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The business practice of Airbnb

Article · November 2021

DOI: 10.6084/m9.figshare.21739967

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Running Head: Airbnb Lodging Hospitality Service 1

Airbnb Lodging Hospitality Services

Sk Tanvir Ahmed
School of Management
California Lutheran University, Thousand Oaks, CA 91360
Airbnb Lodging Hospitality Services 2

Introduction:

Due to the development of technology, everything in our life is getting easier day by

day. In addition, a few years ago hospitality business was hardly a topic of academic or

commercial interest. However, providing the largest networked accommodation service,

Airbnb is now a surprising major hotel chain such as Hilton and other five-star hotels. In

addition, Airbnb’s market valuation also surprises financial activities hence, people keep

investing in Airbnb. On the other hand, Airbnb grows digital platforms that show a structure

of social changes. For example, allowing a complete stranger to staying a person’s own house.

Furthermore, some Airbnb offers services such as airport pickup, etc which is establishing a

strong bond between people. From the business point of view, short-stay holiday rentals by

private individuals and entrepreneurs establish a professional hotel business that is making a

positive impact on the economy.

The business practice of Airbnb is contested. This is because Airbnb promotes a more

inclusive form of tourism than conventional tourism accommodation through a peer-to-peer

platform. Which allows ordinary people with novel ways to make money from renting out

space in their own homes. However, here the argument is the property owner using Airbnb for

the commercial provision of permanent holiday homes (Kadi et al., 2019). Here Airbnb opens

a door of income for those property owners also retired people who own property. This type of

service is the same as the hotel service however, the difference is the guest feeling an

environment such as staying in a place like a family or local place. This type of environment

is not possible in the hotel service. Based on this fact the impact of Airbnb on host communities

shows a provision practice in the housing, commercialization, and local neighborhoods housing

platform.
Airbnb Lodging Hospitality Services 3

History of Airbnb:

Airbnb was founded by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk in San

Francisco in 2008. In 2007 those founders were traveling to a conference, however, unable to

pay for their housing hence, the two founders decided to rent out part of their apartment which

will help them to pay for the cost of the trip. This event changed everything and create the

company name Airbnb. From this event, the founder wanted to change the way that people

thought about travel. During the year 2009, Airbnb’s founder partnered with Y Combinator

and expanded its limited offering. In addition, Airbnb founders keep continued their expansion

and capital-raising efforts until the operations go internationally by acquiring Accoleo. Airbnb

now recognized tourism activities in many places in recent years. In addition, this company is

known as the world’s largest marketplace of accommodations. Furthermore, Airbnb offers

unique, authentic 7 million accommodations and 50,000 handcrafted activities where

everything is powered by the local hosts. On the other hand, Airbnb is recognized as an

economic-powered engine where it helped millions of hospitality entrepreneurs monetize their

spaces and their passions. Furthermore, it also helped those entrepreneurs for keeping the

financial benefits of tourism in their own communities. To present more than three-quarters of

a billion guests have been arrivals to date and this is accessible in more than 62 languages

across more than 220 countries and regions. The company also plays an important role in

people-to-people connection, community, and trust around the world.

Airbnb offers a wide selection to choose properties. For example, it hosts many

different kinds of properties such as single rooms, apartments, moored yachts, houseboats, an

entire house, and even a castle. In addition, the host no needs to pay the fee for the list of their

properties. The property description is like a written description of the room or apartment with

some photos. The guest or traveler will take a look at that and let the host know. Another point

of view is the host is independent to set up his or her property price. Furthermore, the Airbnb
Airbnb Lodging Hospitality Services 4

database is customizable, and guests can search property based on price, amenities, and the

language of the host. Airbnb also offers a protection program for guests and hosts. For example,

Airbnb holds the guest payment for 24 hours after check-in before releasing the funds to the

host. In addition, for the host, Airbnb offers a guarantee program that is up to $1,000,000 in

damages to covered property and these rules apply in eligible countries.

