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Elaborative Business Model Of Airbnb – Fully Explained

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Are you looking to get up to date with the business model of Airbnb? You can get started here!

Airbnb is an American company that provides services of lodging and homestays for vacation purposes. The company is a platform that connects house owners who want to rent their property with guests who want home-like villas for vacations.

In this blog, we will understand the Business Model Canvas of Airbnb and all the attributes that have contributed to the success of the company

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About Airbnb

Airbnb was initiated in 2008 and was brought into being by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk in San Francisco, California. Though it was established in 2008 the venture has been rapidly growing for two years.

Airbnb is an online marketplace offering homestyle lodging, rental vacations, and tourist accommodations. Service provided by the company can be used via app and website both of them are very user friendly.

In reality, the company doesn’t own any of the property, they earn from the commissions taken from guests. The company has been criticized for possibly driving up home rents and creating nuisances for those leaving near-leased properties. The company is a competitive threat by the hotel industry. Guests can search for lodging using filters such as lodging type, dates, location, and rent and find customized and homely accommodations

Now that we have a clear idea about the company, let us look at the business model canvas of the company. 

Business Model of Airbnb

The first step the host has to do is to make a list. The host has to include all the details in the list which will provide basic information to the customers such as well-lit photos of the rooms, how spacious the rooms are, facilities provided, and the details about the property. 

The rent is decided according to your demand based on the area, the duration for which the customer wants to stay, the days of the week and all other quality factors. Also, the platform offers you an optional Smart Pricing tool that automatically adjusts your listings based on the quality factors. Airbnb is free once a reservation is made the company charges hosts, 3-5% service fee. Airbnb offers a Home Guarantee that may provide up to $1 million in property damage protection as well as Host Protection Insurance. The guest can book their stay from the website or app after looking at all the specs.

Business Model of Airbnb – Target Customers

The marketing strategy of Airbnb focuses on both market segmentation at the same time, unlike other companies. It deals with both niche customer segmentations as well as hosts and guests.

  • The hosts: These want to monetize their unoccupied space and gain some profit from it. It provides the host an opportunity to start earning some revenue out of the rent and provide guests with the accommodations they wish for.
  • The guest: Airbnb provides accommodations for those who are searching for homes, hotels, or lodges at an affordable price.  Mostly they are budget-minded travelers belonging to tech-savvy generations. Tourists are the major target audience who wish to enjoy homely staycations at a very cheap rental price.

Business model of Airbnb – Service

  • Opportunity for travellers to book an Airbnb at a cheap price than the cost of a hotel room.
  • Allow hosts to rent out their properties during holiday seasons.
  • Airbnb host offers enjoyable properties like apartments,  bungalows, gardens, terrace yard, swimming pool, dining, houseboats, etc.
  • Hosts don’t have to pay anything to the website just a short description of the listings and the photographs to get ideas to the travellers. So, the services provided by the company are free of cost.
  • The whole rental management process is organized by the Airbnb website itself, which adds rental value to the properties of the host.
  • Guests or travellers are allowed with customizable searches- they can look for the type of properties they wish to stay in.
  • Airbnb provides guaranteed protection to the guest as well as hosts. In case of host or guest damage, Airbnb protects $1,000,000 which means the property is insured in a way and the host doesn’t, have to worry about anything.

Business model of Airbnb – Business Growth

Airbnb’s Revenue has grown at over 40% each year over the last 3 years, compared to levels of about 12% for Expedia and Booking Holdings. However, the company was adversely affected due to the pandemic as travel and tourism declined at a sharp rate, but the company is aiming to grow further post-pandemic.

The number of Nights and Experiences Booked on Airbnb’s platform has risen from 186 million in 2017 to 327 million in 2019, with Gross Bookings soaring from around $21 billion in 2017 to about $38 billion in 2019. The revenue of the company coming from all the bookings rose from $2.6(2017) to $4.8(2019), which marks the success of the company.

Although again due to the pandemic the market and the revenue are likely to fall and affect the company badly as the tourist industry is most affected because of the pandemic.

Business Model of Airbnb – Revenue Model

Airbnb has a campaign over around 200 countries with seven million listings. The site is majorly used by more than 150 million users with an average of six renters checking into an Airbnb-listed property every second.

The prime source of revenue is generated per booking by both guest and host. A guest has to pay according to the properties and listings depending on the size of the reservation usually under 14.2%. The company also has a price bundle policy in which if a guest books a long or expensive reservation, the service tax is reduced. 

Hosts are charged 3% service fees with complete booking by the guest. When a booking is done, a service fee is given by the guest unless the host cancels the or retracts it. In that case, then the company adjusts the service fees.

Social Media Marketing of Airbnb

Airbnb has a strong online presence which helps them to increase their read and attract new customers all over the world. The company has accounts on different social media platforms and has a huge following. They post stories, videos, content on their properties, and how travelers are enjoying their stay.

1.YouTube

Meet homage hospitality, the hosts making room for all travellers. YouTube offers brands with various field formats to showcase its advertisement, like skippable in-stream ads, Non-skippable ads, etc.

The company uses the platform to showcase live videos of travellers enjoying their stays in the Airbnb villas. By doing this company attract luxury travellers which helps the company in doing strong promotions

2. Instagram

The marketing, strategy on Instagram has mainly been used for interviews with various artists from different backgrounds and primary promotions. It has about 4.9 million followers on Instagram. 

As a modern business, leveraging social media is necessary and Airbnb’s social media strategy encompasses all major platforms and utilizes them to attract customers very well.

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Conclusion

The ideation process of Airbnb is very unique to the world which has led to its success. The company is earning profits without actually owing any property which has helped travelers as well as people who want to rent their properties. They have solved the problems of travelers especially luxury tourists who want a comfortable and classic vacation. The company can further expand its services more in different countries and can add medium-range properties also in its portfolio to enhance its sales. They are doing well with their services and have used social media very effectively. People can experience the vibe from their stories and videos on social media, which attracts them and works in the favor of the company.

Liked the blog? If you want to learn further about Digital Marketing, do check out our 45 minutes Free Digital Marketing Masterclass by Karan Shah, the founder and the CEO of IIDE. Thank you for reading this case study. Do share your views in the comment section.

Lead Trainer & Head of Learning & Development at IIDE

Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs......[Read full bio]

Aditya Shastri

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