What is Airbnb & How it Works? [Updated Guide]

How Airbnb works is a question many entrepreneurs, travelers, and developers ask when analyzing the success of the world’s leading vacation rental platform

Airbnb operates as a peer-to-peer rental platform that connects travelers with hosts offering a wide range of accommodations, from private rooms to entire homes. With over 7.7 million listings across more than 220 countries and regions, Airbnb has significantly transformed the vacation rental industry.

Founded in 2008, the company started with a simple idea: to help people earn money by renting out their extra space. Today, Airbnb has become one of the most successful vacation rental apps in the world, inspiring many entrepreneurs to build an Airbnb-like app to replicate its scalable and profitable model.

The success of Airbnb lies not just in its marketplace functionality, but in its ability to build trust, streamline communication, and provide seamless booking experiences through its web and mobile apps. This has opened doors for tech startups and property management businesses to explore similar on-demand vacation travel solutions.

As of July 2025, Airbnb’s market capitalization is approximately $82.78 billion, placing it among the top 250 most valuable companies globally. This article explains how Airbnb operates, how it generates revenue, and what makes the Airbnb business model so effective for on-demand travel. Let’s get started with your Airbnb-like app guide:

Airbnb Stats and Facts 2025: Funding and Major Milestones

• Founders: Brian Chesky, Joe Gebbia, Nathan Blecharczyk
• Headquarters: San Francisco, California, USA
• Host community: More than 5 million hosts worldwide
• Gross booking volume (GBV): $81.8 billion in 2024
• Total funding raised: $2.5 billion across several rounds, with the last major investment in early 2020
• Active listings: Over 8 million properties available across 220+ countries and territories
• Annual bookings: Around 491 million nights and experiences booked in 2024
• Company valuation: $82.78 billion as of July 2025, ranking Airbnb among the top 250 most valuable public companies globally

What is Airbnb?

Airbnb is a leading online marketplace that connects hosts offering short-term rentals with travelers looking for affordable, comfortable, and unique accommodations. On the Airbnb platform, users can book apartments, homes, private rooms, or vacation rentals anywhere in the world. At the same time, hosts can list properties on Airbnb, set their desired rental price, and reach a global audience. Airbnb ensures secure payments, seamless booking management, and verified guest reviews, making it easier for travelers to find trusted accommodations while helping hosts earn income from their properties.

 

How Airbnb Works?

Airbnb is an online marketplace that connects hosts with travelers looking for short-term rentals. Whether you’re a guest seeking a unique place to stay or a host looking to rent out your property, Airbnb makes the process simple, secure, and convenient.

1. How Airbnb Works for Guests (Travelers)

1. Search for Accommodations: Guests enter their destination, travel dates, and number of guests. Airbnb shows available listings, complete with photos, amenities, and pricing.

2. Filter & Compare: Users can filter listings by property type (apartments, homes, private rooms, vacation rentals), price range, location, and reviews.

3. Booking: Guests can either book instantly if the listing allows or send a booking request to the host for approval.

4. Secure Payment: Airbnb handles secure payments through its platform. Guests pay upfront, and Airbnb releases the money to hosts 24 hours after check-in.

5. Stay & Enjoy: Guests check in at the agreed time and enjoy their stay.

6. Review & Feedback: After the stay, guests leave reviews, which help future travelers make informed decisions.

2. How Airbnb Works for Hosts (Property Owners)

1. List a Property: Hosts create a listing by adding photos, detailed descriptions, pricing, and house rules.

2. Set Availability & Pricing: Hosts manage their calendar availability and can adjust rental prices based on demand.

3. Booking Management: Hosts can accept booking requests or allow instant booking.

4. Welcome Guests: Hosts provide the promised amenities and ensure a comfortable stay.

5. Receive Payment: Airbnb releases payment 24 hours after guest check-in. Hosts also gain reviews that improve credibility and attract more bookings.

3. Airbnb’s Role

• Payment Security: Airbnb ensures safe and reliable transactions.

• Trust & Safety: Verified profiles, ratings, and reviews build trust between hosts and guests.

• Booking Support: Airbnb provides 24/7 customer support to resolve issues.

• Global Reach: The platform connects hosts with millions of travelers worldwide.

Airbnb Business Model Explained

Here is a clear picture of how the Airbnb business model works:

1. Value Propositions

• Airbnb provides distinct value for both hosts and guests.

For Hosts:

• Monetize underutilized space by renting it out.
• Airbnb offers insurance to protect property owners.
• Professional photography is provided for the listed properties, increasing booking chances.

For Guests:

• Book homes or unique stays as an alternative to hotels.
• Competitive pricing compared to hotels.
• Access to local experiences and personalized stays.

2. Customer Segments

Hosts:

• Property owners looking to earn extra income.
• Individuals interested in meeting new people and sharing their space.

