Business Model of Airbnb – How does Airbnb Make Money?

Airbnb is a two-sided online marketplace for hospitality services and we analyze the Business model of Airbnb in depth in this article. It is one of the largest community-driven hospitality companies. Established in the year August 2008, Airbnb functions with the mission of creating a world where anyone belongs anywhere.

The Airbnb business model offers homes and experiences around the world, so you can have a marketplace to discover, list, and book unique places and experiences. Airbnb services can be accessed via its official website or by an app. Airbnb users opt for its services to arrange or offer to lodge for tourism experiences or homestays.

What is the Airbnb’s Business Model?

 

Did you know that Airbnb started as a company that would provide mattresses to the people and also provides breakfast items as well?

However, the company soon went on to provide the means to travel for the company.

Airbnb is something that has an efficient and community-oriented business model for those who want to know about it. Not only is the business model unique, but it is a pretty profitable means as well.

Not just that but it has risen to such a level that it is now known to be one of the most desirable and loved options for facilitating bookings and financial transactions to listing and booking a space in an efficient and equally convenient fashion.

The hospitality brand is something that has grown to be quite popular amongst the people and hence is known to everyone.

Airbnb offers a marketplace where people can rent out their homes to the guests that are looking for accommodations in that location. Hosts can make income from their property while guests can get inexpensive accommodations with ease.

Understanding Airbnb’s Business Model Canvas

Airbnb stands for Air –bed, and breakfast. This is an online marketplace that works for both sides of the web. The travelers can easily connect with the local hosts of the company in the best way.

The business model, which is used for the Airbnb business is the one which is known as the Aggregator Business Model in the best way.

This is not really a linear business model which is present in the other companies such as Hilton and Marriott and so much more. The traditional businesses with the hotel type have to make sure that they are investing more and more millions on the building as well as maintaining all the amazing properties of the website as well.

The key resources which are provided for Airbnb are all for the people, and hence they don’t have to actually do all of that in order to make sure that they have the best results for sure. So, that is one of the main reasons why the business can grow at an incredible rate and that too at an affordable cost too.

The biggest asset for Airbnb is considering the human being as the capital and opting for Human Capital Management. There is simply not a single speck of doubt about the fact that it is going to be one of the best things for the companies who want to have the best ideas.

How Airbnb Business Model Started?

The founders (Brian Chesky, Joe Gebbia, Nathan Blecharczyk) of the company came with the idea of it because they weren’t able to afford the basic expenses such as rent or other expenses and now it has turned into a giant of a business venture for the people. It was founded in the year 2008.

The website was pretty simple in the beginning, and it just offered the people some mattresses and homemade items for breakfast nearby. However, with the pouring in of more and more people, there is no doubt that it rose to the strands of publicity in the best way.

The website money grew very much, and they experimented with a lot of other things such as cereal boxes and so much more. Also, there were some images of the rented location provided on the website as well.

Now, when we look at the growth of the company, there is no doubt that you will be amazed by the result.

Global Presence of Airbnb

Airbnb is headquartered at 888 Brannan Street, in San Francisco, California.

There are about over 65,000 cities in 191 countries that have branches of Airbnb in the best way. It is involved in services like Lodging and Hospitality.

Key people

• Brian Chesky (CEO)
• Joe Gebbia (CPO)
• Nathan Blecharczyk (CSO)

Airbnb enjoys 4,500,000 listings around the world. Its revenue is $3.378 billion and the number of employees- 5,597 (2020).

Customer Segments of Airbnb

There are four significant categories of people who are identifiable as the customers of Airbnb. It includes hosts and guests, freelance photographers, and people who provide experiences. They help Airbnb to earn and spread the word to attract more people.

1. Hosts

They are the ones who are the owners of the property. Hosts fall under the category of people who provides their homes on rent. This way, they can earn some money from it.

They need to provide a list of their belongings (property) on Airbnb and add the detail of them. Also, they can set the price as per their choice. They can also curate the time for check-in and check-out according to their comforts.

A host has the full liberty of rejecting a booking. It is after they go through the reviews of the travelers thoroughly. They can also do the same if they find the social profile of the person inappropriate.

2. Freelance Photographers

There is a long list of freelance photographers who have access to Airbnb in different parts of the world. They visit from place to place and captures photographs that are high in quality. They click the pictures of the properties. This way, people feel the attraction of visiting these places.

Airbnb earns from both ways even after making a direct payment to these photographers. The pictures that are higher in quality draw people to the places.

3. Travelers or Guests

They are the ones who book the places from the list for accommodation from the local hosts. They can strain out a space based on the price, the location, the appliances, and many more.

