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Are you a traveler or have a spare room? 

Then you must have heard of Airbnb and how you can rent a room at an affordable price.

Have you ever wondered how Airbnb Business Model works?

Why is Airbnb so successful? How much revenue does Airbnb make?

Started by Brian Chesky and Joe Gebbia in 2008, Airbnb has taken the hospitality industry by storm.

Airbnb has revolutionized the way people travel by focusing on building a community and not just a mere distribution platform. After reading this article you’ll get to know everything about Airbnb’s business model.

 

What’s in it for me?

#1 What is Airbnb 

#2 Airbnb Business Model

#3 How Airbnb works

#4 Airbnb vs uber vs Oyo rooms

#5 How Airbnb earns?

#6 Marketing Strategy of Airbnb

#7 Airbnb Statistics

#8 Airbnb India

 

 

What is Airbnb?

Airbnb is a marketplace where travelers get to stay at the property listed on the site by the local hosts. A person who has a spare room can list his property on the website and the person who is traveling to that particular location can book it and get to have a unique experience offered by the host. 

Airbnb is a community built on sharing. It was started by two friends when they faced difficulty in paying the massive rent and had a spare living kind of a room. They got a mattress and started marketing it offline as a space for rent. Later they started offering breakfast with that as well.

They got 800 cereal boxes which they sold for around 40$ each during the presidential campaign. They earned so much money and reinvested back into the business.

Airbnb is now operational in more than 190 countries and has a presence in 34000 plus cities. 

It has turned into a huge business now with 150 million-plus users and 1.9 million plus listings that the user can book at any given time.

 

 

Airbnb business model

Airbnb is based on an aggregator business model. Aggregator Business Model is a network model where the company collects the data about a specific good/service providers, make the providers their partners, and sell their services under its own brand. 

 

 

Since the aggregator is a brand, it has to provide services which have a uniform quality and price. This is done by signing up a contract with the partners. You can understand it as an asset light model where you earn a commission for the services you provide without owning any inventory.

If we talk about the conventional model where you had to purchase a hotel to get started with bookings, they have turned the game around  and connected the demand and supply. This is one of the reason of its rapid growth.

People having vacant space at their home and willing to earn some extra money can list their rooms on the website and earn some extra bucks. Also, the key differentiator is they sell experience and not just space.

 Many travelers wanna feel like home once they go out to travel and explore different countries. The travelers get a local like feel and also feels light on the pocket as compared to hotels.

Airbnb also has a personal profiles and rating/reviewing systems that  helps the travelers make an informed decision about the hosts and what is on offer. Hosts too can decide and have a choice about whom they have to rent  out their space . These help to build trust and reputation in the community.

Besides the travelers and hosts, Airbnb business model also includes a huge network of freelance photographers in all major cities of the world. They visit a property and get high-definition photographs of the property. 

These high-definition photographs improve the click-rate and help in getting more responses. Airbnb pays these photographers directly.

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How Airbnb Works?

Airbnb is a platform that connects the travelers to the local host. If you have a spare room in your house, you can list that on Airbnb’s property and earn for every booking.

 It is a kind of opportunity for both the travelers and the host as travelers to get live cheaply as compared to hotels and also get a feeling of hometstay. On the other hand, hosts earn money for the property they provide. 

The host can provide additional services like breakfast, tour guide, pet friendly environment,etc for which they can decide the amount the want to rent at.

The rating and review system builds a trust and if you read the reviews for some properties, travelers make a long term connection with the host. 

 

Airbnb vs Uber vs Oyo Rooms:

Airbnb , Uber and Oyo Rooms all work on the aggregator based model. Oyo Rooms has still shifted significantly and have started to operate the full buildings independently. Also, they have expanded to co-living and co-working spaces.

Uber has simplified traveling from one place to another. It’s business model is such that it acts as a middleman between the drivers and the riders guaranteeing a standardized level of service. 

 

 

However, this is different from Airbnb business model that thrives on discoverability. The level of service is not consistent. The travelers are free to make a choice from the listings that are there on Airbnb’s website  after going through its reviews.

Uber too has ratings and reviews for both riders and drivers.It doesn’t give the facility to the user to choose a driver they want to ride with. Also, the reviews on Uber, if you would see are not as elaborate as those on Airbnb.

The most Uber can do is suspend a driver or rider if his/her ratings are too low. Uber pays its driver partners through a fixed rate of commission for every ride.

Oyo Rooms business model is based on quality control or standardization where they ensure a certain level of unifromity in their services. The case with Oyo Rooms is that a person books the room with the brand and not the individual hotel. 

With Airbnb, the case is opposite, a room is booked through the website with the host providing it. Just like Uber, Oyo ensures a certain level of service. As I told above, Oyo has now started to lease out the full property and run the entire building under its brand name which gives it the access of day to day operations.

Airbnb has no such control over the quality of the homestay.  The difference is also, Airbnb earns through commissions mainly.

 

How Airbnb Earns?

As we talked about Airbnb being run on an aggregator based model, its main income comes from the commission on every booking made. The property owner can list their properties for free. 