Guests:

• Frequent travelers seeking affordable and unique accommodations.
• People looking for authentic local experiences and social connections.

3. Channels

Airbnb reaches its customers through:

• Airbnb Website: Desktop and responsive web platforms.
• Airbnb Mobile App: iOS and Android applications for easy booking and management.

4. Customer Relationships

• Engagement through social media channels.
• Prompt customer service and dispute resolution.
• Special promotions and offers to attract new users.
• Optional home insurance for peace of mind.

5. Key Activities

• Engaging with users (hosts and guests) to maintain platform activity.
• Improving value proposition and ensuring smooth payment processing.
• Enhancing platform functionality and user experience.
• Building a strong network of hosts and guests.

6. Key Resources

• Strong brand recognition and trust in the market.
• Local hosts providing unique accommodations.
• Skilled employees managing operations, marketing, and technology.
• Robust technology infrastructure including website and app platforms.

7. Key Partners

• Hosts and guests as core contributors to the platform.
• Photographers for professional property images.
• Investors supporting financial growth.
• Payment processors enabling secure transactions.

8. Cost Structure

• Technology setup for web and app development.
• Employee salaries for operations, support, and marketing teams.
• Freelance photographer payments for listing enhancements.

9. Revenue Streams

• Commission from hosts on every booking (typically 3-5%).
• Commission from guests on every booking (around 10-15%).
• Optional fees for additional services like Airbnb Experiences.

 

How Airbnb Works for Guests?

Here’s a clear, step-by-step explanation of how Airbnb works for guests:

1. Search for a Place

• Guests visit the Airbnb website or app and enter:

  • Destination

  • Travel dates

  • Number of guests

• They can filter results by:

  • Price range

  • Property type (entire home, private room, etc.)

  • Amenities (Wi-Fi, kitchen, parking, etc.)

  • Guest ratings

2. Browse Listings & Reviews

• Each property listing shows:

  • Photos of the space

  • Detailed description

  • Nightly price & cleaning fees

  • Cancellation policy

  • Host’s rating and guest reviews

• Guests can compare multiple listings to choose the best option.

3. Check Availability & Pricing

• Airbnb shows a calendar with available dates.

• Some listings have dynamic pricing, so rates may vary depending on demand, season, or special events.

4. Book the Stay

• Guests can:

  • Instant book some listings (no host approval needed)

  • Request to book others (host approves within 24 hours)

• Guests pay through Airbnb’s secure payment system using:

  • Credit/debit cards

  • PayPal or other regional payment methods

5. Receive Confirmation

• After payment, Airbnb sends a confirmation email with:

  • Check-in instructions

  • Host contact info

  • Property details

6. Check-In & Stay

• Guests follow the host’s check-in instructions, which may include:

  • Key pickup

  • Smart lock code

  • Meeting the host in person

• Guests stay at the property for the booked duration.

7. Leave a Review

• After checkout, guests can leave a review about:

  • Cleanliness

  • Accuracy of listing

  • Host communication

  • Overall experience

• Reviews help other guests make informed choices and improve host accountability.

8. Optional: Book Experiences

• Guests can also book Airbnb Experiences:

  • Tours, workshops, or local activities hosted by locals

  • Payments and bookings are managed via Airbnb

In short, Airbnb for guests is about searching, booking, staying, and reviewing, all through a secure platform that makes travel easier and more personalized.

 

How Airbnb Makes Money?

Airbnb makes money primarily through service fees charged to both hosts and guests, along with other secondary revenue streams. Here’s a detailed breakdown:

1. Guest Service Fees

• Airbnb charges guests a service fee when they book a property.

• This fee typically ranges from 5% to 15% of the booking subtotal, depending on factors like the length of stay and the total amount.

• It covers the cost of running the platform, providing customer support, and securing payments.

2. Host Service Fees

• Hosts are charged a service fee for using Airbnb to list and manage their properties.

• Most hosts pay a 3% fee on the booking subtotal.

• For Airbnb Plus or hosts using strict cancellation policies, fees can be higher.

• This fee is deducted automatically from the host’s payout.

3. Airbnb Experiences

• Airbnb also offers “Experiences”, which are local activities like guided tours, cooking classes, or adventures.

• The platform takes a 20% commission from hosts offering these experiences.

• Guests pay the full price of the experience, and Airbnb retains a portion.

4. Other Revenue Streams

• Advertising & Partnerships: Airbnb collaborates with companies for cross-promotions or featured listings.

• Airbnb for Work: Offers corporate travel solutions and charges a fee for bookings.

• Service Add-ons: Sometimes charges for cleaning, extra services, or experiences beyond standard bookings.

5. Key Points

• Airbnb doesn’t own most of the properties listed, so it avoids traditional real estate costs.

• The business model is platform-based, earning through transaction fees rather than property ownership.

• Revenue grows as more hosts and guests join, making the model scalable globally.

