How Airbnb works, Airbnb Business Model

STORY of Airbnb

Airbnb Started in August 2008 in San Francisco with Joe Gebbia, Brian Chesky, and Nathan Biecharczyk as the father figure of such a revolutionizing on-demand online service for the travel industry. Airbnb created an online space for the masses to uncover and book one-off accommodations situated on every side of the world at their convenience using a smartphone.

The Secret Mantra of Airbnb’s Big Fat Numbers

Airbnb started with three essential elements that brought them a lucky charm to get a significant fat number. They rented out three mattresses and promised home-made breakfast for the guests. The trio founders distilled the website with the money earned by vending cereal boxes throughout the presidential campaign in 2008. They took careful efforts and took pictures in good quality of the rented space to enhance the click-through rates.

From the start until now, the co-founders of Airbnb are on their way to construct a business platform that is efficient in disrupting the hotel industry to transform our travel experience.

Spreading out its market presence to over 191 countries and more than 100000 cities, Airbnb is now one of a kind that fuses people with fantastic travel experiences as per their budget. Right from the serviced apartment for a day to a villa for an entire month, Airbnb stands as a resource.

Airbnb platform empowers people to showcase their extra living space and earn additional income to their pocket by renting that space. It also benefits the travelers to book distinctive home stays from the house owners of any locality. Airbnb unleashes on-demand service to the travel industry by defeating the standard hotel booking service.

Thought-Provoking facts on Airbnb & How Airbnb works

Funding until September 2018 – $4.4 Billion Source

Airbnb valuation as on March 2019 – $35 Billion Source

Places listed on Airbnb has served 6,000,000+ people for their stay at comfort Source

Airbnb took the space in the Billion dollar club with 31 different investors who opted to give mighty funding of $4.4 Billion that rolled out Airbnb to pose a successful business model. Airbnb has contributed funding of $1.5 Billion at a single shot while it seems to be the most substantial funding ever.

Value Proposition & Customer:

Airbnb focus is to connect the online community who are looking for a living space for the required duration with the owners who have showcased their extra space for rent. It has provisioned a comprehensive coverage to entitle travelers to rent homes for their private and leisure stay at any part of the world. The system includes personal profiles, ratings, reviewing the service provided by the host and also would help the users understand deals and offers instantly. On the other side, the hosts have furnished a space to choose the kind of users who want to rent out their living area.

Mission and Value:

Airbnb is the most pocket-friendly on-demand traveling accommodation service provider in the world. The purpose is to unfold a beautiful living space for travelers to ensure a “feel at home” while they are in any part of the globe. The aim is to build transparent connections between the users with the local hosts and help them access the typical culture of the place they choose to stay.

Value Establishment:

In simple terms, Airbnb works as a mediator between the travelers who are looking to stay at their favorite destinations and the local hosts who have listed their living spaces for rent. User reviews and profiles take a vital role to establish a reputation amongst the marketplace.

Revenue Model:

Airbnb gets monetary benefits from both the guests and the hosts on every booking. Airbnb takes a commission of 6-12% from the guest and a 3% from the hosts for every successful transaction. Check the Cost of renting out on Airbnb.

Organization: Airbnb goes beyond the virtual space by partnering with city authorities in San Francisco to identify hosts and help displaced people to get connected with local hosts for their stay in case of an emergency.

Key components that Transformed Airbnb into a successful business model

Partners

Bloggers
Legal institutions

Investors
Travel community operators
Insurance companies

The Brand

A repository of accommodation information listed
A community of home providers

A community of travelers
The city of home providers & travelers
Database with accommodations

Value Propositions

Reliable plan
Membership at no cost
Insurance covered for properties

24/7 customer support team
User-friendly
Unique rented spaces

Key activities

Exploiting technology to establish infrastructure & design
Focussed management of community
Customer support
Customer association

State of Art Marketing techniques
Intense development of the product
Managing international payment mechanism

Marketing channels

Mobile app
Website
Blog

Social media
Press Releases
Word of mouth

Cost to Investment

Design and development of the platform
Human resources

Multiple Payment Gateways
Marketing

Travellers

People who rented out their space for additional income

Crucial Resources

A Collaborative Support Team

Mobile applications

Types of Customer Segments

Source of Revenue

6-12% of booking fee from the customers

3% of commission from every host on a rented place

Insights from the Airbnb business platform

The Airbnb's business pattern is unique and proliferating.
Entrepreneurs can apply the Airbnb's business model to boat rentals, office space sharing, car rentals, etc..

