Airbnb – How a Simple Air Mattress Led to a Global Business

Posted on May 18, 2022

Airbnb is an platform operating online that connects people who want to rent out their vacant space in their own rooms with people who are looking for lodging.

Airbnb has come a long way since 2007, from a single room to more than 7 million listings in 100,000 cities and 220 countries across the world.

How AirBnB started

The company has a very humble beginning. The idea of AirBnB came from an acute problem during the recession. That of scarcity of affordable accommodation.

It was year 2007, when two friends Brian Chesky and Joe Gebbia put up an air mattress, turning it to a makeshift bed. The two rent out the space in their San Francisco apartment to offset the hight cost of rent.

The idea took hold and slowly travellers were using shared space for accommodation.

In the year 2008, the two with Nathan Blecharczyk created a website to provide short term rentals that eventually became AirBnB.

AirBnB has been expanding its operations to international markets in the United Kingdom, Germany, France, Spain, Russia, and Brazil, since 2012.

Besides simple renting, AirBnB also offer other services now including – AirBnN experiences, AirBnB collections and AirBnB plus.

How AirBnN works

AirBnB is a trend setter. It is a prime example of how social paradigms shift when major incidents take place. Founded during the recession of 2008 it has changed the way people look for accommodation worldwide.

Basically the idea is about sharing rooms. If you have a extra room than you can rent it out to someone looking for accommodation. The renting and payments are all done online through the Airbnb app so you and the customer dont have to do anything.

The customer gets a homely environment (hopefully) with probably some extra facilities like a kitchen and the host can put some money in the pocket in the process. All at an affordable price lower than most hotel rooms. A win win situation for both the customer and the host.

This is how the process works – search for accommodation in the area through the AirBnB website/app. You will get a list of accommodation available. Choose any accomodation, read the reviews (optional) and about the host (optional) and see the ratings. If you are satisfied, then you can book by paying through AirBnB website/app.

How AirBnB makes money

AirBnB is a prime example of how to take advantage of a shared economy. Listing a property at AirBnB is free but for any transaction involving the property costs money.

AirBnB charges both guest and the host. When a host gives a room for accomodation, AirBnB charges 3% from the host. And the guest has to pay something around 14%.

Besides the transaction fee, AirBnB also charges for any additional services offered by the host. These include massage, swimming pool, spa and any other value added services. AirBnB charges 20% for any additional service.

These are the two main ways for AirBnB to make money. The website/app mercifully does not show ads.

AirBnB IPO

AirBnB went public on December 10, 2020. The initial public offering share price was $68. AirBnB raised $3.5 billion from the IPO.

AirBnB marketing strategy

AirBnB has two types of customers. First the hosts or house owners and second the guests or travellers. The company knew that the growth of the company depends on focusing on the hosts. They have been extensively providing the house owners with all the tools to make the hosting a smooth affair.

In the beginning when the founders saw that some of the pictures were not upto the standard, they took it upon themselves to visit the hosts and train them on taking qualilty pictures.

Not only that, AirBnB has guides and training classes for hosts. They have tutorials and rewards for preforming hosts.

Unlike hotels, AirBnB has tried to create a community of travellers and hosts. Airbnb’s does not compete with hotels. Instead, the founders focuses on the unique experience of staying at a native place.

It is not only about lodging, but the whole cultural experience that comes when people from difference societies mix in a homely atmosphere. AirBnB strives to facilitate that.

The user interface in the website/app is made to give a unique feel. Most of the action buttons are made from letters giving it a uniqueness in design.

AirBnB retargets the user. When a user stays at one of their rental spaces, they ask the user about the experience and also to list his/her own property in the platform.

With their additional services, the company tries to give a homely atmosphere to the guest and make him/her comfortable. Their superhost program rewards the people who have taken good care of their guests and are rated highly.

The challenges ahead

The main challenge of AirBnb has always been to comply with the regulatory framework on the region they are operating on.

With operations going international the headaches associated with local rules have been a real problem for AirBnB.

AirBnB has about 7million listings in 220countries and almost 100,000 cities worldwide. With this huge assortment of listings comes the inevitable hassle of complying with the local regulatory rules.

So far AirBnB has opted to go with the regional guidelines to expand their listing.

Secondly, there are competitors popping up everywhere. Companies like tripping.com, booking.com, hometogo.com, flipkey.com, vrbo.com etc. are providing stiff competion and eating into AirBnB shares of the market.

It will be interesting to see how well AirBnB responds, because these competitors run on almost the same strategy as AirBnB and some of them provide service at verticals that AirBnB does not serve at the moment.

Whatever happens to AirBnB, one thing is for sure; it has changed the accommodation industry forever.

Business lessons from AirBnB

Necessity is the mother of invention. AirBnB is a lesson of how solving a pain point can lead to a global business. In fact most successfull businesses follow this simple truth. Solve something that is bothering people and you have the blueprint of a solid business.

Run against the current, that is where the development is. AirBnB was founded during recession, when most businesses collapsed. People would think you to be a mad to start a new business. But that is what the founders did and the rest is history. It is finding opportunity in despair that matters!

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