Airbnb is an online marketplace for short-term rental accommodation and various experiences. The company, which was started in 2008 by Joe Gebbia, Nathan Blecharczyk, and Brian Chesky, was one borne out of necessity rather than by design.
They hired Blecharczyk to build a more robust platform and then expanded into Denver as 20,000 people descended on the city for the Democratic National Convention.
The launch in Colorado was successful but not profitable and early investors were not convinced that the business model was viable.
Many were skeptical that Airbnb was just another tech company that wanted to repurpose an old idea, while others were worried for the safety of customers who were staying in the homes of strangers.
Refinement of the business model and funding
Around the time of the 2008 election, the co-founders raised $30,000 by selling limited edition cereal boxes featuring Barack Obama and John McCain.
In early 2009, one investor who did show interest was Y Combinator founder Paul Graham.
Graham tipped in $20,000 and the Airbnb team spent a few months at the start-up accelerator refining their product.
Graham reiterated the importance of understanding the company’s users and encouraged Gebbia and Chesky to visit New York City, listen to the needs of hosts, and promote the business in general.
Airbnb achieved 1 million nights stayed in 2011 and was present in 89 countries. The company also won the break-out mobile app award at SXSW and became a tech unicorn soon after.
Much of the company’s initial growth was driven by younger hosts who could rent out space in their apartments and create a side hustle in the process.
In 2012, the company started to experience some of the problems it continues to battle today.
Some cities made short-term stays illegal and hosts were evicted or fined for listing their properties on the platform.
Negative publicity also resulted from instances of guests damaging property and a controversial logo redesign in 2014.
Nevertheless, Airbnb reported that it had surpassed 150 million active users in 2018. This number has not been updated since, but revenue has remained strong in the face of the COVID-19 pandemic and macroeconomic headwinds.
Airbnb is an online marketplace for short-term accommodation and experiences. The company, which was started in 2008 by Joe Gebbia, Nathan Blecharczyk, and Brian Chesky, was one borne out of necessity rather than by design.
Broke and unable to pay their rent, co-founders and roommates Gebbia and Chesky decided to turn their apartment into a bed and breakfast. The pair believed the business model to viable, but early investors were unconvinced.
One investor who did show interest was Y Combinator founder Paul Graham. Graham invested $20,000 in 2009 and encouraged Gebbia and Chesky to visit New York City to better understand their hosts and refine the businessmodel. Growth was rapid thereafter as the company secured additional funding.
Airbnb’s founders primarily own Airbnb: Brian Chesky, with over 76 million Class B shares, which give him 33..4% of ownership and 30.6% of voting power; Nathan Blecharczyk, with over 64 million Class B shares, which give him 29.4% and 26.9% of voting power; and Joe Gebbia, which has nearly 47 million of Class B shares which give him 21..5% ownership and almost 27% of voting power. Other institutional investors comprise Sequoia Capital, Fidelity, and The Vanguard Group.
Airbnb is a platform business model making money by charging guests a service fee between 5% and 15% of the reservation, while the commission from hosts is generally 3%. For instance, on a $100 booking per night set by a host, Airbnb might make as much as $15, split between host and guest fees.
Airbnb was initially called Airbedandbreakfast, as the main idea behind the starting of the company was to rent air mattresses in their apartment, as San Francisco filled up due to various conferences, to make some money to pay back the rent.
The Aibnb’s founders noticed this as they were designers. And a design conference (IDSA / ICSID) was about to happen in 2007; they launched Airbedandbreakfast as a service offering “Air Bed and Breakfast” to other designers coming to town who could not find available rooms in a hotel.
Thus from there, the initial name.
Yet, as Airbnb joined the Winter 2009 batch of the popular accelerator, YC, Paul Graham, founder of YC, suggested the founders change the name from Airbedandbreakfast to Airbnb – before demo day – as the name sounded better.
Airbnb is a two-sided marketplace where hosts and guests transact via its booking platform. Thus, Airbnb makes money by charging a fee on top of hosts and guests when a transaction goes through. For instance, in 2023, Airbnb generated $ 9.92 billion in transaction rates, with an average take rate of 13.5%.
The Airbnb story began in 2008 when two friends shared their accommodation with three travelers looking for a place to stay. Just over a decade later, it is estimated that the company now accounts for over 20% of the vacation rental industry. As a travel platform, Airbnb competes with other brands like Booking.com, VRBO, FlipKey, and given its massive amount of traffic from Google. Also, platforms like Google Travel can be considered potential competitors able to cannibalize part of Airbnb’s market.
