The Airbnb Business Model – How do they Make Money?

What started out as a simple platform with mattresses and home-cooked breakfast has changed the way people travel today. Airbnb’s business model is unique and profitable, and it has grown to the point where it is now the most loved hospitality brand in the world. Today there are more than 6 million listings on Airbnb, and there are more than 4 million hosts around the world. There are Airbnb rentals in more than 100,000 cities around the world. More than 150 million people around the world use Airbnb and have booked more than 1 billion stays.

What makes Airbnb so successful? Its noteworthy business model. So before you go for Airbnb like app development, you need to study about Airbnb’s business model. This way you will be able to emulate the success of Airbnb.

Let’s have a look at the Airbnb business model and how it makes money in this blog.

Airbnb Business Model

Airbnb uses the aggregator business model. Its business model deviates from the conventional one used by Marriott, Hilton, and the like. Building and maintaining a traditional hotel costs millions of dollars. Because its people are its greatest strength, Airbnb is not obligated to follow any of those traditional business practices. Since there won’t be any additional expenses for expansion, it can expand rapidly.

As part of its business model, Airbnb employs a sizable army of independent photographers based in the world’s most populous cities. They visit the location of the property and capture high-quality images of it. The number of views and responses is boosted by the great quality of these images. Airbnb pays the photographers directly.

Other products of Airbnb

Apart from acting as an aggregator of rooms, Airbnb also divulged offering different products. 

Airbnbmag

With the goal of making guests feel at home anywhere in the world, Airbnb is revolutionising the travel industry. To realise this goal, they’ve introduced Airbnbmag, a publication that goes beyond the scope of a traditional travel guide. The goal of this $15 magazine, the product of a collaboration between Airbnb and Hearst, is to enable visitors to learn about a city or town without visiting the typical tourist traps.

Business Travel

The Airbnb business model also includes homes that are ready for business and meet certain requirements for home type, amenities, check-in, reviews, responsiveness, and host commitment. This feature is made for the travel managers of companies so that they can give their company more information and more accurate reports.

How does Airbnb Make Money?

Airbnb gives property owners free listings, and traveler can then look through the different properties in a certain area based on their needs and budget. On the Airbnb platform, reservations are made, and money is exchanged. The following sources help bring in money for the company:

Commissions

There are two basic ways in which Airbnb charges commissions to hosts and guests.

Split fee structure

In a split-fee arrangement, the host pays some of the fees, and the guest pays the rest. In this way of making money, the host pays 3% of the total amount of the booking to Airbnb. The nightly rate and any cleaning or extra guest fees are added to the nightly rate to get the subtotal. There are no Airbnb fees or local occupancy taxes included. This amount is taken out of the host’s payout automatically.

The guest pays fees that add up to 14.2% of the subtotal of the booking. This fee is based on a number of things that are shown to the guest during check-out. Whether it’s rented on the weekend or during the week, if it’s rented during the high season, and if special amenities are needed are all things that can change the price.

For example, if a room costs $100 per night plus $40 for cleaning, the booking subtotal is $140. The host would pay $4.20, and the guest could pay up to $19.88.

Depending on the local tax laws, users may also have to pay a value-added tax (VAT). The final price of the goods and services is used to figure out the VAT. Different countries have different tax laws, so Airbnb does not charge VAT for every booking. Also, Airbnb sets different exchange rates for guests who pay in a different currency than what the host has chosen. The amount of VAT a host has to pay depends on how much money they make from different bookings.

Host-only fee

With this setup, the whole fee is taken out of the Host’s pay. It’s usually 14–16%, but Airbnb Plus Hosts and Hosts with Super Strict cancellation policies may pay more.

This fee is required for both traditional hospitality listings (like hotels, serviced apartments, etc.) and software-connected hosts (unless most of their listings are in the USA, Canada, the Bahamas, Mexico, Argentina, Taiwan, or Uruguay).

All Hosts with an API connection will be enrolled in the Host-Only Fee, and they won’t be able to get out of it.

Experience Fees

The Airbnb business model now also includes Airbnb Experiences. This is a local activity that can be done in person or online and is led by a local expert. An experience could be a class on the local art scene or a walk through the area’s natural areas. For experiences, Airbnb charges a 20% service fee. This helps cover the cost of most experiences’ goods, services, support, and insurance.

When the booking is done, Airbnb takes the experience service fee out of the host payment automatically. Payouts happen 24 hours after the experience happens, or the first immersive part of the experience is done, whichever comes first.

Keep in mind that the experiences are added as a separate cost. You can tweak the commissions or even go for new revenue streams like advertisements when you go for Airbnb-like app development. Do note that while going for Airbnb-like app development, you will need to focus on building a robust technology stack that can cater to millions of users worldwide. 

Conclusion

Airbnb is now a big company with offices in almost every country. Airbnb’s unique business model has been very successful, as people prefer Airbnb over hotels when they want to stay in a new place for less money and more comfort. People get to experience the culture of the area for a lot less money. Airbnb has used new technology to create a platform that brings people from all over the world together. It is the largest chain of properties in the world right now, even though it hasn’t earned a single one. Even though Airbnb only charges a small service fee, its income keeps going up as the number of bookings keeps going up every day. Hire top Airbnb app developers to build a high-quality Airbnb-like app.