Financial Goals of Airbnb:

Since the company has established Airbnb has gained skyrocketed in popularity as an

alternative to hotels. The online hospitality service in the marketplace keeps an authentic place

that establishes a connection between travelers and the local hosts (Deane, 2020). On the other

hand, Airbnb statistics and information show that the company keeps growing day by day. For

example, in 2020 Airbnb has approximately 2.9 million hosts. In addition, 14,000 new hosts

join the Airbnb platform every month. Lastly, this year’s data show that there are

approximately 220 countries and regions with active Airbnb listings. The current market

valuation of Airbnb is $35 Billion and revenue in Q2, 2020 is approximately $335 million. Due

to the COVID-19 pandemic like other businesses Airbnb also faces losses and that amount is

approximately $1 Billion. Based on this fact Airbnb has issued a refund policy due to the global

travel shutdown. In addition, $250 million of aid has been released to cover the immediate

losses. Like other organizations, Airbnb also axed about 2000 employees in the pandemic

situation. Having faced so many difficulties the company founder planning to focus on hosting

properties in a lesser-known destination in order to save the company from further losses in the

future. On the other hand, at the end of 2020 Airbnb preparing to potentially go public (Crane,

2020).
 Airbnb Lodging Hospitality Services 5

AIRBNB REVENUE
Revenue

$5,000,000,000 $4,700,000,000.00

$4,500,000,000

$4,000,000,000 $3,600,000,000.00
$3,500,000,000

$3,000,000,000 $2,600,000,000.00
$2,500,000,000

$2,000,000,000 $1,700,000,000.00

$1,500,000,000
$900,000,000
$1,000,000,000
$423,000,000
$500,000,000

$0
2013 2014 2015 2016 2017 2018 2019 2020

Figure 1: Airbnb Revenue

Figure 1 illustrated the revenue earned by Airbnb from the year 2013 to 2020. At the beginning

of 2014, Airbnb started its revenue at $423 million which ended at $900 million in the year

2015. The graph shows that from 2016 the revenue keeps increasing and in 2018 the revenue

is approximately 3.6 billion. However, did not face any fluctuation in the marketplace Airbnb’s

revenue increased to 4.6 billion in 2019. On the other hand, due to the COVID-19 pandemic,

the current revenue of Airbnb is now $335 million approximately. On the other hand, it can be

said that the company will net around $3.5 billion by the end of 2020. Airbnb offers rentals

with 7 million properties around the world based on their website and 2.9 million hosts have

made in 2019 (Curry, 2020). The reason for earning so much profit is Airbnb earns money by

being the middleman between renters and Airbnb guests. For example, when an Airbnb guest

books the host's property then the host pays Airbnb a fee. In addition, another reason for earning

revenue is an extra charge and fee depending on the total cost of the guest's stay. Based on

these facts there is four analysis point of view that allow Airbnb to earn revenue. The first
Airbnb Lodging Hospitality Services 6

reason is the average number of guests per listing each year. The second point is the number

of listings. The third and fourth points are the average rent per guest and Airbnb’s share of the

profit respectively (Deane, 2020).

Airbnb Users
Users

160,000,000 150,000,000

140,000,000

120,000,000
100,000,000
100,000,000

80,000,000

60,000,000 50,000,000

40,000,000

20,000,000
6,000,000

0
2011 2012 2013 2014 2015 2016 2017 2018 2019

Figure 2: Airbnb user statistics

Figure 2 illustrated the user statistics of Airbnb from the year 2012 to 2018. In 2012 the user

was around 6 million. The user figure keeps continuing to increase from the year 2013 to 2014.

Another reason is due to the development of modern technology such as smartphones

increasing a number of users seen in 2015 increased to 50 million and in 2018 it increased to

150 million respectively (Curry, 2020). On the other hand, it is very easy to download the app

from the Google and Apple play store. Hence, based on this fact currently now is more than

150 million users using the Airbnb app. More customization options, the popularity of the

company, trusting point of view from two sides such as the host and the user, and the Airbnb
Airbnb Lodging Hospitality Services 7

adventure through the global allowing people to keep downloading the app from the two-

common app stores.