The booking and monetary transactions are carried out on the Airbnb platform. The company mainly earns from these transactions in the following ways-

  1. From the hosts/owner of the property

Airbnb take-offs flat 10% commission from hosts for every booking done through the platform. Usually, the payment processing fees are 2% that here is 3. So, an additional 1% is also levied that the host pays.

       2. From the Travelers/Guests

Airbnb charges an amount upto 20% of the booking total that  is set as service fee by Airbnb for travelers for every confirmed booking. This fee is non-refundable

       3.Airbnbmag

Airbnbmag is a magazine product that the company has added. The thinking behind it is to make the travelers feel that they belong to the place they visit. This $15 dollar magazine is a result of partnership between Airbnb and Hearst. The motive is also to help the traveler discover the place through the locals’s eye.

     4. Business Travel

Airbnb business model also includes business ready homes that fulfill certain requirements for home type, amenities, check-in, reviews, responsiveness, and host commitment. This feature is designed especially for travel managers of the companies to provide better transparency and more accurate reporting for their company.

5. Airbnb Services

Airbnb also provides services like for which it charges flat 20% commission from the person who provides it.

 

 

Marketing Strategy of Airbnb

Marketing is an essential part of any business and below we have discussed some strategies adopted by Airbnb to get their product out there to more and more people.

  1. Influencer Marketing

Influencer marketing means promoting your product/service through social media influencers who have audience. It could be youtubers, Social Media celebrities, bloggers and even movies stars.

In 2015, Airbnb hosted a ‘floating house’ publicity stunt on the Thames River in London with a variety of related events including a #FloatingHouseParty where attendees were encouraged to live stream, take pictures and splash the night all over social media.

 The resultant coverage turned out to be massive. 340 press pieces in the UK alone, which translated into over 70,000 page hits, 10,000 new users, and more than 200 million social impressions!
Airbnb also leverage the impact of celebrity stays. 

 

 

  Since then, Airbnb has partnered with a number of celebrities – picking up the tab for their stay in return for some social media love.

 

 

 

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2. Quality imagery

Airbnb understands the importance of high quality images and that’s why they offer all of their hosts free professional photography to maintain consistency across their media.
They even spend more money on production than promotion because they understand that better quality content will always get more engagement. Travel lovers use Airbnb because they feel inspired by what they see in the beautiful pictures on the Airbnb website.

 

 

3. Community building

Airbnb knows the value of community building and hence focuses on building trust through regular communication, detailed profiles and strong reviews. That makes the  engagement phenomenal. Another advantage is booking a room with Airbnb is just a matter of few clicks if we compare it with the conventional hotels that includes a longer process. This is one of the reason customer keep coming back to the website.

It is also the authenticity of the experience that makes Airbnb such a successful community. Hosts go out of their way to make their home their guests’ home with detailed local knowledge of the best eateries, transport links and hidden gems.

 

4. Brand partnerships

Airbnb has shown us n number of  times that collaborating can provide some serious exposure and generate a lot of buzz. Successful Airbnb partnerships include KLM Royal Dutch Airlines, UK bookstore chain Waterstones and even the French government.


Think what customers of each brand would love and find something that appeals to both. The brand crossover has to offer something unique, something you can only offer together.
For example, with KLM a contest was created where the winners could spend a free night in a luxury ‘Airplane Apartment’.

 With the French government it was a night in the Paris Catacombs at Halloween, which helped raise the profile of a lesser-appreciated French tourist spot.

 

 

Airbnb India

Airbnb has huge expectation in Indian market and said their co founder said that millenials will drive its growth in the country. It is active in most of the tourist places like Goa, Delhi, Mumbai, Rishikesh,etc. Recently it has invested in Oyo Rooms also around an amount of $200 million. More than one million Indians have travelled on Airbnb globally. 

With over 30,000 listings in the country, Airbnb listings in India have grown by 115% over the past year. There has been almost 2x growth in the number of nights booked on Airbnb in India since 2016. We have witnessed over 100% YoY growth in inbound guests from around the world (2017-2018) 

 

Airbnb statistics

  • Airbnb has 31 offices across the world.
  • Around 400 million guests has been hosted since the company’s launch.
  • Over 150 million users are on the platform.
  • Airbnb has more than 5 million listings worldwide
  • 53% of travelers use Airbnb because of price
  • Airbnb has a total of 21 acquisitions till date related to its business. Basically, they are constantly improving their product for the good of both hosts and guests.
  • Airbnb has raised a total funding of around 4.4$ billion till date in 15 funding rounds.
  • Millennials account for roughly 60% of all guests who have ever booked on Airbnb.
  • There’s a million dollar insurance coverage for an Airbnb host
  • Airbnb users can book 1.9 million listings at any given time
  • Airbnb has a total of 1000-5000 employees.
  • The website has a monthly traffic of around 86,570,491 with a monthly visit growth of around 3.99%.
  • Cost of renting an average home on Airbnb is cheaper than a single hotel room.
  • Airbnb has spent $23.5 million and counting on advertisement in the U.S
  • Airbnb has a total of 21 acquisitions till date related to its business. Basically, they are constantly improving their product for the good of both hosts and guests.
  • Airbnb has raised a total funding of around 4.4$ billion till date in 15 funding rounds.
  • The company had a profit of around $93 millions  in the year 2017 and has reported a profit in the year 2018 as well.

 

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