Airbnb is a new way for travelers to find short term accommodation at better prices. As one of the founder’s Joe Gebbia says,

We’re helping people be more resourceful with the space they already have and we’re connecting people around the world. We can see ourselves doing this for a decade to come – a generation.”

Airbnb - Strategies for Renting Your Accomodation Online

© Shutterstock.com | mirtmirt

In this article, we will look at 1) what is Airbnb?, 2) the business model, 3) How to list successfully on Airbnb, and 4) advantages and disadvantages of listing on Airbnb.

WHAT IS AIRBNB?

The Company

Airbnb is a consumer-to-consumer e-commerce platform that helps people find accommodation for short term rentals. At present, the company has close to 800,00 listings and is spread over 33,000 cities in 192 countries.

To use the service, potential renters and hosts are required to register and make an online profile. As with many other C2C channels, a host who lists on the website has recommendations and reviews against their profile. These reviews and ratings are left by previous guests. There is also a response rating and private messaging service available to users.

The company was founded in August 2008 and is based in San Francisco, California. The company managed to raise $119.8 million in venture funding by 2011. These funds came from a variety of firms including Y Combinator, Sequoia Capital, Greylock Partners, DST Global Solutions, Andreessen Horowitz, General Catalyst Partners, as well as from other independent partners. In 2014, the company received further funding from TPG capital.

History

The company was created by Brian Chesky and Joe Gebbia. The idea took shape in October 2007 when they moved to San Francisco. The company began as AirBed &Breakfast and was created during an Industrial Design Conference that was organized by the Industrial Designers Society of America.

At this point, the site offered short term living arrangements along with breakfast. This allowed the people attending the conference to find accommodation in a saturated rental and hotel market. Since the two founder had trouble paying their own rent, they converted their living room into a bed and breakfast of sorts, where as many as three guests could stay, using air mattresses and being provided with homemade breakfast.

By 2008, a third partner joined the company. Nathan Blecharczyk was a Harvard graduate and a technical architect. The company continued to focus on events that were of a high-profile nature and where attendees could have problems finding affordable boarding and lodging. The website for the business was officially launched in August 2008. To fund their operation, the founders worked on creating breakfast cereals. These special edition products included ideas such as Barack Obama and John McCain inspired cereals. In a short time, as many as 800 boxes of these cereal sold for $40 each and this allowed the company to raise enough money for its incubation as well as attract the attention of Y Combinator’s Paul Graham. By 2009, Graham invited the company to join Y Combinator’s winter incubator session for three months of training. This left them in the position to come back to San Francisco with a profitable business model to present to potential investors.

In the same year, the website changed from Airbedandbreakfast.com to a shorter form, Airbnb expanded to a greater number of properties that included entire apartments and houses, private rooms, castles, boats, manors, tree houses, igloos and private islands among other properties.

Within a year, there were 15 employees working in the apartment where the business began. Eventually, the company moved to its first office space and continued to grow. By 2010, $7.2 million were raised in a series of funding and by 2011, the company gained further investment from A Grade Investments. The actor Ashton Kutcher was a partner in this firm, and he announced the investment as well as his role as a strategic brand advisor to the company.

In 2014, the company made design revisions to its site and mobile app and introduced a new logo.

International Expansion

The company also grew internationally during this time. In May 2011, the company expanded to Germany by acquiring a local competitor by the name of Accoleo. This was the first international move and the company setup its office in Hamburg. A second international office was setup in London by October of the same year. By 2012, six new offices were set up in Paris, Milan, Barcelona, Copenhagen, Moscow and Sao Paulo. In 2013, Dublin was designated headquarter for Europe. Given the service’s popularity in Australia, Thailand and Indonesia, a new office was also created in Sydney in 2013. In the same year, the company announced plans to focus more aggressively on the Asian market with a new office in Singapore.

