How Does Airbnb Make Money? – Airbnb Business Model Explained

Paresh Sagar
blog updated dateUpdated Date: May 21, 2024

Airbnb Business Model Explained

Airbnb has caught the eyes of people with its howling success. With a unique idea to let travelers stay at other’s homes, Airbnb made a billion-dollar company today. It has revolutionized the way people travel. As per the latest reports, more than 260 million people across the globe have till now stayed in Airbnb properties while traveling or any other purpose. Today, Airbnb operates in approximately 81,000 cities across 220 countries.

The reason for such a huge success is the uniqueness of the Airbnb business model(which we will discuss later in this article). With this business plan, Airbnb is ballooning like anything.

So, in this article, we are going to discuss the whole concept of Airbnb- how it started, how it works, and how it generates revenue.

Airbnb Initial Phase – The History

So, how did Airbnb come to existence? That’s the most curious question many of us have.

There is an interesting story on how Airbnb began. The founders of Airbnb- Brian Chesky and Joe Gebbia were having trouble while paying the rent and that’s when they came up with the thought to earn some cash. In the research period, they once observed that almost all hotel rooms were booked due to a big conference which drew a lot of visitors to the city.

And that is the point where these youngsters saw an opportunity. They bought a few airbeds and offered visitors a space with basic necessities and breakfast. Further, they named it “AirBed & Breakfast” and the idea was born! Later, Nathan Blecharczyk, technical architect joined the team and together these three made wonders.

Airbnb Founders, Facts & Funding

Founders: Brian Chesky, Joe Gebbia, and Nathan Blecharczyk.

Funding received: $5.4 billion

Airbnb valuation: $31 billion

Headquarters: San Francisco, United States, California

Countries Served: 220+

Airbnb Booking(till 2020): 260 million

How Does Airbnb Work?- The Concept

Airbnb implements the sharing economy concept. It is an online marketplace wherein travelers associate with hosts. The concept of Airbnb is straightforward, where hosts list the properties with every sort of detail on the Airbnb platform. Voyagers can go through properties and select the one which suits best to them. So basically, it is two sided marketplace.

On one side Airbnb lets hosts list their spare property and earn extra bucks. While on the other side, travelers can get the best experience by staying in the local neighborhood to have an authentic experience.

Airbnb’s business strategy even covers the three other services except above. which are;

Airbnb Plus: Here comes a listing of the stays which come with standard facilities and high rates.

Airbnb Experience: Hosts offer their knowledge to the backpackers through various activities like cooking, exploring locals, unique skills and much more. This lets travelers have lasting memories with unique experiences.

Airbnb Work Collection: It is a new work collection designation by Airbnb. Here, business travelers can apply a filter for work trips and get an appropriate stay.

Read Also: How Much Does it Cost to Make Clone Apps for Rentals?

Airbnb Business Canvas Model

The Airbnb concept is exactly clarified by its business canvas model. The key exercises, key assets, incentives, key accomplices, client relations, channels, etc. are present in the business model canvas for Airbnb. Alongside, Airbnb cost structures and revenue have been mentioned.

 
Airbnb Business Canvas Model

Airbnb Value Proposition

Cost is the thing that you pay, Value is the thing that you get“- Warren Buffet

This says everything. Having an effective business among the competitors is the place where you make incentive clients. A few points in that shows Airbnb’s core values are:

  • In a foreign place, travelers get a stay in a homely environment.
  • The stays are cheaper and travelers can experience the local life of the place.
  • Travelers can browse through a vast variety of stays made available by Airbnb.
  • Hosts can earn extra bucks through Airbnb.
  • Airbnb even provides the insurance to stays listed on their platform.
  • Hosts even have the right to accept or reject the traveler’s request.
Are you looking to Develop Your Airbnb-Like App.

Airbnb Business Model

Airbnb Business Model Work

Airbnb adopts an aggregator business model just like Uber and many other organizations. Airbnb business strategy is not like conventional lodging networks that put millions in building their properties.