Letting house owners make extra money by renting their space.
Airbnb disrupted the travel industry with its marketplace by hooking it with the technology.

Case Study of Airbnb's Business Model

Customer Segments

Any enterprise needs customers; A business can exist in the market only when they meet the customer’s demand. They need to look at what the community desperately needs and try to build their business. In this way, find your set of customers, create an answer to your customer’s solutions, and that is how Airbnb rolled out its business model.

Airbnb Business Model is a two-sided platform that serves customers who are on the lookout for a decent space to rent during vacation and sellers who are convinced to share their homes with an intent to make some extra money to their pocket. So looking at the service model the business dealing is with two different customer segments, the guests and the hosts while the business happens only if both the customer segments are there.

Value Proposition

“Price is what you pay, Value is what you get”- Warren Buffet, this statement says it all. Value Proposition equals to products or services that generate value for a particular customer segment.

Making the difference in the industry among the competitors is where you create value for your customers. The core of business strategy should be directly proportional to customer value proposition with the consistent alignment of the process and capabilities. A right value proposition in place equips your business to stand out and makes it a reason for your business to be the customer’s choice.

What did Airbnb do about its Value Proposition?

Airbnb chose to frame out a value proposition to give mutual benefits to both the customer segments.

Benefits of Airbnb to Customer segments & How Airbnb works?

People’s interest in Airbnb is growing day by day from rooms, villas, castle, igloos, etc.. Airbnb found a way to hook it up with a community who are ready to share their living space for rent.
Airbnb worked carefully to build trust between the customer segments and the hosts through rating and reviewing system. It stood as a community marketplace where people started to browse and discover unique places all over the globe.

Both the guests and the hosts got mutually benefitted.
Hosts can have the option to rent their living space for an extra income.
Customers can filter and find the places according to their budget, room type, amenities, duration of stay, etc..
Guests got the option to rate the stay and write a review on their experience with the hosts.

Channels

Reaching customers the right way is one active ingredient to showcase your market presence. That is the best way to stay ahead of the competitors.

How is Airbnb marketing its service?

Integration of Craigslist: Airbnb exploited Craigslist (classified advertisements website) to the maximum, to increase and get a sustainable user database. The backroom boys of Airbnb were supersmart. They drilled their minds and came out with provision for the users with an instant link to post it on Craigslist when Airbnb’s users filled out forms to list out their bedrooms. In this way, Airbnb took a different strategy by covering the craigslist audience.

Advertising: From conventional to the state of the art advertising techniques, social media marketing, etc.. on the list, the marketing team sourced all types of advertising means to target its customers.

Referral Schemes: Airbnb implemented the referral scheme to promote its market presence to its customers through exclusive referral URLs. Whenever a new user signs up through the existing users’ referral, the current users who referred to the new user will get some credits which they can use for their future trips. The referral program seems to be alluring that the new users are tempted to try the latest deals that come their way and use the service.

Customer Relationships

“Your most unhappy customers are your greatest source of learning” – Bill Gates.

Losing Customers should not happen to any business which is trying to thrive in the industry.

How Airbnb formed a strong relationship with its Customers?

Airbnb serves two ranges of customer segments, renters and owners. One part cannot benefit without the other. Owners give renters an excellent experience to retain them while they stay in their properties. Airbnb worked hard to maintain a strong bond with the customers with a high-quality website and reliable customer service.

Revenue Stream

The revenue stream is directly proportional to the type of customer segment. Airbnb looks at its revenue based on commission in return for the service it mediates to the community. Airbnb charges 6% to 12% guest service fees from travelers and 3% host service fees from the local hosts on all confirmed bookings in the Airbnb platform.

Cost Structure

How much do you invest? On what do you spend? These are the prime factors of every business.

Airbnb’s Cost Structure

Airbnb developed and maintaining a website platform where two customer segments meet in a single place. The cost structure is also designed to incur investment for its marketing and sales purposes.

Conclusion

Consistency in generating value proposition to your customers and implementing new techniques to defy outdated business structure. Sketching out innovative methods to move forward should be your prime goal to create value to your customers and set a benchmark in the competitive marketplace.

Airbnb has rolled out an on-demand service business model with innovation as a new gaming technique to the travel industry. It has created tremendous and significant value to its core customers and society.