THE BUSINESS MODEL

Airbnb description

© Flickr | Gustavo da Cunha Pimenta

Airbnb’s business model under the business model canvas structure can be analyzed in the following way:

  • Customer Segments – Two main categories of people are seen to use Airbnb. These are personal travelers and business travelers. Personal travelers are more price sensitive and therefore flexible about the accommodation itself. While business travelers, especially those that plan to stay longer than a day or two are more likely to focus on the place itself rather than the rental amount. Another segment comprises of locally situated people such as expatriates or students.
  • Channels – The website uses several channels to reach customers. These include advertisements online, PR and word of mouth. Online marketing is aggressively focused upon, with advertisements found on a large number of affiliate sites and major search engines. PR is also a strong channel as the story of the founders is widely known, and they appear in conferences and other press events fairly often. Word of mouth is generated by a great user experience. This means that the company works hard on ensuring that customers have an exceptional experience both before booking and after.
  • Customer Relationships – The company keeps a balanced focus on building relationships with both hosts and renters. Hosts are the public face of the company and have many options now for listing their properties. For this reason, the company works on setting up online and offline events and support to strengthen the relationship. Similarly, the renters are the ones who pay for the service. A good user experience and support is key to maintaining this relationship.
  • Revenue Streams – The company makes money by charging a commission from both the renter and the host. Both these are kept on the lower side to encourage people to continue to use the platform. The company makes efforts to discourage transactions from being completed away from the site to prevent the commission from being lost.
  • Value Proposition – The company offers hosts a chance to earn money from an underutilized asset (Their house or spare room) and offers this service internationally that increases the customer base significantly. For the renter, there is a level of trust that the property on offer is not a scam and that they can find a place to stay for a more reasonable amount than most hotels can offer.
  • Key Activities – Major activities for the business include marketing, product development and platform development and maintenance. Apart from this, there is also the community management with home owners, through online and offline events.
  • Key Resources – A key resource for the company is its wide international network of travelers. In addition to this, well networked founders and the Airbnb brand are now key resources as well. The team also has some of the best technical and design talent in the field that allows the platform to run smoothly and remain accessible and user-friendly.
  • Key Partners – A key partner for Airbnb are tourism ministries in different countries as well as other tourism related networks. Other partners include payment partners as well as investors.
  • Cost Structure – The company has three main categories of costs. These can be broadly understood as technology, marketing and sales. Technology means the cost of top programmers and technical experts as well as things such as server space and software, etc. Marketing includes advertising and PR internationally. Sales teams are present at all major offices to further the business.

Airbnb USP

Airbnb differs from its competitors by being more than just a space for classified advertisements. The website facilitates the entire process of listing and booking and handles all financial transactions. This means that payments are made on time and are secure. For example, a guest has to be checked in for 24 hours before the host is paid. It is free to list a property, and the commission is only charged when a transaction goes through. The website also offers a review system that allows actual users to write reviews. This helps make reviews more accurate. Another aspect is the extensive network globally which helps international travelers and hosts to connect with each other easily.

HOW TO LIST SUCCESSFULLY ON AIRBNB

Airbnb - How it works

© Airbnb

Tips for Hosts

Hosts are people who list their properties or rooms for rent on the website. There are some basic things that every potential host of Airbnb should keep in mind. These are:

  • Startup Costs – It is important to remember that there may be some initial costs such as extra sheets and towels, as well as other household goods, and grocery items. There may also be some costs associated with maintaining the property by getting it cleaned before and after a renter.
  • Act like a Host, Not a Landlord – The Airbnb business model means that the people coming into the house are guests and not tenants. This means that a good host should make an effort to anticipate their needs. This means providing a clean house, food, extra towels, any instructions or tips for the home or the city and other items such as tea, coffee and wine. Some hosts may consider hiring a cleaning service to avoid the hassle of having to do so themselves on a regular basis. Another good idea is to send guests a welcome email with information such as WiFi passwords and ensure that all relevant appliances such as a cooling or heating are turned on.
  • Make Your Listing Look Attractive – A successful listing on the website needs to have not only good reviews but also detailed and attractive photos. The website offers the services of a professional photographer at no cost to do this for a host. Make sure that you complete all the verifications and profile fields on the website to make sure your listing is well placed in the search results.
  • Be Prepared to Make A Time Investment – A successful Airbnb host invests some time and effort into related activities each day. This means keeping the listing optimized, responding quickly to any queries and guest related activities such as handing over keys, cleaning, answering questions, etc. It is a good idea to have the app installed on your smartphone with some responses prepared in advance to be able to quickly reply to potential guests.
  • Be Clear on the Type of Guests You Want – Not every type of traveler may be a good fit for every host. It is a good idea to be clear about who is acceptable as a guest to you. Some hosts may prefer families while others may want to avoid children.
  • Be Prepared for a Bad Experience – Though this is not common, there can be the occasional misfit who can damage or steal property. The website requires a police report to be filed in such an instance, and an insurance claim is then processed.