Airbnb concept is all about an online platform wherein the travelers and hosts connect to each other. The key assets of Airbnb are its individuals who empower the Airbnb process to be quick with minimal costs. Hosts and travelers are the ones around whom Airbnb business model rolls.

Hosts can list their property for stay and travelers can book them as per their requirements. Hosts will get the rent in exchange. The travelers can have a whole new level of experience by staying with locals. Other than voyagers and hosts, the Airbnb business model even includes a system of taking high definition pictures to the property to enhance the Airbnb reactions.

Airbnb Market Segmentation – Business Plan for Airbnb

So far, we came across how Airbnb works and its history. Now let us go through the three segments that define the entire Airbnb business model.

Hosts

They are the ones who own a property and have some extra space that they want to rent out. The hosts want to earn a few extra bucks by renting the extra space available. So, they make a listing of the properties they want to rent with a proper description and facilities they are providing.

They have the right to set their own rent, check-in and check-out timings. With that hosts can even accept or reject the request by having a look at the travelers’ profile.

Travelers

They book the spare space from the local hosts through a mobile app. Travelers can search for a suitable place with the help of filters like price range, no of members, location, facilities, etc.

Travelers can have the most hassle-free booking and can save more bucks than that with a hotel booking. They can book a space through the app portal and pay online.

Photographers (Freelancer)

Airbnb comes with an enormous network of photographers who click pictures of the property. They are available in almost all cities of the globe. They are directly paid by Airbnb.

The main aim of having such photographers take pictures is to give travelers the perfect idea of the space and how it looks. As the Airbnb business model is all about providing physical space, with these high-definition pictures they expect more bookings and responses.

SEE ALSO: Lyft Business Model

How Does Airbnb Make Money? – Airbnb Revenue Model

So after having every point clear on the Airbnb business model, now it is time to have a look at how Airbnb makes money.

The Airbnb revenue model is straight and simple. The primary revenue of Airbnb comes from the fees charged to the hosts and travelers. It shows that Airbnb’s revenue models are all about staying and listing.

Airbnb Cost Structure

The cost structure will let you have a deep understanding of the Airbnb strategy of earning.

  • Airbnb will charge a flat 10% to hosts on every booking made. They are even charged with a 3% fee for preparing the installment process of the traveler’s payment. The fee may get higher for the Airbnb Plus listing.
  • Travelers or guests are charged with 6-12% of the fee based on the size of reservations and type of listing. This amount is non-refundable to travelers. A more expensive reservation is directly proportional to the lower fees. A group or family booking can save money for other expenses during the trip.

So, this is the main revenue stream through which Airbnb makes money.

A Complete Timeline Path of Airbnb

If you’re planning for a startup like Airbnb then you must have a look at its timeline. How they managed to get this huge success. This path will surely motivate you for your business.
Complete Timeline Path of Airbnb

Know more: The Most Popular Rental Business Ideas to Start

Planning to Start Vacation Rental like Airbnb?

The Airbnb business model is becoming stronger as more and more people are opting to stay at Airbnb. The sharing economy has always witnessed a greater expansion whether it’s Airbnb or Uber. These companies took advantage of technological innovations to make their business successful with online platforms.

If you’re planning for such a startup, then yes, we are here to provide you with the best in class solutions. We have built an Airbnb clone that you can easily customize according to your needs.

Still, having doubts about the Airbnb business model? Lets Connect.

Paresh Sagar
Author
Paresh Sagar, the innovative CEO of aPurple, is renowned for his passion for experimenting with new business models, technological aspects, and software solutions. His knowledge and insights are a must-read for entrepreneurs, tech experts, and avid readers alike, offering valuable perspectives on the ever-evolving landscape of business and technology. With a keen eye for innovation and a dedication to sharing his expertise on business digitalization, Paresh continues to inspire and inform professionals across the globe.

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