Travelers can also book a house directly from the portal by making an online payment.

4. People who provide experiences

These are specially equipped people who have some extraordinary quality. They rent the places to provide sessions of those qualities, conduct events, organize tours, and many more.

These personals receive ratings from the guests who visit these Airbnb. They have to pay a commission of twenty percent for the booking of various activities and events.

Key Partners of Airbnb

Different partners that are associated with the business model canvas of Airbnb are-

• Hosts who provide travelers with property information and specifications to help travelers make the best choices
• Hosts who offer experiences by providing information and arranging tickets for special events such as kayak tours, wine tasting, cooking classes, hiking, etc.
• Corporate Travel Partners & Managers
• Investors/ venture capitalists
• Insurance companies
• Professional Photographer Services

Value Proposition of Airbnb Business Model

The value propositions of Airbnb are different for the hosts and travelers or guests. Let us have a look upon both here-

For Hosts

• Easy and secure for publishing property listing, so hosts will be able to list any property if it complies with the Airbnb policy
• Can make additional money by renting out their space to travelers
• Offers absolute control of availability of dates, pricing, and property rules
• Offers $1 M home insurance for covering damage or accidents
• Ensures professional services
• Convenient communication
• Self-check-In
• 24 * 7 customer support

For Guests

• Affordable and value for money
• Secure payment
• Easy to browse and easy to book
• Spacious property
• Amenities as per preferences like kitchen, washer, pool, etc.
• A unique experience for guests
• Background check on hosts & guests
• Self-check-In option

How Airbnb Business Model Works

Airbnb revolves around the framework of three simple steps:

1) Hosts who are ready to rent out their available space

2) Travelers who are ready to book the listed available space that suits their inclinations

3) Freelance photographers go to the major cities to click HR photographs of the property

So, all this begins when people list all their favorite spaces which are available on the amazing platform and that too for some extra money. This will be the rent that they get from the properties that they have on the listings.

With the Airbnb platform, the travelers will also be able to easily connect with all the bookings of homestays as well as the local hosts too. So, they don’t have to spend much money on the process, and they have a pretty free lifestyle for sure. So, there is no doubt about the fact that this business model is going to be one of the best things for the company.

There are some personal profiles that are provided as well as some of the best and the most amazing places to stay. They don’t have to spend the money on expensive hotels as well. There is a free lifestyle that people can have in the best way.

Not just that, but people can easily live like the locals and have all the amazing benefits as well.

That is not it because the hosts have some sort of benefits from the amazing website as well. They will be able to rent out the spaces. This is something that can be a great help when it comes to maintaining a reputation as well as the trust of the company for sure.

Not just the hosts and the travelers, but Airbnb is also able to help all the amazing freelance photographers that have a profile there. You will be able to share your pictures with the world.

Also, the freelancers can easily go to a proper property and will have HD photographs of the amazing properties as well. These are the amazing HD photographs that will be able to improve to click rate of the photographs in the best way.

Airbnb Customer Relationships

The keynote to establish a good relationship with the customers is developing trust for any matter for that purpose. If an issue comes into existence, it is crucial to deal with and heal the same as soon as possible. It is because a customer may cause damage to the reputation gained over the years.

Here are two significant factors for maintaining a healthy relationship with the customers.

The first one is applicable for both hosts and guests

It is crucial to handle the issues of a customer within a time limit. It is also necessary to deal with risks and negative behaviors calmly. The personal data and the privacy shall provide clarity about the hosts and the travelers.

The second one is significantly applicable to the hosts.

A healthy relationship comes into existence depending on the facilities that Airbnb provides to the hosts. It also depends on the earning of the hosts from renting their property. Also, it depends on the point of protecting them from gusts that may cause damage.

The ability of Airbnb to generate income is one of the crucial factors. Checking the quality of guests comes next. The support they provide during the process of onboarding stands third. It is vital to give them some supporting hand in the totality. Airbnb shall also play a role in making successful hosts.

Also, they must reward the best hosts apart from managing complicated issues.

Challenges Faced By Airbnb

Airbnb has a rapid growth in the present market. There are various challenges Airbnb faces despite its popularity. Some cities and countries stand straight against them.

It is probably because of their services. The purpose behind Airbnb is to provide rent to people for a short period. It is the only possible reason behind the inculcation of various legal issues that came as the outcome.

It becomes crucial to check and recheck the places that people take on rent at Airbnb. Some people unknowingly gave their house for rent. They had to face the consequences.

It was an illegal act according to the law of that city.

The IPO and Airbnb create pressure on them to make an expansion geographically. Airbnb, in that case, needs to match the legal grounds of the country they want to expand.

