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Is Airbnb a Viable Business Model?

by Ava-Rose Calderon

Airbnb is a platform that started as a simple way to offer a place to stay with a homemade breakfast. Today, it has revolutionized the Proptech and iRenting industries, and completely changed the way that people travel. Is Airbnb’s business model a viable one?

It is certainly unique, and there’s no denying that the short-term rental and long-term stay options available on Airbnb can be very popular and profitable.

Whether you’ve recently paid the Airbnb management cost to start listing on this popular rental site or are in the process of getting an Airbnb license number to get started with a new hospitality venture, it’s clear to see that Airbnb has become one of the most popular and most well-loved hospitality brands around the world today. Keep reading to find out more about what the Upperkey has to say about Airbnb’s business model and why it works.

What is Airbnb?

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Before you apply for your Airbnb registration number, look into Airbnb property management in Paris or determine what is a long term let on Airbnb to create your listing, it’s important to find out more about what Airbnb is and how it all started.

Airbnb is a community-based, online marketplace that is designed to connect guests with local hosts. The founders had the idea when they had a problem paying rent, and built a simple website using their own property for guests to stay in on a mattress with a homemade breakfast.

From there, Airbnb has grown to become a huge company with properties in thousands of cities across around two hundred countries, with millions of listings and millions of guests. Every day, around 140,000 people stay at properties that they found and booked through Airbnb. The company overtook Hilton Hotels in 2012 for the number of nights booked and was valued at a massive $31bn in 2017.

Now a private, global company, Airbnb can be accessed either through its website or app. The platform is designed for individuals that own listed properties in over two hundred countries and regions where it operates. In 2022, Airbnb’s website reached over seven million listings in around one hundred thousand cities.

Currently, the US is home to the most Airbnb listings, followed by France and then Italy. There are around 650,000 hosts currently listing on Airbnb, with the average host’s earnings currently standing at $924 monthly.

Airbnb Vision and Airbnbmag

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The main vision of Airbnb as a business is to make guests feel like they belong in any place that they visit. As a result of this, a new product known as Airbnbmag has been added to their business model. It offers much more than just a simple guidebook and costs $15. Airbnbmag resulted from a partnership between Airbnb and Hearst, and its main aim is to help guests get to know the places that they visit through the eyes of a local, rather than having all the usual tourist experiences.

Airbnb Business Travelers

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While Airbnb is a popular choice for guests who are taking a city break or want a longer stay for fun in an area, the business model also includes offering homes that are ready for business travelers to stay in. These properties need to meet certain requirements when it comes to the type of property, amenities available, host commitment, responsiveness, reviews, and check-in type. The business travel feature is designed specifically for company business travel managers to provide more accurate reporting and better transparency for their company.

What is Airbnb’s Business Model?

Airbnb uses the ever-growing Aggregator business model, similar to Uber. Unlike traditional hotel chains, it does not have a linear business model. The main difference between the two is that traditional hotel companies need to invest a lot of money into building and maintaining their properties, while Airbnb does not need to invest any of its own money in property as its main resources are people.

Hosts can list their available room or property to rent on the platform and earn money from guests booking to stay there. The platform allows travelers to connect with local hosts and even stay in homes, rather than booking a room in expensive hotels, which is more appealing to some as not only does it help them save money but also offers a more authentic travel experience. Host profiles and reviewing systems are in place to help guests make more informed decisions when it comes to where they stay, and hosts can also choose who to rent their space out to.

Airbnb Vs. Uber Business Model

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Despite several similarities between the two Aggregator Business Model companies, there are some main differences between the two. For example, when you book an Uber, the company has made the process of hailing a taxi simpler than ever by reducing the uncertainty of when the car will arrive and what type of car you’re going to get. Uber acts as a middleman between drivers and riders, and once you book a car, you have little choice – the nearest driver to you can accept your ride and arrive.

On the other hand, the Airbnb business model is based on discoverability and does not offer a standardized level of service like Uber. As an Airbnb guest, you can choose the listing you want to book after going through reviews, photos, and listing details, which are more elaborate and detailed compared to companies using a business model like Uber.

How Airbnb Makes Money

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Property owners are provided with free listings by Airbnb, which can then be browsed by guests who are looking to stay in that location. Guests can browse listings based on a number of requirements including their budget and the amenities that they need. The booking process and any payments are made via the Airbnb platform. The main ways that Airbnb makes a profit include:

  • Host/Owner Commission: For each booking that is completed through the platform, Airbnb charges a flat rate of ten percent to the host or property owner. Along with this, hosts pay a three percent fee to process guest payments.
  • Traveler and Guest Transaction Fees: Guests and travelers will also pay 6-12 percent of the booking amount as a non-refundable booking fee to Airbnb. Value-added tax (VAT) may also be added depending on the tax laws in the area, which vary from country to country. Guests who make their booking by paying in a different currency to the host’s native country will also pay exchange rates that are set by Airbnb.

The Main Challenges of Airbnb’s Business Model

Despite being a successful and viable business model that has proven itself to be very popular around the world with people travelling for both leisure and business, there are some challenges to be aware of within the Airbnb Aggregator business model. Some of the main challenges include:

  • Trust: Despite providing insurance, trust is still one of the biggest challenges, particularly as the community continues to grow. To overcome this, Airbnb offers clear reviewing systems and has strict requirements in place for hosts to meet.
  • Competition: Local competition remains one of the biggest threats to Airbnb. This is especially true since local competitors have a solid understanding of the local culture, which gives them an advantage. Along with this, competitors who can respond to Airbnb’s expansion quickly also have a first-mover advantage.
  • Regulations: As Airbnb grows and becomes more popular around the world, new regulations have proven challenging; many countries and cities have begun to introduce new regulations against the renting of properties to stop the process from being misused to avoid paying taxes.

Airbnb Future

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Today, Airbnb has become a huge company with a major presence in most countries around the world. It has a unique business model that has proven itself to be very popular and viable, as many guests prefer to stay in Airbnb properties rather than hotels to make sure that they are getting a more comfortable, affordable stay in a property that feels more like a home from home.

Airbnb has proven popular with guests as these properties often offer amenities that are not available in hotel rooms such as a kitchen space or separate rooms for different members of the guest party. Along with this, people often prefer being able to stay with locals and experience the local culture first-hand compared to the tourist-like experience of being in a hotel, while paying the same amount or even less.

Thanks to technological innovation and the rapidly growing iRenting industry, Airbnb has built a platform that works to connect people across the world. Today, it has become the largest chain of short-term and long-term rental properties, although Airbnb itself does not actually own any properties. As bookings continue to grow every day, Airbnb’s revenue and value continue to grow at a rapid pace, despite only charging minimal service fees and commission fees to guests and hosts.

Despite being unlike traditional hotel companies, Airbnb has proven to have a popular and viable business model connecting hosts and guests around the world.