is-airbnb-profitable

Is Airbnb Profitable?

The company lost $496 million in 2021.

In 2021, Airbnb generated $6 billion in revenues, almost $47 billion in gross bookings, and over 300 million nights and experiences booked, at an average service fee of 12.8%.

Key Financial Facts (Analysis by FourWeekMBA)2021
Gross Booking Value$46.9 Billion
Revenue$6 Billion
Nights and Experiences Booked300.6 Million
Average Service Fee12.78%
Average Value per Booking$155.94
Net Loss$496 Million
Airbnb Business ModelDescription
Value Model: Expanding the hospitality industry, at scale.Airbnb’s mission is to “create a world where people can belong through healthy travel that is local, authentic, diverse, inclusive and sustainable.” A peer-to-peer platform enables hosts to easily list and monetize their real estate and guests to find alternative locations across the world. Airbnb created a whole new category for travel, expanding the industry and making it viable at scale.
Technological Model: Peer-to-peer platform. Two-sided network effects.As a peer-to-peer platform, Airbnb enjoys two-sided network effects. The more hosts join the platform, the more it becomes valuable to guests, who can find alternative locations at various price points, depending on their experience. On the other hand, the more the community of guests is thriving, the more hosts are incentivized to invest back in their locations, making Airbnb the go-to location for travel worldwide.
Distribution Model: Brand, Growth Engine, Continous Improvement, Community Building.Airbnb has built a strong brand over the years, thanks to its seamless platform and support to hosts. The company’s main growth asset is the community of guests and hosts that interact, making the whole platform thrive long-term. In addition, the platform is fast in releasing new features, testing them out, and trying to figure out new ways for hosts and guests to connect (as Airbnb shows throughout the pandemic).
Financial Model: Platform Tax.Airbnb makes money by charging a service fee on top of each booking. Thus making money as more bookings go through it repeatedly. In 2021, Airbnb generated $5.99 billion in service fees.

More About Airbnb Business Model

airbnb-business-model
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%. Due to the pandemic, Airbnb is stretching its business model and experimenting with new formats like online experiences to transition toward fully digital experiences.
airbnb-organizational-structure
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
airbnb-competitors
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.

Related To Airbnb Business Model

Multi-sided Platform Business Model

multisided-platform
A multisided platform business model is a company that leverages multisided network effects (coming from two or more sides of the network). Therefore, when one side of the network grows, this makes the overall platform more valuable for the other side of the network and vice-versa, triggering exponential growth for the platform business.

Network Effects

network-effects
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

Virtuous Cycles

virtuous-cycle
The virtuous cycle is a positive loop or a set of positive loops that trigger a non-linear growth. Indeed, in the context of digital platforms, virtuous cycles – also defined as flywheel models – help companies capture more market shares by accelerating growth. The classic example is Amazon’s lower prices driving more consumers, driving more sellers, thus improving variety and convenience, thus accelerating growth.

OTAs Connected Business Models

Booking

booking-business-model
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 commissions and travel insurance fees. Almost 17% came from merchant fees, and the remaining revenues came from advertising earned via KAYAK. As a distribution strategy, the company spent over $4.5 billion in performance-based and brand advertising. 

Expedia

trivago-business-model
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.

Google (Google Travel)

Expedia-business-model
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-brand strategy.

Kayak

how-does-kayak-make-money
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

how-does-opentable-make-money
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

oyo-business-model
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

tripadvisor-business-model
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

trivago-business-model
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.
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