Introduction
The Airbnb was established in 2008 in San Francisco United States. However, the company has grown to become a global player in the peer-to-peer online marketplace. In the homestay market, the company enables the customers to rent or list periodical lodgings in residential properties in the destination countries with the accommodation prices being set by the property owners (Abelsohn 24). Consequently, the company makes income through commissions from the property owners and the customers served. Worth appreciating is that since its establishment in 2008, the company has expanded its operations in over 191 countries and has listings in the majority of the cities in the nations (Soto-Acosta, Simona, and Daniel 3). The company has been widely appreciated for connecting the 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 held, the need of such services in the tourism industry keeps surging. Consequently, the company has been forced to expand operations into other areas across the world. The popularity of the services on the online media has greatly influenced the performance of the company 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 together with the size of the market, the competition levels, and the legal and political factors. Again, social cultural factors, the relative wage rates, the access to research and development, the logistical requirements, the customer needs, and the infrastructures are important factors that the company must evaluate in making the decision to venture into the new markets. Therefore, it is imperative to evaluate the influence of these factors towards the entry of Airbnb Company to Spain in the European region.
Background of Spain
Tourism in Spain is a highly esteemed industry as it contributes significantly to the country’s national economic life. In fact, the country realizes as much as 11% of the national GDP from the sector annually. The summer holidays attract the highest number of tourists from the UK, German, 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 countries. The national airline of the country is called Iberia and facilitates local and international transport. Furthermore, the country has a well-developed transport infrastructure with highly developed road and rail networks. Besides, the country can be accessed through the waterways. Therefore, tourists realize the advantage of improved efficiency in movement through the high-speed trains and road systems (Nessfield 1). The local destinations and hotels also offer specialized transport for the tourists to and from the many summer beaches and resorts across the country.
Besides the tourism attraction sites and features in the country, cultural tourism and the business tourism thrive. Thousands of people visit the country for educational programs, festivals, and religious purposes (Nessfield 1). The well-developed villas and residential quarters across the country provide an adequate and comfortable living for the visitors through the rental services. Although locating some of the villas and the residential quarters could be argued to be easy in some of the regions, the process could be challenging in some other areas. Other important features of tourism in the country are the attractive nightlife in the countries cities such Barcelona and Madrid (Frías-Jamilena et al., 294). Finally the mountainous regions of the country present great attraction sites for the winter tourism. Accordingly, one can observe that the tourism industry thrives throughout the year.
Favorable Factors
Any company intending to invest in trade in Spain is required to appreciate various factors. First, one discovers that the country is currently experiencing strategic uncertainty because of the European crisis in Brexit. The influence of the forces of Brexit could be blamed for causing the economic uncertainty. Again one could appreciate the influence of the country’s crisis in the globalization of the markets, good business strategies, and the well-developed infrastructures. The lack of investment in research and development could also be blamed on the low inflexibility in the job markets (Rivera 1). Again, the country ranks poorly in the development and adoption of technology as compared to other countries. However, the general analysis confirms that an international investor like the Airbnb could benefit from various favorable factors for business.
- Favorable income tax in the country: Currently, Spain runs such a regime of income tax that favors both the international and local investors. In fact, there are special beneficial income tax rates that are designed to favor the companies entering the market. For example, the current legislation stipulates that the 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). Again, the country introduced an incentive to prevent the layoff of workers in all companies with effect from the year 2009. Similarly, the companies who do not lay off employees in the hard economic times during the financial crisis could be enabled to apply for a reduction in the tax rates by up to five percent.
Fig 1: Easier Tax obligations in Spain
- The market size: A market size in a country is explained as the total amount of the potential sales by all the companies in a given market over a given time. One should appreciate that Spain has a national population of about 46 million people with 12% representing the 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 had a relative impact on the local economy. The effect of Brexit and the periodic recession has been the mass exodus of the foreigners into other European countries. Consequently, the movement affects the market of local commodities and services adversely. On the other hand, the economic crises and the exit of 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 been constantly rising as the demand for social networking and information rises. In fact, the digital service industry presents the most potential in the country’s future.