Tips for Renters

As with hosts, there are also some basic things that renters can do to ensure a positive Airbnb experience. These include:

  • Consider Picking a Live-in Host – If a traveler wants to be able to live like a local for a few days, then a good idea would be to pick a live-in host. This is usually a more desirable option for people traveling alone. This way, there can be an informal tour guide and a temporary companion.
  • Use Your Own Account to Make a Booking – Often a reservation may be made from a friend’s account or even a boss or employee’s account. This can create confusion later when it is time to review the guest and for the guest to review the host. Often this step is then ignored which is unfortunate for both parties.
  • Communicate Before Booking – It is a good idea to check if the place is available before trying to make a booking. This is good for the host as it allows them to answer a query without turning away a booking and therefore maintaining a good record for reservations. It can also help save time for the renter.
  • Read Listing Carefully – It is a good idea to go through the information in the listing before deciding to either make the booking or emailing a host with questions. Most common queries are usually addressed in the listing along with any specific caveats.
  • Don’t Treat the House as A Hotel – As a renter, you are a guest in someone else’s house. It is common courtesy to pick up after yourself, leave a clean house and be considerate of neighbors.
  • Create a Detailed Profile – A complete profile will go a long way in helping hosts finalize your request for a booking. Even if there is no renter history or reviews, an honest and detailed profile will make a positive impact. This includes an actual photo and other basic details.
  • Haggle – A host on Airbnb may be more flexible on prices than a hotel. This means there is often room to haggle on the price. It is a good idea to keep this in moderation, however because the risk is that the host will turn down a booking if the potential renter is too aggressive.
  • Book in Advance – More experienced users of Airbnb will make it a point to charge last minute travelers higher prices. This is especially true if the traveler is linked to a special event or conference. So making a reservation in advance will help mitigate this.
  • Pay Attention to the Host’s Rules – Every host has different rules for their listing. Some may allow pets or smokers while others may prefer families without children or singles. Some may even ask you to either pay for cleaning or do it yourself and failure to do so may lead to a penalty. Some hosts may charge extra for a guest in case of multiple travelers.

ADVANTAGES AND DISADVANTAGES OF RENTING ON AIRBNB

A few pros and cons of using Airbnb are:

Pros

  • There is an opportunity to meet new people from within the country and also all over the world. This is true for both renters and hosts.
  • Travelers can find accommodation that offers greater value for money as well as a different experience from a hotel.
  • Hosts have the opportunity to make money from an unutilized resource such as a spare room or an empty house.
  • Airbnb offers support to its users, and there is an insurance coverage for property damage or theft.
  • Users can rate each other i.e. both renters and hosts which helps create credibility.

Cons

  • One major risk is damage to property. Though not too common, but there are stories of difficult renters who left a damaged house and missing items in their wake.
  • Guests may also have to deal with properties that do not match the listing. In addition, there may be unresponsive and unhelpful hosts that make the stay unpleasant.
  • There may also be the occasional scammer, such as a person renting someone else’s apartment without the actual owner knowing.

Image credits: Airbnb and Flickr | Gustavo da Cunha Pimenta under Attribution-ShareAlike 2.0 Generic.

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