How Does Airbnb Make Money: Business Model & Revenue Source

Do you also wonder how does Airbnb makes money? Their popularity has surged since its launch in 2008, and so does their sales.

In 2023, Airbnb’s total revenue worldwide reached 9.92 billion U.S. dollars, and revenue for ending June 30, 2024, was $10.505B based on Statista reports and macrotrends.

It is a global online marketplace that provides affordable accommodations to travellers with hosts who offer their properties as short-term rentals.

Let’s start by understanding their business model and revenue source to learn how they have become a billion-dollar business.

Airbnb’s Core Business Model

The Airbnb business model operates as an aggregator business model. Its model is a two-sided marketplace that connects travellers with hosts globally.

It is unlike your hotels because they don’t own or manage properties directly. They have helped make renting private living spaces and accommodations easy.

The host can list their properties, and the guest can choose them based on location, preferences, and availability while the host gets rent in exchange.

You can trust them because Airbnb includes a verification process, reviews, and dispute resolution mechanisms. They even include photographs of the property to help the guest make the right choice.

It offers the best staying experience and allows them to learn about local culture. Their business model has helped them become a leading player in the hospitality industry. The Google Ads have also helped Airbnb promote their business, leading to great profits.

Key Features of Airbnb’s Business Model

Airbnb's business model helps it make money. However, the model's key features contribute to its success.

Service Marketplace: It is an online platform for connecting guests and hosts, creating a two-sided marketplace. It benefits both of them, as the hosts can earn extra income while the guests can find unique accommodations.

Global Reach: Airbnb has a wide global reach, which is known from the fact that they have 7 million active listings in over 220 countries.

Community: Airbnb encourages interaction among hosts and guests, creating a sense of community.

Payment Processing: The payments are handled through a secure and convenient payment system, making the payment process easy while reducing the risk of fraud. It happens when the payment gateway integration is done with good strategies.

Scalability: Airbnb's business model includes scalability because it allows it to accommodate a growing number of users and expand its operations.

Airbnb Revenue Model

The revenue model of Airbnb relies on the service fees charged to both hosts and guests. The listing and stays are the crucial aspects of their model.

However, their revenue comes from the service fees that are the bread and butter of Airbnb’s revenue model while Airbnb revenue manager also implement various strategies to optimize company’s revenue.

Earlier, the booking can only be made on websites, but now it has expanded to apps, leading to the increase in mobile development apps trends.

Guest Service Fee

When guests book a property on Airbnb, they are charged 14.2% of the booking subtotal. This fee covers the costs of guest support, platform maintenance, and other operational expenses.

Airbnb offers competitive pricing, but it can still increase revenue because of the flexibility in guest fees.

Host Service Fee

Another revenue source is a host service fee. Hosts are charged 3% of the booking subtotal.

The hosts can keep a large sum of their earnings because Airbnb doesn’t charge for payment processing. This fee usually covers operating and maintaining the platform costs.

If you are choosing a future business idea like Airbnb, you can include such models and revenue streams in your business.

Airbnb’s Additional Revenue Streams

Airbnb's primary revenue streams come from service fees. However, there are additional revenue sources that help with their growth in sales and how Airbnb make money.

1. Airbnb Experiences

Airbnb experiences are a new addition to the platform. It offers other unique experiences for guests, such as cooking classes, guided tours, and workshops.

Airbnb reported over 448 million booked nights and experiences in 2023. This is because many people want more than just a place to stay.

2. Airbnb Plus

Airbnb Plus is a premium service that offers properties with higher standards of quality and service.

The host also enjoys benefits and amenities like professional photography and guaranteed guest satisfaction. This enhances Airbnb's revenue and brand image by offering a superior experience and accommodation.

3. Airbnb Luxe

Airbnb Luxe is another revenue stream that offers high-end services catering to luxury travellers. These travellers get access to exclusive properties and customized services.

Airbnb Business Segmentation

Now, you must have learned about how does Airbnb make money. But, you should also know that it has segmented its market into various categories to understand the target market.

Here is everything about the Airbnb market segmentation.

1. Hosts

Hosts are those who offer their properties for rent to guests. They list their properties on the website, and after they get booked, the host receives rent in exchange.

They can accept or deny the guest’s request after reading their reviews. You can also check the check-in and check-out times, including the additional facilities the host offers.

