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    Revenue and Profit Drivers in Airbnb

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    Lumière Luminy
    Airbnb generates revenue primarily through service fees from bookings ranging from 6-12% that are charged to guests. Hosts are also charged a 3% fee per booking. Airbnb profits from these fees without owning properties or directly providing services, as it connects hosts and guests through its platform. Its business model allows for continued revenue growth with minimal costs. While initially a low-end disruptor to hotels by providing cheap alternatives, Airbnb has increasingly disrupted the hotel industry by attracting more customers and converting long-term rentals into de facto hotels, driving up competition and rental prices. The hotel industry has lobbied against Airbnb at local and national levels in response to this disruption.

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    Revenue and Profit Drivers in Airbnb

    Uploaded by

    Lumière Luminy
    165 views2 pages
    Airbnb generates revenue primarily through service fees from bookings ranging from 6-12% that are charged to guests. Hosts are also charged a 3% fee per booking. Airbnb profits from these fees without owning properties or directly providing services, as it connects hosts and guests through its platform. Its business model allows for continued revenue growth with minimal costs. While initially a low-end disruptor to hotels by providing cheap alternatives, Airbnb has increasingly disrupted the hotel industry by attracting more customers and converting long-term rentals into de facto hotels, driving up competition and rental prices. The hotel industry has lobbied against Airbnb at local and national levels in response to this disruption.

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    Revenue and Profit Drivers in airbnb

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    Airbnb generates revenue primarily through service fees from bookings ranging from 6-12% that are charged to guests. Hosts are also charged a 3% fee per booking. Airbnb profits from these fees without owning properties or directly providing services, as it connects hosts and guests through its platform. Its business model allows for continued revenue growth with minimal costs. While initially a low-end disruptor to hotels by providing cheap alternatives, Airbnb has increasingly disrupted the hotel industry by attracting more customers and converting long-term rentals into de facto hotels, driving up competition and rental prices. The hotel industry has lobbied against Airbnb at local and national levels in response to this disruption.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    165 views2 pages

    Revenue and Profit Drivers in Airbnb

    Uploaded by

    Lumière Luminy
    Airbnb generates revenue primarily through service fees from bookings ranging from 6-12% that are charged to guests. Hosts are also charged a 3% fee per booking. Airbnb profits from these fees without owning properties or directly providing services, as it connects hosts and guests through its platform. Its business model allows for continued revenue growth with minimal costs. While initially a low-end disruptor to hotels by providing cheap alternatives, Airbnb has increasingly disrupted the hotel industry by attracting more customers and converting long-term rentals into de facto hotels, driving up competition and rental prices. The hotel industry has lobbied against Airbnb at local and national levels in response to this disruption.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Revenue and Profit Drivers

    In airbnb
    • How is the firm likely to generate revenue through this
    innovation?

    Airbnb with listings in over 65,000 cities spread out in more than 191
    countries, Airbnb’s reputation and revenues have rapidly grown. The
    primary source of Airbnb’s revenue comes from service fees from
    bookings. Depending on the size of the reservation, guests are required
    to pay a 6-12% non-refundable service fee. A more expensive
    reservation will result in lower service fees for guests. Airbnb reasons
    that families or groups with larger reservations can save money for
    other travel expenses. With every completed booking, hosts are also
    charged a 3% fee to cover processing of guests payments. When a
    reservation is booked, guests pay the service fee unless the host
    cancels or retracts the listing. If the reservation is altered, Airbnb adjusts
    service fees to accommodate users.

    • What is the basis of its profitability?


    With lodging more accessible than ever thanks to mobile computing, the
    sharing economy continues to expand rapidly. Airbnb have taken
    advantage of technological innovations to create platforms that connect
    individuals to exchange everyday needs. Airbnb doesn't own any
    property and doesnt have overhead of maintaining these properties.
    There is no risk of loss, if a few properties are not rented out.
    Airbnb doesn't offer goods or services to the individual. Instead, its
    platform connects individuals who want to transact business with each
    other. Due to a large number of bookings, Airbnb’s revenue continues to
    grow while only charging a minimal service fee.

    As per the reports available for 2017, Airbnb made profit of close to
    $100 million.
    Nature of the Innovation
    • What is the likelihood that this innovation will be
    successful?

    • Will it have a disruptive effect on the industry? If so, how


    will the disruption occur?

    Companies like Airbnb in the sharing economy don't provide individuals


    directly with goods and services, but make their money by connecting
    buyers and sellers. This model has the potential for continued revenue
    growth.

    Airbnb started as low-end disruptor, providing cheap and basic


    alternative to hotels. Initially it wasn't noticed at all by the Hotel industry
    as it wasn't targeting the customers staying in high end hotels. But with
    time, they kept on adding features and growing the user base.

    Recently they have under scanner of lawmakers, and especially the


    hotel industry, have been concerned that long-term rental units are
    being converted into de facto hotels — thus driving prices in the rental
    market and increasing competition for hotels. The $1.1 trillion hotel
    industry has an annual budget of $5.6 million dedicated to lobbying. In
    2016, the American Hotel and Lodging Association presented a
    “multipronged, national campaign approach at the local, state and
    federal level,” according to the New York Times, and effectively
    declared war on Airbnb.

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