digital platform. These factors can, therefore, point to the potential for significant investment by Airbnb in Spain.
The discussion paints Spain as a country with a huge potential for investment by the Airbnb Company. However, despite the facilitative factors discussed, one could be concerned with the arguably unfriendly trade culture in the country. Many of the local cities like Barcelona and Madrid are known to be highly expensive for foreign investors (Nessfield 1). The city policies and requirements inhibit foreign investors’ efforts to launch seamlessly. Again, the locals’ low exploitation rate of the online business platform could pose a strategic challenge to the Airbnb Company. Most investments in the country’s cities exploit the traditional business frameworks hence the low reception of modern business frameworks. Nevertheless, one must acknowledge that the country still holds huge potential for a global organization such as Airbnb, exploiting a relatively new niche in commerce.
This paper notes that the Airbnb business strategy is to provide supportive services in tours and travel. Accordingly, the company facilitates the local movement of people and the hiring of periodic rental houses and accommodation facilities to people through the online platform. Potential customers are only required to create a personal profile on the website and gain access to the various offers at the destination point. After the person makes a selection, booking and confirmation can be made online. As such, the business framework can be considered relatively new as facilitated by modern technology. However, this paper has evaluated the business potential the company could exploit in Spain. Therefore, this paper recommends that the company invest in the country due to the established supportive factors. The paper notes that the country has a favorable tax regime for investors. Other supportive factors are the large market size, workforce availability, improved quality of life, and affordable housing amenities.
Abelsohn, Jessica. “The Airbnb movement.” Journal (Real Estate Institute of New South Wales), vol. 65, no. 9, 2014, pp. 24.
Albalate, Daniel, Germà Bel, and Xavier Fageda. “When supply travels far beyond demand: Causes of oversupply in Spain’s transport infrastructure.” Transport Policy, vol. 41, 2015, pp. 80-89.
Bujosa, Angel, and Jaume Rosselló. “Climate change and summer mass tourism: the case of Spanish domestic tourism.” Climatic Change, vol. 117, no. 1-2, 2013, pp. 363-375.
Frías-Jamilena, Dolores M., Salvador Del Barrio-García, and Lorenza López-Moreno. “Determinants of Satisfaction with Holidays and Hospitality in Rural Tourism in Spain The Moderating Effect of Tourists’ Previous Experience.” Cornell Hospitality Quarterly, vol. 54, no. 3, 2013, pp. 294-307.
Nessfield, Mark. “Is Spain a Good Place for Foreign Entrepreneurs to Launch Start-ups?” EUStartups. N.p., 2011. Web. 19 Oct. 2016.
Rivera, Rafael. “It’s Time for Spain to Embrace the Sharing Economy-An Outsider’s Perspective.” Available at SSRN 2805590 (2016).
Soto-Acosta, Pedro, Simona Popa, and Daniel Palacios-Marqués. “E-business, organizational innovation and firm performance in manufacturing SMEs: an empirical study in Spain.” Technological and Economic Development of Economy, 2015, pp. 1-20.
Stors, Natalie, and Andreas Kagermeier. “Motives for Using Airbnb in Metropolitan Tourism—Why do People Sleep in the Bed of a Stranger?.” Regions Magazine, vol. 299, no.1 2015, pp. 17-19.