- Workforce availability: The data provided by the National Statistics Institute, Spain has over four million unemployed people. In fact, the recent years have seen the unemployment rate affect nearly all sectors of the country and affecting both males and females in all ages of employment. 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 as a great potential of improving the economy. Thus the government has shown great commitment towards increasing the employment opportunities through the application of favorable market policies. Accordingly, the foreign companies like Airbnb eying the market could exploit the great advantage inadequate supply of labor.
Fig 2: Rising unemployment rates in Spain
- Quality of life: Spain has been considered as among the leading destinations for leisure and work due to the improved quality of life. First, the country prides in excellent weather as compared to the majority of the European countries (Nessfield 1). Nevertheless, the high demand for services and goods in the country has contributed to the rise in the 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 speed and quality in healthcare delivery, leisure activities as well as the freedoms. Nevertheless, the high population leads to traffic congestion as well as the lack of sufficient housing. Nevertheless, the perceived shortage presents a great opportunity for the investors in the housing and such other social amenities in the country.
- Costs and availability of the real estate facilities: The first decade after the millennium saw the costs of real estate increase to about 200% compared to the late years of the 20th century. Nevertheless, the prices have now fallen and a 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 the services in the market and hence the relative fall in the prices. The outcome can be said to be the increased range of opportunities for both the foreign and local investors. Therefore, the Airbnb Company can exploit an unequaled advantage in the variety of rental houses available for the hire services. Currently, investors in the real estate have resulted in the construction of business and residential premises away from the cities hence creating a great opportunity for supportive industries. Among other immediate beneficiaries of the low rates of housing has been the tourism industry. Many people, therefore, travel into the country without the fear of high costs of the accommodation services due to the plenty of options. Nevertheless, not many of the traveling and hospitality companies have taken the strategic advantage in exploiting the opportunity.
Justification
From the background analysis of the Airbnb Company, one can establish that the company invests in the online platforms for connecting travelers with the local service providers in accommodation and temporary rentals. If the country intends to expand operations and introduces the services in Spain, this discussion shows that the country has a great potential. 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 at the foregoing policies. Secondly, the country has a large population of people. The high population also encompasses the large segment of unemployed and highly skilled persons. Thus, by introducing the operations in the country, the Airbnb can enjoy great returns in the availability of labor and technical skills. Furthermore, the country also offers a great potential for customers of the company’s services. With the large population, a sizeable number of 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 the borders could be interested in visiting the country for employment and for leisure purposes. In fact, Spain ranks high in tourism returns as the developed industry contributes largely towards the country’s national GDP. Finally, the country presents a great 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. Consequently, the information could be very useful for the Airbnb Company intending to introduce the services of connecting the homeowners and the potential customers. Other facilitating factors are together with the legacy of the country as a tourism destination and the potential in exploiting the digital platform for the industry. These factors can, therefore, point to a potential of great investment by Airbnb in Spain.
Criticism
The discussion points that Spain as a country presents a great potential for investment by the Airbnb Company. However, in spite of facilitative factors discussed, one could be concerned with the arguably unfriendly culture of trade 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 become inhibiting to the efforts of foreign investors to launch into the economies. Again, the low exploitation rate of the online business platform by the locals could pose a strategic challenge on the Airbnb Company. The majority of the investments in the country’s cities exploit the traditional business frameworks hence the low reception of the modern business frameworks. Nevertheless, one must appreciate that the country still harbors a great potential for such a trading organization as the Airbnb which is exploiting a relatively new niche in commerce.
Conclusion
This paper notes that the Airbnb business strategy is to provide supportive services in tour 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 as 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, then booking and confirmation can be done online. As such, the business framework can be considered relatively new as facilitated by modern technology. This paper has however evaluated the business potential that the company could exploit in Spain. This paper, therefore, recommends that the company invests in the country due to the various supportive factors established. The paper notes that the country has a favorable tax regime for investors. Other supportive factors are the large market size, the availability of workforce, improved quality of life and the availability of affordable housing amenities.
Works Cited
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.
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