How Airbnb Works: On Demand Vacation Rental App Business Model

How Airbnb Works: On Demand Vacation Rental App Business Model Explained

3447 Views | 5 min | January 2, 2019
Airbnb business model explained

Airbnb is disrupting the world of travel accommodations. It enables you to find places to stay in a large number of cities around the world. You can lease lofts or even whole houses from individuals everywhere around the globe using Airbnb.

The great success of Airbnb has figured out how to get the attention of individuals. Sometime before Airbnb influenced people to stay in other’s homes and turned into a billion-dollar company, while at first, it was only an idea to earn additional money through rent. Yes! It has reformed the manner in which people travel today. Airbnb business model is novel, beneficial and successful to such an extent that people want to know the secret sauce behind it.

Today, we are going to have an in-depth look at the Airbnb business model to know how it works and how it brings money to the table. So, here we go:

Airbnb Stats and Facts: Funding and Major Milestones

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

  • Funding received: $4.4B (Till March 2017)

  • Present in 34,000+ cities across 190+ countries.

  • Company valuation: $31 Billion (as of March 2017)

  • Number of AirBnb listing: 4 Million (as of 6/22/18)

  • Headquarters: San Francisco, California, USA.

How Airbnb Works?

“Cost is the thing that you pay, Value is the thing that you get”- Warren Buffet, this statement says it all how Airbnb works. They focus on just two things; the value they provide and the price they get of the value provided.

Airbnb Business Model enables people to use their extra living space and earn extra money to their pocket through rent. On the other hand, it also helps the travelers to book homestays from the house owners of any location that they are searching for. Airbnb provides on-demand services in the travel industry defeating the ordinary options.

Here is a clear picture of how exactly it works:

  • Airbnb has two ranges of customer segments – travelers and property owners.

  • A room, a mansion, a villa, an igloo – Airbnb offers everything to stay for travelers across 191 countries around the world at affordable prices.

  • Hosts (people who have places to rent) list their property details on Airbnb along with different factors like pricing, facilities provided, check-in and out options and so on.

  • Travelers search for a property in the city where they wish to stay and browse available alternatives as per their requirements.

  • Searches are streamlined to customize places as per the user’s budget, room type or luxuries needed and preferred the time of stay.

  • Airbnb also sends an expert photographer to the property area so as to take brilliant photos and to ensure the place is sound and convenient.

  • Booking is made via the Airbnb website or mobile app where travelers make the payments set by hosts and some extra money as transaction charges.

  • The host accepts the booking. Travelers spend time there and Airbnb pays the amount to the host and takes their commission.

  • The travelers and hosts can rate one another and can give reviews based on their experiences.

  • And following the same way, Airbnb provides mutual benefits to guests as well as hosts.

How Airbnb Makes Money?

After checking on how Airbnb works, let’s get into how it makes money.

Mainly, travelers act as the fundamental source here. For them, Airbnb charges 6-12% of the total booking amount. More the size of booking, lesser the expense, and higher is the savings for a traveler. The commission charge acquired is for keeping the room check-in prepared.

Without a doubt, the first reason behind Airbnb success is the less expensive methods they offer for hosts. Just a mere 3% booking charge is collected from hosts when the customer checks out.

Majorly, Airbnb generates revenue utilizing the above-mentioned strategies. Also, they utilize and follow other techniques like account arbitrage and corporate travel.

The Cost Structure of Airbnb

Airbnb invests money into improving and maintaining website platform where the two customer segments interact. The cost structure is additionally designed to incur investment plan for its sales and marketing purposes as well.

What are Airbnb’s Hands on Marketing Their Service?

From standard to the best in class advertising strategies, social media and what not in the rundown, the Airbnb business plan sourced a wide range of advertising means to target its clients. Here is all that they are doing:

Integration with Craigslist

Airbnb used Craigslist (a website for classified advertisements) to the maximum, to sustain and increase their existing client base. Airbnb’s unauthorized integration with Craigslist is one of the best growth hacks that the organization used.

Here is How They Used It

AirBnB made a hack to cross-post an AirBnB listing on Craigslist. After some time, any user looking Craigslist for rentals started seeing professional listings with AirBnB’s name.

AirBnB also utilized an email campaign to inform posters of vacation rentals on Craigslist how simple it was to post on AirBnB too. This trick of cross-posting their requirenments to Craigslist and attracting established Craigslist posters got AirBnB the initial buzz they required, without spending money on ads.

Referral Schemes

Airbnb utilized the referral scheme for promoting its market presence to its target audience through exclusive referral URLs. Each time a new user signs up with the referral link of the existing user, the existing user get credits that can be utilized for their future trips. The referral program is by all accounts alluring.

Build a network

Airbnb is more than just a P2P accommodation provider; it’s a network. They’ve created their network by making a trust between users. They emphasize regular communication, strong reviews and detailed profiles. The engagement is sensational.

Making a network has additionally simplified the booking procedure. Users must make their profile when they first sign up however after that it’s as basic as entering their payment details. It is additionally the credibility of the experience that makes Airbnb such an effective network. Hosts make special efforts to make their home their visitors’ home with detailed information of the best restaurants, places to hangout and hidden jewels.

The Future of Airbnb

Airbnb is presently a multi-billion dollar company and is sure to grow further. Having a presence in 190+ countries over the world, it is right now focusing to grow further. The company has continuously modified and changed its business model. Initially, they were restricted to just website however now they have expanded to apps. With a total valuation of $31 Billion till date, the special business model of Airbnb has even ended up being more grounded as people lean toward staying at an Airbnb motel as opposed to a hotel.

If you’re a conventional business hoping to expand and get an application like Airbnb, Uber, Instagram and Snapchat, etc go through the brand success stories here.

FAQs

Q 1. What is Airbnb?

Airbnb is one of the leading real estate marketplaces that allow users to rent their properties and spare rooms to guests. Airbnb works on the basic model of commission on every booking from both hosts and guests.

Q 2. How much will is cost to develop an Airbnb Clone app?

The average cost of developing an app like Airbnb costs between $35,000 to $40,000. Although, the cost may vary as per the features you want to include in the Airbnb business model.

Q 3. How Airbnb makes money?

As per the Airbnb revenue model, it makes money through commissions that they earn from both guests and hosts. Their revenue model is well secured with the two-tier security of earnings.

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