Booking
Booking Linear (Booking)

200,000,000

180,000,000

160,000,000

140,000,000

120,000,000

100,000,000

80,000,000

60,000,000

40,000,000

20,000,000

0
2015 2016 2017 2018 2019
Booking 25,000,000 52,000,000 115,000,000 140,000,000 187,000,000

Figure 3: Airbnb Booking Statistics

Figure 3 illustrated the booking statistics of Airbnb made by the user from the year 2015 to

2019. At the beginning of 2015, the booking was around 25 million whereas in 2016 it

increased to 52 million. However, in 2017 63 million bookings increased from the year 2016.

In 2018 the booking increased to 140 million. As most people like to make a booking through

the holiday period such as December however, due to COVID-19 there are not many bookings

took place in the year 2017 and 2018. Approximately 187 million bookings took place in 2019

(Curry, 2020). On the other hand, more than 500,000 U.S. booking reservations took place that

night. In addition, people like to reserve a rental space at night which plays a norm for Airbnb

rentals. Another point of view is Airbnb showing a huge threat to the hotel industry this is

because the booking number is higher than in the hotel industry. As the trend keeps increasing

it will make an effect such in less than a decade, Airbnb will show a redefinition of how people
Airbnb Lodging Hospitality Services 8

travel, create a memorable event through social media, and have an economic impact on the

global market.

Airbnb Listing
Years Listings

8000000
7,000,000.00
7000000
6,000,000.00
6000000

5000000
4,000,000.00
4000000

3000000
2,100,000.00
2000000
1,200,000.00
800,000.00
1000000
300,000.00
120,000.00
2012 2013 2014 2015 2016 2017 2018 2019
0
1 2 3 4 5 6 7 8

Figure 4: Airbnb Listing Statistics

Figure 4 illustrated the number of listing from the year 2012 to 2019. It graphs show that from

2012 to 2014 list keeps increasing. Which is approximately 0.12 million in 2012, 0.3 million

in 2013, and 0.8 million in 2014. Since the Airbnb app has been introduced in 2010 then the

listing keeps increasing (Curry, 2020). It takes time to introduce people to the Airbnb app and

its facture. On the other hand, data connection and network speed are also a point of view. For

example, many Asian countries do not have strong internet speeds like European countries.

Hence, the host faces several technical problems to post the listing. However, due to the

development of advanced technologies such as data science and algorithm the listing

dramatically keeps increasing. For example, from the year 2015 listings on Airbnb cross 1.2

million, and in 2016 it increased by 1.0 million as the actual figure of listing made in 2016 was

2.1 million. Furthermore, listing on Airbnb keeps increasing as result in 2018 6 million listing
Airbnb Lodging Hospitality Services 9

has been made and last year approximately 7 million lists have been taken place (Curry, 2020).

The booking depends on the user such as which time they are comfortable coming. On the other

hand, there is no limitation of listing on Airbnb however bandwidth and locations may cause

some delays due to a large number of the user. The good news is due to the advanced

technology can accommodate 1.9 million listings at any given time. In addition, hosts can

attract potential guests through listing on the Airbnb website or social media pages.

How Airbnb works:

Airbnb’s business model has the same category as other apps such as Uber and OYO.

In addition, Airbnb did not follow traditional hotel apps like Hilton and Marriott. Following

the methodology of Grubhub’s business model, Airbnb was also helped by the online platform

in order to make a connection between the component and the model. The biggest assets of the

Airbnb process are the individual and the hosts. Another advantage is unlike big hotels, Airbnb

has a minimum cost and does not need huge capital (Saxena, 2020). The platform Airbnb is for

hosts and travelers. The processing is sample such as host can put up their property on the

Airbnb platform and someone who wishes to stay there, the host will receive rent in exchange.

In addition, the individual who books via Airbnb gets a different experience by staying close

to the locals. Based on these facts the Airbnb process consists of five steps. The first steps are

for the host to list their properties on the Airbnb website or app. That posing is with necessary

facilities such as providing Wi-Fi, meals, a number of bedrooms, etc. The second step point on

the photograph. High-definition photographs of the property are uploaded on the website or the

app. The third step depends on the travelers. Travelers then browse through and choose the

property where they are willing to stay. After choosing the property they set updates, the day

of stay, and the number of guest before making the payment. Step four-point on host approval
Airbnb Lodging Hospitality Services 10

to stay and payment which includes some extra charges. In the last step when the staying is

over then after deducting the commission fee, the host is paid by Airbnb (Saxena, 2020).

