Airbnb Business Model: How Airbnb Makes Money?
Are you a travel business owner or startup founder? Or do you have a spare room? If so, you might have heard about Airbnb and by now you would have thought of how to rent a room at an affordable price. Read this blog completely, you will get to know everything related to that the Airbnb business model.
Have you ever wondered about how the business of Airbnb works? Why is Airbnb so successful? How much revenue does Airbnb make? Are all these questions that are in your mind? You have arrived at the right page where you will get to know about the Airbnb revenue model and their working procedure.
In 2008, Airbnb started by Brain Chesky and Joe Gebbia took the hospitality industry by storm. This has revolutionized the way people travel by focussing on building a community and not just a mere distribution platform.
What is Airbnb?
In simple terms, Airbnb is a marketplace that allows travelers to stay at the property that has been listed on the site by the local hosts. The logic behind the working of revenue model of Airbnb is very simple to understand.
A person who has a spare room can list his property on the website and the person who is traveling to different locations can book through this for staying in a particular location.
The travelers will get to have a unique experience that is offered by the host from Airbnb.
How Did AirBnB Become Successful?
This tends to be a community built on sharing and was started by two friends. They actually faced a lot of difficulty in paying the massive rent and had a spare living kind of a room.
When they initially started they got a mattress and started marketing it offline as a space for rent. Later they even started providing breakfast with it and then came with more and more improvisations.
They bought nearly 800 cereal boxes and they sold them for a high price during the presidential campaign. From that, they earned so much money and reinvested it back into the business.
Now Airbnb is operating in more than 190 countries across the globe. It has a presence in 34000 plus cities. This has now turned into a huge business that has 150 million-plus users and 1.9 million-plus user listings with which the users can book the space for them at any given time.
What is Airbnb Business Model?
The business model of Airbnb is based on the aggregator business model. This aggregator business model is a network model.
Here the company will collect the data about a specific good or the service providers. They will make the providers their partners and sell their services under its brand.
Services Without Owning Inventory
The aggregator is a brand and it has to provide services that have uniform quality and price. This can be done by signing a contract with the partners.
This can be easily understood as an asset-light model in which you can earn a commission for the services you provide without owning any inventory.
Conventional VS Present Business Model
In the conventional Airbnb business model, you will have to purchase a hotel to get started with the bookings. It has turned the game around and connected the demand and supply and this has become one of the reasons for its rapid growth.
The people who have vacant space at their homes and are willing to earn money can list their rooms on the website. From this, they can earn some extra money and the key differentiator is that they actually sell the experience and not just space.
Most travelers want their staying place to give a feel as that of their home once they go out to travel and explore different things in different countries.
In such circumstances, the travelers will get a local-like feel and will also feel light on the pocket as compared to hotels.
Airbnb Business Model Builds Trust With Review and Rating System
Airbnb also has personal profiles and rating or reviewing systems that will surely help the travelers to make a decision about the hosts and what is on offer.
At the same time, the hosts too can decide and have a choice about whom they rent out their space. Moreover, this helps to build trust and reputation in the community.
Other than the travelers and the hosts, the business model of Airbnb also includes a huge network of freelance photographers. The photographers are from all the major cities of the world.
They will visit the property and will get a high-definition photograph of the property. The high-definition photographs improve the click rate and will help to get more responses. Here Airbnb pays these photographers directly.
How Does Airbnb Work?
Airbnb becomes a platform that connects travellers to the localhost.
1. Host will list their properties on the Airbnb website along with the necessary facilities they will provide. Some of them are like wifi, meals, number of bedrooms, etc.
2. Photographers are sent by Airbnb. Photographers upload it to the website by clicking the high-definition photographs of the location.
3. The travelers will then browse through and will choose the property that they like to stay at. They will even choose the dates, days of stay, and a number of guests before making the payments.
4. Host will approve the stay then the payment is made. Sometimes this will also include some extra charges.
5. Once the travelers want to leave or the stay is over the host will be paid by Airbnb after that they deducting the commission fee.
Who is Airbnb Target Audience? | Airbnb Target Market Segmentation
Hosts are the people who will list their spare places on the website. If the places are booked he will give hosts rent in exchange.
The hosts will have the liberty to accept or reject the travelers. They will read the reviews from the other hosts and decide whether to have them or not.
They can even list their property with the facilities they will be provided along with the rent and also the check-in and check-out time.
Travelers are the one who books the living space from the hosts on rent.
The travelers get the option to filter the search as per their needs. They can set the rent and even the basic amenities that they will need.
They can also pay the amount online and this can be one of the most hassle-free bookings.
The quality photographers who get the most bookings are paid by Airbnb.
The Airbnb business model has physical living spaces that the travelers can’t reach themselves. Airbnb hires freelance photographers to take high-definition photos of the property.
How Does Airbnb Make Money? | Airbnb Revenue Models
As you know Airbnb runs on the aggregator-based model, its main income comes from the commission on every booking made. Here the property owner can list their properties for free.
On the Airbnb platform, the company carries out booking and monetary transactions. The company mainly earns from the transactions and the ways are as below.
From the hosts/owner of the property
For every booking done through the platform, Airbnb takes off fat 10% commission from the hosts. Generally, the payment processing fees are 2% and here it is 3. So in addition, 1% is also levied that the host pays.
Airbnb charges an amount of up to 20% of the booking total. This is set as a service fee by Airbnb for the travelers for every confirmed booking and this fee is non-refundable.
This is a magazine product that the company has added and this makes the travelers feel that they belong to the place they visit. The main motive of this is to help the traveler to discover the place through the local’s eye.
This business model even includes business-ready homes that can fulfill certain requirements. For home type, amenities, check-in, reviews, responsiveness, and host commitment are also included.
This feature is designed mainly for the travel managers of the companies with which they can provide better transparency and more accuracy for their company.
Airbnb even provides services for which it charges a flat of 20% commission from the person who provides it.
In conclusion of The Future of Airbnb
Today Airbnb is a huge company that has known well in most countries. They have a unique business model and have proved to be very strong.
People nowadays prefer Airbnb over hotels for an affordable and comfortable stay in new locations. The revenue of Airbnb continues to grow as there is an increase every day.
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FAQs of AirBnB Business Model
The business model of Airbnb is based on the aggregator business model. This aggregator business model is a network model. Here the company will collect the data about a specific good or the service providers. They will make the providers their partners and sell their services under its brand.
The best Airbnb marketing strategies for hosts and entrepreneurs:
- Create your brand
- Increase social media presence
- Connect with influencers
- Update your listing according to the season
- Price right and strategically your property
- Build partnerships
You can start an Airbnb business in the following 9 steps:
- Decide on a budget
- Choose the best real estate market for starting an Airbnb business
- Study the local Airbnb laws and regulations
- Search for appropriate investment properties for sale
- Analyze the return on investment on Airbnb rentals
- Buy an investment property
- Fix up the Airbnb property
- Choose the best short term rental platform
- Create a listing
The final cost to build an app like Airbnb can reach approximately $52000 for a mobile app. Let’s look in detail all about app features design, platform & Location..
Estimating the exact cost to build an app like Airbnb Business is quite unfair to say because the cost may vary depending on the features of your app. The essential ones are design, admin panel, platforms, and location. You can also use an app cost calculator service provided by us.
The cost to start an Airbnb business is unpredictable. Cost may vary depending on the expenses such as software expenses, office space expenses, equipment and supply expenses, training and education expenses, Above all, advertising and marketing costs, website costs and many other expenses as per your requirements.