As a peer-to-peer platform, Airbnb will collect a fee from both key players once the transaction between host and guest goes through. For example, from a $100 booking per night set by the host, Airbnb might collect $3 as a hosting fee. At the same time, it might increase the price for the guest to $116 ($16 above the price set by the host) to collect its guest fees of $12 and taxes for the remaining amount.
In 2023, on $73.25 billion in gross bookings, the company reported revenues of $9.92 billion, a record of $4.79 billion in net income, and 13.5%, in take rates.
In 2023, Airbnb reported a 13.5% take rate (analysis by FourWeekMBA). Airbnb reported a 13.3% take rate in 2022 and 12.8% in 2021. The company’s take rate is a critical metric that Airbnb tracks to evaluate the financial health of its platform.
In 2023, Airbnb generated an average value per booking of $163.51, compared to 2022, when Airbnb generated an average value per booking of $161, compared to $156 in 2021 and $124 in 2020.
In 2023, Airbnb had over 5 million hosts on the platform, which generated 7.7 million listings in the same period; Airbnb had 6.6 million active listings, compared to 6 million in 2021.
A storyboard is a linear sequence of illustrations used in animation to develop a broader story. A storyboard process is now used also in business to understand and map customers’ experience and enable the growth of the company using that process.
Airbnb arbitrage is a business model where the renter of a house or apartment sub-lets the property to Airbnb users. This is a model where the Airbnb arbitrageur can transform a long-term rental, with the main property owner, into a short-term rental, with higher rates and margins.
An accessory dwelling unit (ADU) is a term used to describe a secondary house or apartment located on the same plot of land as a larger, primary place of residence. This has become an industry for its own sake, with the potential to become the next trillion-dollar industry.
Samara is a manufacturer of prefab accessory dwelling units (ADUs) that can be installed and operational in a matter of hours. It started as an R&D unit of Airbnb in 2016. And it eventually was spun off and run by Airbnb co-founder Joe Gebbia, who now runs it full-time.
Booking Holdings is the company the controls six main brands that comprise Booking.com, priceline.com, KAYAK, agoda.com, Rentalcars.com, and OpenTable. Over 76% of the company revenues in 2017 came primarily via travel reservations commisions and travel insurance fees. Almost 17% came from merchant fees, and the remaining revenues came from advertising earned via KAYAK. As distributionstrategy, the company spent over $4.5 billion in performance-based and brand advertising.
Trivago is a search and discovery travel platform part of Expedia Group. Trivago is widely known as a trusted hotel comparison service. Trivago doesn’t charge based on bookings but rather through a cost-per-click (CPC) model, monetized when a hotel searcher clicks one of its advertiser listings. This referral revenue comprises most of Trivago’s income. Trivago also has another minor revenue stream via subscriptions to its Business Studio, a tool that helps hoteliers track impression and click data associated with their properties.
Born in 1996 as a travel platform of Microsoft, it would be spun off later on. Expedia became among the largest online travel agencies (OTAs) which comprise a set of brands that go from Hotels.com, Vrbo, Orbits, CheapTickets, ebookers, Travelocity, Trivago, and others. The company follows a multi-brandstrategy.
Kayak is an online travel agency and search engine founded in 2004 by Steve Hafner and Paul M. English as a Travel Search Company and acquired by Booking Holdings in 2013 for $2.1 billion. The company makes money via an advertising model based on cost per click, cost per acquisition, and advertising placements.
OpenTable is an American online restaurant reservation system founded by Chuck Templeton. During the late 90s, it provided one of the first automated, real-time reservation systems. The company was acquired by Booking Holding back in 2014, for $2.6 billion. Today OpenTable makes money via subscription plans, referral fees, and in-dining with its first restaurant, as an experiment in Miami, Florida.
OYO’s business model is a mixture of platform and brand, where the company started primarily as an aggregator of homes across India, and it quickly moved to other verticals, from leisure to co-working and corporate travel. In a sort of octopus business strategy of expansion to cover the whole spectrum of short-term real estate.
TripAdvisor’s business model matches the demand for people looking for a travel experience with supply from travel partners around the world providing travel accommodations and experiences. When this match is created TripAdvisor collects commission from partners on a CPC and CPM basis. The non-hotel revenue comprises experiences, restaurants, and rentals.
Trivago is a search and discovery travel platform part of Expedia Group. Trivago is widely known as a trusted hotel comparison service. Trivago doesn’t charge based on bookings but rather through a cost-per-click (CPC) model, monetized when a hotel searcher clicks one of its advertiser listings. This referral revenue comprises most of Trivago’s income. Trivago also has another minor revenue stream via subscriptions to its Business Studio, a tool that helps hoteliers track impression and click data associated with their properties.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