Cost Structure of Airbnb

Different factors involved in finalizing the cost-structure of Airbnb are-

• Infrastructure Cost
• Platform development and maintenance cost
• Employee salaries
• Sales and marketing cost
• Customer Acquisition Cost
• Regulatory cost
• Cost of capital
• Development and maintenance
• Insurance cost
• Credit card processing fees
• Legal and administrative cost

How Airbnb Makes Money?

Airbnb lets the property owners meet the people with the help of the free listings that are provided on the website in the best way.

Travelers will also be able to view all the amazing properties in the best way. All they have to do is find out the location, and they will be able to find the places according to the budget as well as the requirements that they have for sure.

Also, the momentary and the booking transactions are always carried out with the help of the platform of Airbnb, and people have the best results as well. Apart from that, a share of the revenue is provided to the company with the help of the different sources that it has.

1. Commissions from the Hosts

There are some of the commissions that are provided to the company with the help of the owners and the hosts. The company collects the 10% commission whenever there is a booking done from the people with the help of the hosts that they have for sure.

2. Commissions from the Guests

There is no doubt about the fact that the travelers also have to pay a proper transaction fee to the people to make sure that their bookings are confirmed without any hassle for sure.

This is the payment that they have to pay to make sure that the payment is processed in the best way. This would be around 3% of the booking amount

However, by opting for the services of Airbnb, there are some other ways in which people will be able to save a lot of money as well. There are some tax laws that are present in the areas as well.

The users have to pay the VAT according to the tax laws of the area. So, this is one of the best ways to make sure that people can save some money on the Airbnb platform.

With the Airbnb Company, the people will be able to feel that they belong somewhere and that is one of the new visions why the company has managed to provide new and amazing products and services for the people out there.

There is also a magazine for the company, which is also a pretty important contributing factor, and that is something that helps the people in understanding all about the business models as well.

So, there is simply not a single speck of doubt that you will be able to have all the benefits that are essential with the company of Airbnb.

Airbnb vs Uber vs Oyo Rooms

Be it Airbnb, Oyo Rooms, or Uber, all of these all work on the aggregator-based model.

Uber is involved in simplifying traveling from one place to another as it functions as the middleman between the drivers and the riders by ensuring a standardized level of service.

Oyo Rooms model is based on quality control or standardization in which the company itself ensures a certain level of uniformity in its services. It lets an individual book the room with the Oyo Rooms and not the individual hotel. Hence, Oyo also ensures a certain level of service.

While on the other hand, Airbnb lets guests book a room via a website with the host providing it. Airbnb does not have any control over the quality of homestay. Another key difference is the earning of Airbnb that mainly occurs through commissions only.

What is Airbnb Plus?

Airbnb plus homes are of exquisite quality, comfortable, and have a stylish look that falls under the category of Airbnb Plus. It is a program by Airbnb that provides travelers with luxury. The host who wants to come under the roof of Plus needs to pass the long list of criteria that consists of three hundred points.

As the Airbnb model evolves, it is looking for houses that are identifiable as high-quality homes with intricate designs. Airbnb is following the footsteps of the Uber model. There you will find that Uber has come up with various services strategically for its customers who belong to different strata of the society. Likewise, Airbnb is coming up with the idea of providing rent to people who have variant choices and different budget options.

What is Airbnb Luxe?

The program provides travelers with luxury homes that look pristine. It consists of luxurious appliances, exceptional services, and devoted designers for trips.

As Airbnb is evolving and expanding, they are including expensive stays and the most affluent housings in their list. Airbnb Luxe is the new segment. The design is inclusive of customers who can readily spend more than a thousand dollars for a night. It has strategically designed magnificent private homes, scenic beauty, and delicate appliances.

The addition of the new segment is inclusive of more than two thousand homes. The selection of these homes belongs from different parts of the world with a strategic approach. All of these accommodations have to go through three hundred different strict tests. They had met all the quality of services and designs.

How Airbnb gets Hosts and Travelers?

 

Now you must be thinking about how Airbnb reaches out to its customers. Then the answer is quite simple, just through some of the most common means of today’s times and they are-

• Word of Mouth
• Promotion Offers
• Social Media
• Digital Marketing
• Online Advertising and Social Media Ads
• Affiliate Marketing
• Refer and Earn Offers, etc.

Wrapping it up!

So, these are some of the things that you need to know about Airbnb.

This is a company that has one of the best business models for sure, and we are here to assure you that you will have a lot of information if you follow this particular business model in the best way.

We hope that this article is very informative for you when it comes to understanding all that you need to about the Airbnb business model.