Week 7 Case Study 14.3 – AI at Airbnb

Week 7 Case Study

Read “Case 14.3: AI at Airbnb” and write an essay that answers the following questions:

1. How has Airbnb’s business model transformed the travel industry?

2. How does Airbnb use sentiment analysis to improve its services?

3. How does text mining help Airbnb gain insights from guest reviews?

4. How does Smart Pricing help Airbnb hosts set the best price for their properties?

5. How can AI be used to help businesses strategically place themselves in a market based on data?

6. What are some potential drawbacks or ethical concerns of using AI in the hospitality industry?

7. How has the implementation of AI in Airbnb affected the revenue for both hosts and the company?

8. Can the use of AI in hospitality improve guest experiences? How?

9. How might AI be used in the future to further enhance the hospitality industry?

10. How might Airbnb’s use of AI influence the use of AI in other industries? 

Requirements:

· There is no specific page requirement for your analysis. Instead, your work will be evaluated based on how thoroughly it addresses each of the questions that have been outlined for you.

· You must utilize proper APA formatting and citations throughout your paper. If you use any supporting evidence from external sources, it is imperative that you provide accurate citations for each reference.

· You must include a minimum of two sources from scholarly articles or business periodicals, aside from the course textbook. 

· Include your best critical thinking and analysis to arrive at your justification.    

 

 

 

Case 14.3: AI at Airbnb

Airbnb was founded in San Francisco, California, in 2008, and it became a publicly traded company after the 2020 IPO. The company reported a revenue exceeding $3.3 billion in the same year. Airbnb’s current market cap is about $100 billion. Airbnb has a revolutionary business model that transforms the travel industry by offering regular people an opportunity to rent out their homes or apartments to trav- elers for an affordable price, allowing them to stay for a prolonged time and in a larger space. This is a great alternative to a hotel and the platform manages millions of users daily. Airbnb’s hosts span over 100,000 cities worldwide. Through online platforms and mobile apps, millions of hosts allow for different experiences ranging from rock walls to golf courses to private on-site chefs. This innovative business model has been proven to be trusted and deals with problems quickly and effi- ciently. Airbnb is more than a mobile app that just allows people to rent out or rent a home. The use of artificial intelligence and big data analytics is widely acknowl- edged. Here we will introduce how Airbnb applies AI to improve its business.

One of the best tools to analyze the information using AI is sentiment analysis, which analyzes customers and their feelings toward products, services, and facts. Airbnb appraises opinions from the reviews that were posted on the application. Airbnb uses natural language processing technology that analyzes the review boards or the message boards through sentiment analysis, which helps Airbnb understand the true feeling behind the reviews. The results show how consumers made their decisions and what made them stay at a particular place in that region. With such analysis, patterns and themes were gathered to make Airbnb aware of what behav- iors or feelings were provided to the consumers. In turn, Airbnb provided their hosts with discoveries to potentially improve their amenities or services within their accommodation based on what the results displayed. The use of sentiment analysis is everywhere in Airbnb as there are numerous sensors and real-time data being col- lected every day from the users. And overall, these inputs created a more functional environment that allows for endless possibilities for both the company and its users.

Text mining is the process of transforming unstructured text into a structured format to identify meaningful patterns and new insights (ibm.com). Text mining was used in Airbnb to extract valuable information from guest reviews through a tool called Rapid Miner, which uses AI algorithms to identify patterns and under- stand meanings from texts such as customer feedback. The mining processes include data preparation, machine learning, and predictive model deployment. The software system first performs sentiment analysis using ALYIEN and then Rapid Miner con- ducts correlation analysis on discoveries based on words, aspects, and visualization findings. The software can automatically process a variety of texts and languages. AI monitors everything so patterns can be reported and studied and once again put into use by Airbnb. Text mining has provided Airbnb with new information that was not taken into consideration or examined before. By identifying common trends in the reviews, hosts can identify where they are among the competitive listings by seeing what their competitors are doing better with the aim of replicating those aspects into their own service. Additionally, Airbnb can use this information to give insights to hosts about their strengths and weaknesses, which allows the hosts to do a SWOT or competitor analysis so that they can emphasize the relevant points in marketing and strategic decision-making.