Message

Host Room or House Visitor

Access to matket Access to market

Profit Host and room Request

Renting fee and service fee 6-12% service fee
o

Airbnb

Figure 5: Airbnb Digital Business model

On the other hand, the Airbnb revenue model contains the fee that is charged by the

host and the travelers. In addition, this charging is somewhat similar to the Postmates revenue

models. The difference is Postmates earns through fees whereas the Airbnb revenue model is

based on the listing and the number of stays. The listing and booking are made from a platform

and that platform is the main source of Airbnb revenue. Here the first source of revenue is a

commission from the hosts. When someone chooses a host’s property and makes a payment
Airbnb Lodging Hospitality Services 11

that time Airbnb cuts 10% of the payment as the commission earnings. In addition, this is also

a part of the Airbnb fee structure. The second source of revenue is the transaction fees from

travelers. Travelers are charged 3% for the transaction and this amount of charge adds to Airbnb

revenue (Saxena, 2020).

Technology used by Airbnb:

Since the year 2008 Airbnb users keep increasing day by day. The main reason for

Airbnb’s success in the market is it is a safe, reliable, user-friendly, and convenient marketplace

which allows Airbnb’s platform easy to rent and lease accommodations (Tokareva, 2018). In

addition, these achievements are not made unless Airbnb uses great functionalities and features.

Airbnb uses programming languages such as Ruby and JavaScript. Here the ruby framework

is Rails. ROR framework is also known for its awesome capabilities of speed and development

which help Airbnb to reduce costs on many fractures. The JavaScript framework is based on

React. The UI library of the Java script helps Airbnb to make a flexible and efficient solution

for building a sleek user interface. For the web server, Airbnb uses Nginx. Nginx is known as

the powerful HTTP and proxy server that help Airbnb to speed up content delivery, and ensure

Airbnb’s security and scalability. In addition, Instagram, and Netflix also get an advantage by

using the Nginx platform. Airbnb uses Redis for the scalable cache infrastructure and key

database storage. To store data which include millions of user picture and other information

Airbnb uses Amazon S3, and EBS cloud storage. In addition, to distribute the incoming traffic

and keep Airbnb’s system all-time running, and avoid traffic spikes Airbnb uses Amazon EC2

cloud hosting and the cloud database is Amazon RDS respectively. Other big data tools are

Presto, Druid, and Airpal which allow Airbnb to store, process, analyze and manage various

instruments (Tokareva, 2018).

Airbnb Lodging Hospitality Services 12

SWOT analysis of Airbnb:

Strength of Airbnb

Airbnb is known as a well-established brand. In addition, Airbnb going to the public by the

end of 2020. Going public pointed to the company’s strong financial condition. This

company’s business model focus on low-price comparison with hotels and guest. The main

product of Airbnb is the accommodations service. Here, Airbnb offers various types of

accommodation such as rooms, apartments, farmhouses even a castle. Hence, customers are

now enjoying several types of products. This also allows Airbnb to expand its operations.

Airbnb is a cheaper alternative to other resorts and hotels. In addition, Airbnb has been

designed for every class of people. Tourists who are unable to spend money on an expensive

hotel can enjoy the benefit of staying at the local place. Sometimes some accommodation

service is nicer than any five-star hotel. In addition, staying in a person’s accommodation

open a bond between the people this type of facility is not seen in a hotel and other resort.

Airbnb is recognized globally and it has many users around the world including hosts and

guests. People looking for a standard or luxury listing have the option to choose Airbnb Plus.

This fracture has launched in 2018. Another fracture is Airbnb collection. Which introduces

the user to book for special occasions such as Airbnb for work, Airbnb for families, and

homes for dinner parties, gatherings, and weddings. Good customer service and activities in

social media help Airbnb attaching more customers day by day (Bhasin, 2019).