2. Travelers

Airbnb’s market segmentation includes travelers, who look for places to stay or rent from hosts. They can book a place without any hassle by choosing it according to their needs and preferences.

3. Photography

Airbnb provides high-quality photos of listed properties with the help of professional photographers. This helps attract travelers and shows the features of each accommodation.

4. Short-Term Rentals

Short-term rentals are Airbnb's core business, and they also contribute to increased sales.

They are best for guests who want short-term accommodations. Airbnb allows them to choose from many options, such as entire homes, apartments, and rooms.

5. Business Travel

Are you going on a business trip to a different country or region and looking for the best place to stay? Then look no more because Airbnb also offers a comfortable and convenient option for business travelers.

6. Long-Term Rentals

Airbnb also introduced long-term rentals in 2011, making them convenient for guests seeking extended stays.

They allow 28 days or monthly stays. Airbnb offers many benefits, from furnished rentals to simple monthly prices.

Airbnb Cost Structure

Airbnb cost structure includes the expenses associated with operating a large-scale online marketplace. Its cost structure involves several main costs:

1. Technology Costs: Technology costs are required to maintain and develop the Airbnb platform. These costs are needed for the website, server, and data storage. Airbnb pays for these costs.

2. Running Costs: Running costs include electricity bills and other ongoing expenses required for the business's daily operation.

3. Permanent Employees Salary: Airbnb employees are paid a monthly salary, which is also included in the Airbnb cost structure.

4. Freelance Photographers Payment: Airbnb also pays freelance photographers fees for photographing the listed properties.

5. Marketing and Advertising Costs: They also have to pay for marketing and advertising to maintain brand awareness and acquire new users and to keep up with emerging trends in marketing.

Impact of Airbnb’s Business Model

Airbnb has disrupted the hospitality industry after entering the market. This is because they offer personalized and affordable options compared to hotels. This has forced hotels to improve their services because Airbnb's increased growth has also increased competition.

Airbnb has changed how people travel and find a place to stay because it has created great opportunities for homeowners to earn extra income and for travelers to find a place to rent easily.

They offer more choice to them, and often at a lower price while allowing secure payments through payment gateways.

Despite their success, they have faced various challenges, including regulatory issues, concerns about its impact on housing markets, and disputes with local communities. However, it still grows because it fulfills the needs of its customers, enhancing their satisfaction.

The Future of Airbnb

Airbnb has come a long way since it launched its website Airbedandbreakfast.com, now Airbnb. They continuously change their business and revenue model while meeting customer needs.

Airbnb also aims to serve more than 1 billion annual guests by 2028. They allow guests to navigate by three property types: shared space, private room, and entire home.

But, they will also add four new property types to its platform: Vacation home, Unique space, B&B, and Boutique, according to Airbnb newsroom. This will happen because the hosts often find it hard to stand out, and it also makes it difficult for guests to find the property they are looking for.

Airbnb could invest in virtual reality technology to enhance the user experience by providing travelers with a virtual experience and tours of properties.

They can also use AI in sales to personalize recommendations and optimize pricing strategies. Blockchain technology could be explored for payment processes and to ensure data security and transactions.

Conclusion

You must have an answer to your question: How does Airbnb make money? They use a similar aggregator business model to Uber and have been profitable since its launch.

Its business model has various features, from marketplace to scalability, that contribute to its profit. Airbnb’s revenue model involves charging the host and guest service fees that vary depending on booking price, location, and accommodation type.

Airbnb also earns additional revenue through different revenue streams, such as experience, plus, and luxe.

After entering the market, it has disrupted the hospitality industry by offering personalized and affordable options.

You can also develop an online platform with our skilled developers' help and incorporate excellent business and revenue model strategies to earn success, just like Airbnb.

Frequently Asked Questions

Q1 How much does Airbnb charge hosts?

Ans Airbnb generally charges hosts a 3% service fee on the booking subtotal.

Q2 Can hosts choose not to charge guests a service fee?

Ans No, the guest can’t choose not to charge service fee because it is automatically applied to all bookings.

Q3 What is Airbnb’s cancellation policy for hosts?

Ans Airbnb offers several cancellation policy options for hosts. However, the terms and conditions for cancellation depend on the policy chosen by the host.

Q4 How does Airbnb protect hosts from damages?

Ans Airbnb protects hosts from damages caused by guests by offering the Host Guarantee. The hosts can also purchase optional insurance for added coverage.