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Airbnb's struggles go beyond people spending less. It's losing some travelers to hotels.
(www.businessinsider.com)
this post was submitted on 24 Aug 2024
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I'd also like to point out that the underlying model may well be unsustainable in the way that it is offered at the start. Who benefits when a for-profit company operates at a loss? We, the customers, do. We get low prices and customer-friendly practices that are genuinely enjoyable. That business can't operate in that way indefinitely, as the early investors are not funding it as an act of charity.
Eventually, the bill comes due. The shareholders have funded the company on the premise that, after losing lots of money on customer acquisition, it can restructure and monetize those customers and recoup their investment, hopefully with a lucrative return when they decide to capitalize their holdings and find a new company with which to repeat the process.
There is absolutely no reason not to enjoy the perks of the early stage of the customer acquisition process; the shareholders are subsidizing your product at no cost to you. But we shouldn't be surprised when the shareholders stop subsidizing and start squeezing their formerly pampered customers in the hopes of getting their money back (and more, of course).
This doesn't excuse unethical or abusive practices, but it does mean that, even without them, the experience of those early days probably wasn't going to last forever.
At the individual level, sure. Even for things like streaming services it isn't a net negative to take advantage of those 'introductory' prices.
But a lot of these businesses that operate at an obvious loss are undercutting currently existing business practices that are probably more cost efficient than these new businesses. Like restaurants that used to take care of their own delivery were undercut by malicious pricing from door dash and uber eats only to wind up in a situation where they would have to start from scratch again or pay the outrageous extortion fees to DD and UE.
I avoided both DD and UE because I knew it would not be sustainably long term. It was obvious they were maliciously undercutting competition. Same with uber and lyft and all the other ride share businesses, although at least they got some reform going on the taxi side.
I can think of one reason. Depriving the existing industry from revenue leading to its demise which ensures the new entrant can raise their prices higher than the preexisting status quo. This is the other part of the equation that makes dumping work. Of course we can't expect most people to choose to pay more but if people were able to resist that, the strategy wouldn't work.