Weaknesses of Airbnb

In some states and countries, Airbnb is not legal hence, it often faces problems from violating

various housing laws and regulations. A poor host can damage the company’s reputation.

For example, the host is not following Airbnb’s guidelines which will result in unsatisfactory
Airbnb Lodging Hospitality Services 13

service feedback from the customer. The huge weakness of Airbnb is its business model,

which is easy to copy, and it is opening doors to other companies. On the other hand, hosts

and guests are not able to see the review, unlike the Uber app. Hence, the guest does not feel

comfortable when they first time meet with the host. This is mark objectivity to the service

review system. Some properties are designed for long-term stays in the market. Here Airbnb

gets criticized for asking a higher price for a short-term stay (Bhasin, 2019).

Opportunities of Airbnb

Having a strong brand value allows Airbnb to expand into emerging markets. This also gives

advantages such as less competition. Allowing different types of properties expands Airbnb

its product mix and offerings which allows Airbnb to serve the customer better. For example,

giving facilities such as travel guides, car rental, etc. Instead of using a laptop or computer,

Airbnb can access through mobile apps. Which gives better user satisfaction from the

customer. Having low prices and personal touch allows Airbnb to increase its visibility

across and gain more revenue (Bhasin, 2019).

Threats of Airbnb

Local law on rental properties makes a threat to Airbnb’s business. In addition, Airbnb needs

to make its guideline based on local law and ensure the guest and host must obey the law.

On the other hand, the company already faces some lawsuits around the world in a place like

New York, Florida, etc. In other words, the Barcelona Authorities have fined Airbnb for

violating tourism laws. VRBO, tripping.com is new in the market, however, in the future,

they may be a strong competitor for Airbnb (Bhasin, 2019).

Airbnb Lodging Hospitality Services 14

Cyber security of Airbnb:

Having a platform worldwide Airbnb often faces cybersecurity threats. For example,

in September 2020 Airbnb hosts’ account data has been exposed by an internal leak (Scroxton,

2020). As a result, the company faced criticism. Cyber analysis advised that Airbnb needs to

clear cookies on their internet browser. In addition, to the leak, Airbnb takes extra security

protocols to secure the host’s sensitive information, including passwords, phone numbers, and

key access codes for the host’s property units. UpGuard rating Airbnb security as 798 points

among 900 points as it has vulnerabilities in the system such as insecure SSL/TLS version,

HttpOnly cookies not used, secured cookies not used, etc. From the host’s point of view, the

host needs to ask guests to use their own Wi-Fi or mobile network. This is because allowing

an unknown person to use the home Wi-Fi network allows a stranger to steal valuable

information about the guest. Here, the host alternatively can create an encrypted guest Wi-Fi

network this is because nowadays everything works through the internet. Lastly, the host needs

to store the router in a safe place and carry out regular firmware updates in order to save

information from the hacker.

Conclusion:

In conclusion, Airbnb was never a billion-dollar company however using information

technology and data science helped the company increase its operating day by day. In the past,

all bookings took place through the website however today all bookings, listings, and ratings

can be done through smartphone apps. In addition, Airbnb all platforms are turned into the

mobile app since the mobile development cost is not high anymore. Spending higher money

than hotel stays plays a significant role in the economy. In the future, Airbnb will take over the

hotel business and become better at providing services than hotels. Airbnb aims to serve 1
Airbnb Lodging Hospitality Services 15

billion travelers annually which will allow Airbnb to add more and more cities to its lists. On

the other hand, due to the huge number of hosts and guests, Airbnb needs to focus more on

cybersecurity, establish guidelines and make more familiar with local laws and regulations. It

is true that the Airbnb business model is easy to follow however, they can add more factors

such as Airbnb Plus, etc. Furthermore, Airbnb also needs to work with host and guest trust

issues such as allowing the guest to view the host’s previous review the same rules apply to the

guest too.
Airbnb Lodging Hospitality Services 16

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Crane, E. (2020, August 11). Coronavirus: Airbnb founder estimates theyve lost $1BILLION.

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 Airbnb Lodging Hospitality Services 17

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