Renting out your home to complete strangers, while you are still living in it, may feel like a crazy scheme, but the success of Airbnb shows that it is actually a highly successful business model. By 2020, this startup home-sharing business is expected to have earned as much as $3.5 billion. If this goal is reached, Airbnb’s CEO Brian Chesky will be at the head of one of the most successful young digital businesses in the world. This success begs the question: Why is Airbnb so popular? What is it about this online travel website and the travel app offering vacation rentals that is taking the travel industry by storm, creating a decent amount of controversy, and bringing in millions to its creators? Here is a closer look at where Airbnb came from and how the Airbnb business model of home sharing is changing the face of the travel industry.
A Short and Successful History
Airbnb and the vacation rental marketplace feel as though they have been part of the travel landscape for decades, but the reality is this is a relatively young company. The concept of home sharing that is at the heart of Airbnb came to the founders in October of 2007, and by January of 2012 the company had seen its 5 millionth booking.
Airbnb is the brainchild of founders Brian Chesky and Joe Gebbia. Having just moved to San Francisco from New York in 2007, the roommates were struggling to pay rent. Realizing that hotel rooms in their new city were constantly booked, the young men purchased air beds, put up a quick website called Air Bed and Breakfast, and offered a space on their floor to potential travelers for $80 a night. Three people took advantage of the offer, and the idea started to take root.
In August 2008, the company launched a new website to benefit from traffic from the Democratic National Convention held in Denver. For this relaunch, they focused on offering Obama supporters a place to stay with fellow Obama supporters, and over 600 people used the service. Yet the convention ended and no new business was coming. Investors were hesitant to jump in with an idea that seemed very foreign at the time. To fund their growing pile of debt, Chesky and Gebbia created a line of special limited-edition cereal boxes, stuffed them with cheap cereal, and sold $30,000 worth. Using that money and the marketing prowess learned through selling the cereal, Chesky and Gebbia were soon able to start reaching actual investors and find more willing hosts to list their properties on the Airbnb site. By March 2009, the company had 2,500 listings and almost 10,000 registered users, and a pattern of success had started to emerge.
The Airbnb Business Model
So, what was it that made Airbnb different from other vacation rental marketplace options? Today, what Airbnb offers is not much different than what other similar sites offer, but the company has the most traction and popularity in the accommodations marketplace. Here’s a closer look at what makes the Airbnb business model unique.
- Sharing is Daring (but, it turns out, Brilliant). First, Airbnb was the first vacation rental company that focused on renting out space in one’s home while the host was still present. While today many can rent full spaces and entire homes for private use, Airbnb was founded on the idea of shared spaces. Travelers can still book these properties, and in fact Airbnb offers unique host opportunities to people who are willing to be an on-site host in unique international destinations.
- Reviews Rule. The Airbnb business model also focuses heavily on user and host reviews. Both hosts and guests are able to write reviews about their experiences, and those reviews are used as a main feature of the website, so guests and hosts have more control over where they stay and whom they interact with in the process.
- Stay Anywhere … Really. Airbnb also stood out in the beginning because the website had more whimsical offerings. Do you want to stay in a tree house or teepee for a more authentic experience? You can with Airbnb. Also, Airbnb did not focus only on high profile resort communities where people rented out their second homes.
- Cater to City-Seeking Millennials. Finally, Airbnb tried to target a new demographic of travelers. Many of the listings on the website are apartments in cities, where hotels tend to lack amenities and have inflated prices. This urban centric, whimsical flair has brought many millennials to the site in their quest to find better accommodations for urban exploration, and the result was great success for the young startup.
Keys to Airbnb Success
So, again, why is Airbnb so popular? Why has it shaken up the vacation rental marketplace so strongly? Here are some keys to the company’s success:
- Showcasing Properties in the Right Light. The most successful properties on Airbnb are those with the best presentation, including great photography. This was one of the key factors Airbnb used to stand out early in their history. Still today, Airbnb offers free professional photography to hosts in key cities to help bring in more bookings.
- Reaching Every Destination. Airbnb does not just rent out properties in Orlando or the Colorado Rockies. Through Airbnb, guests can find accommodations in major urban centers around the globe or at remote rural destinations, and everything in between. Through Airbnb, you can book a stay in a UNESCO World Heritage Site, sleep overnight in an actual castle, or stay in the heart of downtown in your favorite city.
- Never Giving Up. The founders of Airbnb knew they had a good idea, and they spent years crafting a website and seeking funding — even resorting to selling cereal — in order to gain the traction they needed to find success. This sort of tenacity is a key factor in today’s profits.
Today, Airbnb’s success does not seem to be slowing. By the end of the first quarter of 2019, the company expects to hit the 500 million guests mark, which includes 100 million new guests since August of 2018, passing $1 billion in quarterly revenue that quarter, as well. Airbnb is heading towards a possible IPO this year in light of this success, giving investors the chance to add this successful startup to their own investment portfolios. Though the announcement of the IPO is not yet official, the company is making key changes, such as hiring a chief financial officer, that indicate it is a strong possibility.
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