Airbnb has created a virtual marketplace that successfully brings travelers and local hosts together. You can both list your available space and have that extra money, and you can be at the receiving end of the service. Travelers can book amazing, unique local homes to stay in while they’re in town; this, in turn, helps save money and it enables you to have this unique travel experience where you get to live the authentic local experience.
AAirbnb business model has been so successful that they have presence in over 190 countries around the world. Click To Tweet Everyone got in on it and it has helped people in more ways than one. The Airbnb model has completely innovated the hospitality model because tourists actually prefer staying with the locals than going to hotels. This is not just because they save a few bucks, but because locals have a lot more to offer than just comfort.
How does Airbnb make money?
Given that Airbnb makes the listings free for the property owners and allow travelers to choose whatever property is best suited to their budget, you might be wondering how Airbnb makes its money. Well, precisely because the booking of the properties is done on the Airbnb platform, the company earns its share of revenue from both the commission that they charge to hosts and the transaction fee they charge to guests.
The commission from property owners is a flat 10% commission for every booking that gets done through the platform. While the transaction fee is 3% of the amount of money of every confirmed booking.
Airbnb has become quite a successful enterprise for several reasons. First of all, they have managed to take the risk and the edge out of the idea of meeting a stranger online and staying at their house. What’s more interesting, they’ve done it through design. Their platform focuses on showcasing the rentals; the website is simple, elegant, clean, and every rental just looks good. There’s a certain level of confidence imprinted in the very way that the site looks. This, in turn, makes customers trust the services.
Another thing that they have managed to do is turn the traditional seller-customer relationship upside down. They have created this peer-to-peer model where you review each other. Home providers don’t only have to sell their space to you; you also have to sell yourself to them. They can choose who stays with them as much as you can choose where you want to stay. The dynamics have definitely changed and it actually works to everyone’s advantage; that’s how risks are reduced for everyone.
Admittedly, the peer-to-peer model has been used by so many other companies in the past. But never has it been better applied for hospitality businesses so successfully. If you compare it to Ebay you know that there won’t even be a discussion about which one to choose.
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It’s platform style and the sloppiness of its advertisement actually work to its advantage; it’s just really shady. And also, the 1990s called and they want their design back. Innovation is the lifeline of online businesses; Airbnb has excelled at that. Its $30 billion valuation is the only evidence you need.
Airbnb business model explained
- Hosts showcase their property details on the Airbnb website along with prices, list of amenities, basic household considerations, etc.
- Airbnb then send a professional photographer to document the property in high quality photographs.
- Travelers search for properties in the city they will be visiting and go through all of the available options to choose what suits them best.
- When it’s time to book, it’s all through the Airbnb platform. Travelers pay for the stay and transaction charges are added to the total.
- Then the host has to approve the booking and that’s that! They get their pay after Airbnb deduces their commission.
Airbnb’s model growth and its causes
Airbnb’s growth focuses on the fact that it solved the problem of safely booking a place to stay when you travel. It created a place for people to find the best places they can afford to make their traveling experience that much easier and better. Instead of staying in a hotel and confining yourself to that space, you have the option of gorgeous houses and rooms which make a difference. Not to mention the fact that you have better access to local color.
Referrals: Airbnb inspires word of mouth not only because they offer a great service, but because they reward you for it. Once you try it, there are multiple ways of sharing the platform with your friends and you get not only the satisfaction of improving someone’s travel experience, but you also get credit for every sign-up.
Solid value proposition: Value propositions are all about how to create value for a specific customer. In the case of Airbnb value propositions include: booking with locals, finding unique places, customize your search, monetize your house, reviews, among others. In a nutshell: Airbnb aims at being a trustworthy marketplace where people can list, discover and book unique housing around the world.
Customer relationships: Airbnb understands just how important it is to provide a safe, reliable platform and customer experience for both the sellers and the buyers. They have focused on having a high-performance website and it has been a very sound strategy.
Key resources: To achieve their value proposition Airbnb has made sure that they have the right resources to allow for it to happen.
The main and essential resource is their digital platform. Without it being as efficient as it is, it would’ve been impossible to bring owners and renters together in an organized, reliable manner. Their physical resources have also allowed them to grow by having a presence in more than 190 countries.
Key activities and partners: Value propositions also demand the activities that will bring them to life. Those activities for Airbnb are: constantly developing their interface and maintaining it; everything that is design, problem-solving, platform and networking, community management, etc. The partnerships that Airbnb has made have also been a great boost for their growth and success.
What is Airbnb integrating to their services?
Movement is life, evolution is life. That is why it’s so important for companies to constantly expand and further develop their vision. That’s where experiments come in! In the case of Airbnb, there are quite a few things that have helped set this company from the rest.
One of the integration has been to offer cleaning services in select cities like New York, Los Angeles, and San Francisco. There’s an additional price for it that can start at $50 for a one bedroom, one bathroom housing. This feature is still on the experimental stages and the hope is that it will spread to even more cities and hosts in the future.
They have also done quite a few things to improve both safety and comfort for its fellow travelers. As far as safety goes, they are trying to boost the safety of the listings by requiring that they have smoke and carbon monoxide detectors. Airbnb has even given the devices to the hosts in order to help them meet this new requirement.
When we talk about comfort and convenience, it appears that Airbnb is experimenting with pickup at the airport applying the Uber style. It is safe to say that the company tries to improve the experience of the guests by providing services that are highly desired.
Even so, Airbnb is not trying to completely recreate the hotel experience. After all, that’s exactly what has made them so successful; the fact that they offer more authenticity when it comes to enjoying a journey and experiencing a place.
Airbnb has also focused on the mobile user experience. They’re working on their mobile presence and as in July of 2013 the hosts have the option of listing and uploading photos with the use of their mobile phones. The app even offers a step by step guide for those who are posting for the very first time.Came October and about 50% of hosts preferred using the mobile app Click To Tweet. What’s more, it had a direct impact on availability; hosts were proven to attend to their guests and reply a lot faster than on the desktop. That means that bookings are a lot faster.
The evidence suggests that this successful company won’t be stagnating anytime soon. The way it handled the move from startup to the mainstream was exquisite.
Everything was taken into consideration to make sure that the transition wouldn’t hurt the business as it often happens. The market is a savage jungle, you never know when your business is going to blow up, but how you react to it can make it or break it.
Airbnb has shown just quite disruptive their peer-to-peer model can be. Hey, the numbers do speak for themselves!