Read More: Build an App-Like Airbnb: A Comprehensive Guide!

How Airbnb Hosts Make Money?

Airbnb hosts make money by renting out their properties or spaces to travelers through the Airbnb platform. Here’s a detailed breakdown of how it works and the ways they earn:

1. Listing Property for Rent

• Hosts list their entire home, a private room, shared room, or unique property (like a treehouse or tiny house) on Airbnb.

• They set a nightly price for the stay, which can vary by season, demand, or length of stay.

2. Earning from Bookings

• Hosts receive the booking amount minus Airbnb’s host service fee (usually around 3% per booking).

• Example:

  • Nightly price: $100

  • Airbnb host fee: 3% ($3)

  • Host earns: $97 per night

3. Cleaning Fees

• Hosts can charge an additional cleaning fee for preparing the space.

• This fee is usually 100% retained by the host, not Airbnb.

4. Long-Term Stays

• Hosts can offer weekly or monthly discounts, attracting longer-term guests.

• This increases occupancy and ensures steady income.

5. Extra Services

• Some hosts offer additional paid services, like:

  • Guided local tours

  • Meals or snacks

  • Transportation or equipment rentals

• These can boost total earnings.

6. Dynamic Pricing

• Many hosts use Airbnb’s smart pricing tool or third-party services to adjust rates based on demand, events, or seasonality.

• This helps maximize revenue while keeping occupancy high.

7. Tips for Hosts to Increase Earnings

• Keep a high guest rating (more bookings).

• Offer unique or well-located properties.

• Provide extra amenities (Wi-Fi, kitchen, parking).

• Use seasonal pricing to capitalize on high-demand periods.

In short, Airbnb hosts make money by renting out space, adding cleaning or service fees, and optimizing pricing to attract more bookings.

What are the Benefits of Airbnb?

For Guests (Travelers)

1. Variety of Accommodation

• Options range from entire homes, private rooms, shared rooms, and unique stays (treehouses, villas, cabins, boats).

• Guests can find places that fit any budget, style, or group size.

2. Cost-Effective

• Often cheaper than hotels, especially for longer stays or larger groups.

• Guests can save by cooking meals in furnished kitchens.

3. Local & Authentic Experience

• Staying in residential neighborhoods offers a more authentic local experience than hotels.

• Guests can interact with hosts and get insider tips.

4. Flexible Options

• Filters for amenities, location, price, and type of stay make it easier to find exactly what’s needed.

• Options for long-term rentals or last-minute bookings.

5. Personalized Experience

• Many hosts provide extra touches like local guides, snacks, or personalized recommendations.

• Airbnb Experiences allow guests to participate in local activities.

For Hosts (Property Owners)

1. Extra Income

• Hosts can earn money by renting out spare rooms, apartments, or entire homes.

• Long-term or seasonal bookings can provide steady revenue.

2. Flexible Hosting

• Hosts choose availability, pricing, and house rules.

• Can rent occasionally or full-time, depending on comfort and schedule.

3. Global Exposure

• Airbnb connects hosts with millions of travelers worldwide without the need for personal marketing.

4. Secure Payments

• Airbnb handles payments and ensures secure transactions.

• Host service fees are automatically deducted, simplifying management.

5. Reviews Build Trust

• Guest reviews help build reputation, attract more bookings, and justify higher pricing.

For Both Guests & Hosts

1. Community & Trust

• Reviews, verified profiles, and Airbnb’s support system create trust and accountability.

2. User-Friendly Platform

• Easy-to-use website and app streamline searching, booking, and managing stays.

3. 24/7 Support

• Airbnb offers customer support for booking issues, disputes, or emergencies.

In short, Airbnb offers affordable, flexible, and personalized travel experiences for guests while providing income opportunities and global exposure for hosts.

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 its 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 at 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 requirements 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 gets 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 on the best restaurants, places to hang out, and hidden jewels.

The Future of Airbnb in 2025

As of 2025, Airbnb is a multi-billion dollar company with a market capitalization of approximately $82.78 billion, placing it among the world’s top 250 most valuable companies. With operations in 220+ countries and regions and over 7.7 million active listings, the platform has significantly expanded its global reach since its early days.

Airbnb’s evolution from a website-based startup to a robust vacation rental platform with mobile-first functionality showcases the strength of its scalable business model. The company continues to adapt by introducing new services, improving user trust and safety systems, and leveraging AI-driven personalization to enhance the user experience.

As travelers increasingly choose Airbnb stays over traditional hotels, the platform continues to shape the future of travel. This shift reflects the growing demand for authentic, local, and affordable accommodations—an area where Airbnb consistently delivers value to both hosts and guests.

For entrepreneurs or traditional businesses aiming to scale in the on-demand economy, building an Airbnb-like app or launching an Airbnb clone app is a promising opportunity. Learning from Airbnb’s success can offer valuable insights into creating a thriving two-sided marketplace.