Smart Pricing is an AI-based software package that Airbnb developed to help hosts set the best price for their properties. Since Airbnb’s hosts and properties are distributed diversely all over the world, varied in room size and locations, with dras- tically different amenities and services, it is next to impossible to have a fixed rate for all. If the hosts set the price too low, both Airbnb and the hosts will lose revenue. If the price is set too high, the property is likely to be left vacant because the custom- ers will go elsewhere to other providers. Considering more influencing factors such as competing properties nearby, seasonal demand shifts, and special festival events, pricing can be a challenge for both Airbnb and its hosts. The Smart Pricing software considers all such factors as inputs and provides a dynamic pricing solution for each property. The software comes with Aerosolve, which is a machine learning algo- rithm developed to interpret complex input data with intuitive computational mod- els. The results are presented as dynamic pricing features on a calendar with different color codes to indicate the probabilities of renting a room at different price levels. The Smart Pricing software was proved to have grown revenue by 8.6% for hosts while decreasing rates for guests by 5.7% (Barron et al., 2020). With Airbnb’s split- fee formula for revenue distribution, the AI application appears to be a win-win-win solution for hosts, guests, and the company (Owen, 2021).

This Airbnb case shows how AI is used in Airbnb to analyze information from various sources in order to improve business efficiency and guest experiences. Machine learning algorithms are used in Airbnb to help identify common trends between hosts and their listings. AI is useful not only for Airbnb but also for other businesses because it helps reveal patterns and behaviors relating to the market and customers. Consumer feedback offers important information for businesses because it can also help predict demand, improve pricing, and can predict the maintenance of facilities or equipment. In the future, AI technology will see an increase in popu- larity in the hospitality industry and also for other businesses in general because it will help companies strategically place themselves in a market based on data.However, despite its inability, AI is improving its moral development through the advancement of neural networks and machine learning. It is far from perfect, but it is heading in the right direction.

The artificial intelligence technologies within HR are usually software that will extract patterns from data. As data volumes continue to grow, deep learning drives the automated creation of increasingly complex algorithms to capture more data. This also brings the concern of data privacy and ethical issues (Mittelstadt et al., 2016). HR departments keep sensitive information about employees, and using this data for analytics may reveal personal information to third parties. Tasks performed by machines can be difficult to trace. In the HR departments, this could be detrimen- tal to a company as a large part of the information that a human resource company retains is private and personal. This can be a challenge that AI as a whole is facing.

HRM is now taking the advantage of AI by utilizing big data and analytics to open up opportunities for strategic value creation. From the discussions above, we can see that AI is able to influence many different aspects of HR, through recruiting, onboarding, training, and more. When AI assists in these tasks, it helps the company as a whole. Management and HR are closely related and work together on many tasks. Through AI, it takes a lot of stress off the management with employee- related tasks.

Many research efforts have already proven that AI is very useful when sourcing candidates. There are already products out there that can be used to evaluate the current workforce, where they can help employers make better decisions. These products are expensive, but over time they will save time and reduce costs to the human resource and managerial functions. By implementing AI into the recruiting process, it allows managers and HR representatives to be able to focus on more important tasks and less tedious work.

Workflow automation is an area where AI can affect the HR department signifi- cantly. In the past, humans have been doing most of the programming so that com- puters can work around it and understand it, but it is feasible that this can be automated by AI technology now. Examples are scheduling meetings with multiple team members, where this tends to get messy the more people involved. This used to be a time-consuming task, which can be taken care of as AI technology is applied.

Another area AI will influence HR is within mass personalization, here particu- larly around training and employee growth. AI can help train people and be their personal coach whenever it is needed, and will eventually save companies money, and be less time-consuming. AI software will recognize problems their employees are struggling with and help them through the difficulties.

HR functions are one of the important strategic planning functions. Management can provide the HR department with top-notch technology, which leads to the effec- tive running of an organization. The future HR functions aim at developing an intel- ligent, employee-centered, and digitally supported work environment, and AI technology plays an important role in the implementation of future HR prospects.

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