In a nutshell, Airbnb is a marketplace that connects hotel owners with travellers in need of lodging. But when the business was first established in 2008, it was merely a straightforward concept from two buddies who needed money to cover their own rent. Three air mattresses were assembled and offered for rent. Subsequently, they recognised that the concept had considerably more potential.
At the moment, Airbnb is a completely digital platform that only uses its website and app. There is no actual location where you must go, and there is no in-person service.
What is Airbnb?
Airbnb “connects people with places to stay and things to do around the world. The community is powered by hosts, who provide their guests with the unique opportunity to travel like a local”. Basically, it is a marketplace, accessed via the app or website, which connects travelers and hosts.
In other words, renting out surplus space or underutilised property is a new opportunity for people to make extra money. However, those in need of lodging can look through Airbnb listings and rent these places straight from the owners, which ensures a cheaper rate than hotels or real estate that are listed through an agency. Additionally, guests can occasionally engage with the owners, which helps them become more familiar with the local way of life.
How Does Airbnb Work?
- The Airbnb hosts include in the Airbnb platform all information about the space they are placing for rent, including the asking price;
- If available, Airbnb sends a photographer to the location to record high-quality photos of the place;
- The traveler accesses the app and searches for a property on-site, with the features and price range he needs;
- Then, they make the reservation via a digital platform, finding their way to accommodations without having to contact the host directly;
- The traveler makes the payment to Airbnb, including transaction fees;
- The host must agree with the rent;
- When everything is okay, the traveler stays in the rented space and Airbnb pays the host the rent, deducting its commission;
- Finally, both host and traveler can rate the experience and write reviews about it.
Revenue Model: How Airbnb makes money
Airbnb’s revenue model is based on a simple yet highly effective commission system. The platform connects hosts who rent out their properties with guests looking for short-term stays and earns money by charging service fees to both parties. Typically, hosts pay a small percentage of each booking as a commission, while guests are charged a service fee that covers Airbnb’s operational costs and customer support. In addition, Airbnb earns from its “Airbnb Experiences” feature, where users can book local tours and activities. This dual-sided marketplace allows Airbnb to generate consistent revenue without owning any physical properties, making it one of the most scalable business models in the travel industry.