It is crazy how a simple idea such as providing living space and breakfast to visitors at your home can go a long way. This simple idea has changed how people travel around the world. The Airbnb business model has shown that even simple ideas can solve great problems. The business model proposed by the hospitality brand has made it easier for travelers to find quality shelter at modest rates. The ease that it brings to the table has made Airbnb an instant hit among travelers around the world. Now, you can learn about the marvels of Airbnb business model that is unique and sustainable.
Airbnb: What is it?
Airbnb was brought to life when two former classmates, Joe Gebbia and Brian Chesky, put up an air mattress in their apartment in San Francisco and put up an ad that they were providing bed and breakfast service. They felt the need for such a service because the cost of living in San Francisco is absurdly high.
After several instances of seeding and incubators, the idea finally took off. Seed money from the likes of Sequoia Capital helped the founders to put up a quality app. The app served as the interface that allowed the travelers to connect with local hosts.
The idea of Airbnb is to provide lodging services to travelers. These services can be provided by a local in their own home or a rental. Airbnb acts as a broker between the two parties. The host puts up an ad that consists of the services and amenities provided by the host. The ad also contains the listing price. On the other hand, prospective customers browse through the listings to find a suitable rental. After finding a suitable listing, they get in touch with the host through the app. Airbnb makes money through commissions from each booking.
Airbnb is a lodging and hospitality company that is based out of San Francisco, California. As of now, it serves various cities around the world. Their revenue was a whopping $2.6 billion in 2017.
The Global Presence of Airbnb Business Model
As of now, Airbnb has established its presence in over thirty four thousand cities across more than one ninety countries. There are over 4.5 million listings on Airbnb and the San Francisco-based hospitality company has served upwards of 35 million travelers up till now.
According to statistics, more than 140,000 guests stay in different listings on Airbnb every day. It surpassed Hilton Hotels in 2012 for more nights booked over the period.
In numbers, Airbnb has a strong hold on the lodgings and hospitality industry. Over the years, the numbers of users have grown exponentially. As of now, it feels that the rate of growth will not slow down any sooner.
The Airbnb Business Model
Airbnb uses a similar business model as Uber, the famous ride-hailing app. You can learn more about Uber and its business model over here. The Aggregator business model has been used by many successful startups lately. Oyo Rooms, a company similar to Airbnb, is also based on the aggregator business model.
Most of the hotel industry around the world has a linear business model where traditional hotel chains such as Marriot, Hilton etc. put in millions of dollars to build and maintain their enterprises. Airbnb has seen massive growth because of little to no marginal cost. It is the people who put up listings and maintain them. Airbnb, on the other hand, only serves as the broker between the two parties. No money is invested by the company to maintain the lodgings.
Anyone who has available space in their home can put up a listing on Airbnb. In a listing, you can add pictures and details about the service. Airbnb allows the hosts to make money on the side if they have available space. The users pay rent for the property and the services they use.
The benefit of a booking an Airbnb over a hotel is that you can home-stay with any local in the area. Home-stays are cheaper than hotels and are of great value when it comes to experiencing the local culture and their way of living.
What Else Does The Model Include?
Travelers and hosts have their personal profiles. Each profile contains reviews and ratings that are given by a traveler to a host and vice versa. The ratings system helps the users to make an informed decision before getting a place or giving a place for rent.
Hosts can also review the ratings of the traveler to decide whether they want to rent their space or not to a respective traveler.
Lastly, the business model also supports a huge community of freelance photographers. Airbnb pays the photographers to take high quality images of the properties that are made available in the listings. These high quality images increase the click-rate and eventually increase the number of bookings too. The photographers are paid by the Airbnb for the images.
How Does the Airbnb Model Make Money?
All the transactions between the host and the traveler are processed by Airbnb. Airbnb makes money by charging commission on every booking made through the platform. Airbnb charges a 10% commission from hosts and 3% from the travelers on every booking.
Furthermore, the travelers pay about 6% to 12% of the booking amount as a service fee to Airbnb. This fee is charged when a booking is confirmed. The fee is non-refundable. Also, travelers need to pay value added tax for bookings. The VAT is calculated on the basis of the region of the rental.
Travelers who pay in any currency other than the one accepted by the host have to pay for an exchange rate that is set by Airbnb itself.
Hearst and Airbnb have collaborated to put out the Airbnbmag, a travel magazine for its users. This is a $15 magazine that serves as a guidebook to travelers so that they can enjoy their stay in a foreign land. The idea of the magazine is to include details that allows the traveler to see the new place from the eyes of the local.