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Airbnb is an innovative business that has grown faster than anyone could have imagined, in fact, it has been dubbed as the world’s fastest growing travel website! It has shifted the travel paradigm in a new direction, satisfying consumer desires to take part in the sharing economy and to reduce travel costs.
Whilst the concept of Airbnb is simple (you rent a place to stay from a home owner for a specified period of time), there is much more to Airbnb than meets the eye. In this post I will explain what Airbnb is, how it works and what the wider impacts are.
What does Airbnb stand for?
Airbnb is an abbreviation for air mattress bed and breakfast.
Unlike traditional bed and breakfast accommodations, however, breakfast is not typically included in a stay.
The spelling of Airbnb is a tricky one and many people get it wrong. AirBNB, AirBnB and AirB’n’B are common mistakes.
The Airbnb logo is called the Bélo, which is short for ‘Belong Anywhere’. The short form is easily pronounced by anyone on Earth, or so they say.
According to Brian Chesky, co-founder of the company, the Bélo is intended to be a symbol of ‘belonging’. The logo combines four simple symbols: a head which represents people, a location icon which represents place, a heart which represents love and then an A which represents Airbnb. The video below explains why the logo was designed this way.
What is Airbnb?
Airbnb is essentially an online marketplace that involves the renting of property to travellers. They have also recently started offering experiences too.
Airbnb does not own any of the properties. It simply provides a platform from which people can rent out their properties or spare rooms to guests. Prices are set by the property owners and monies are collected via the Airbnb app.
There are many different types of Airbnbs. You can rent a room in someone’s house or a whole island and everything in between! I have stayed in some pretty cool Airbnbs myself, take a look at some of them in this post- 7 reasons why Airbnb is my favourite accommodation option.
The history of Airbnb
Airbnb was founded in August 2008 by Joe Gebbia, Brian Chesky, and Nathan Blecharczyk, with its headquarters in San Francisco, USA.
The idea came to Brian Chesky and Joe Gebbia in 2007 when they could not afford to pay the rent for their apartment. They transformed their living room into a bedroom in order to ‘share’ their home with three guests and provided them with homemade breakfast. This was the beginning of the Airbnb concept.
There was a big design conference in San Francisco and consequentially a number of hotels throughout the city were sold out. This gave Chesky and Gebbia the idea to rent out more rooms to guests on a ‘sharing’ basis. They had seen a potential market for the idea and thus developed a website called airbedandbreakfast.com.
To help fund their business, the boys sold breakfast cereals during the 2008 presidential race; earning them around $30,000.
Contrary to what many people think, Airbnb was not an instant success.
Like many emerging businesses, Airbnb experienced several ups and downs, and it went through at least three separate launches. Whilst the boys managed to spark the interest of a number of investors, they didn’t take the Airbnb concept seriously. Eventually, after much hard work and perseverance, an investor was found. Paul Graham could see the potential in the Airbnb business model and decided to jump onboard.
Graham invited the founders to join a program called Y Combinator, which provides a startup business with money and training in exchange for a percentage of their company. In 2009, Air Bed & Breakfast became Airbnb, which was when the company really started to take off.
According to a Forbes article, as of May 2018, Airbnb was worth $38 billion.
The Airbnb Story: How Three Guys Disrupted an Industry, Made Billions of Dollars … and Plenty of Enemies is a great read for anyone interested in learning more about the Airbnb industry grew and developed so rapidly. Described as ‘an engrossing story of audacious entrepreneurism’, it is the first, definitive book to tell the remarkable story behind Airbnb in all its forms, along with an in-depth character study of its leader Brian Chesky, the company’s curious co-founder and CEO.
Read also: Types of tourism: A Glossary
The Airbnb business model
The Airbnb business model is simple. It is a two-sided platform that facilitates the process of letting out and booking a property for travellers to stay in. It is based on the notion of sharing and is one of the most successful businesses in the sharing economy.
On the one side Airbnb provides the opportunity for home owners to list their accommodation on the Airbnb app, which yields a rental income. On the other side it provides travellers with easy access to a wide range of accommodation options.
In a recent campaign, Airbnb promoted the experience as not just visiting a destination, but ‘living’ there. Airbnb claims that you can ‘feel more at home’, mix with locals and gain a more authentic travel experience by staying in the homes of others instead of in a traditional hotel.
Airbnb is essentially just the facilitator of said transactions ad the company do not own or manage any of the properties listed. Instead, they simply act as the middle man, connecting the home owner with the traveller via the Airbnb app.
Airbnb provides host protection insurance and has a developed review and rating system, which allows both hosts and travellers to vet the people that they will be working with before agreeing to do so. This is common practice throughout the sharing economy and throughout the wider tourism industry, with most people being familiar with websites such as TripAdvisor.
Airbnb makes its money through commissions. It takes 3% commission of every booking from hosts, and between 6% and 12% from guests. It also offers a referral scheme if a person introduces a new customer to the platform (which I am a member of- click here for up to £30 discount on your first stay).
How to use Airbnb as a guest
Using Airbnb as a guest is relatively easy. All you need to do is set up an account, search for an accommodation (or experience), read the reviews and click to book.
Some hosts will allow immediate booking, whereas others will want to check out your profile too. For this reason, I recommend that you add a short profile with an image as well as a short note when booking (the app will give you this option when you click to book). I usually just write a short note to explain who I am travelling with, what my travels planned are and what type of person I am. Here is an example:
‘Hi, I would love to come and stay at your place! My name is Hayley and I am travelling through Europe with my husband and two children. My husband and I are both professionals who work in education and our kids, aged 6 months and 2 1/2 are frequent travellers. We are looking forward to coming to stay! Hayley’
You can do all of this via the app or on a desktop via the website. Here is a detailed video walking you through each step of the booking process.
How to use Airbnb as a host
Many people earn a decent sized income from their Airbnb rentals and some have even managed to turn it into a full time job!
Being an Airbnb host is easy. You simply list your accommodation on the site, which is free. You then decide on the details of your rental such as prices, schedule, requirements for guests etc. Once your ad is live you can then welcome your first guests. Simple as one, two, three!
Although the act of advertising and securing rental income might be easy, however, there are also many things that you need to consider. Theses are listed below:
- Understand rental taxes and what you might be liable for
- Have realistic expectations about how much of your time the rental will take up (many people underestimate)
- Make sure that you have adequate insurance
- Let your neighbours know that you will be renting out the property (to avoid any surprises or feeling of hardship)
- Research your competitors
- Set house rules, if appropriate
- To measures to identify and prevent squatting
- Calculate income and expenditure
- Make sure all appliances are working correctly and have been serviced etc
- Make sure you have the appropriate facilities and amenities
There are a number of websites and books that are available to help guide anybody who is looking to rent out their property on Airbnb. Some of my favourites are Airbnb Listing Hacks – The Complete Guide To Maximizing Your Bookings And Profits and Optimize YOUR Bnb: The Definitive Guide to Ranking #1 in Airbnb Search.
Airbnb operates on a review system.
Like many organisations nowadays, both hosts and guests will receive a request to add a review after their stay. This allows a person to build up a profile, which is publicly available to those who they may opt to do business with in the future.
This helps to withhold high standards and ensure consistency throughout the business.
A series of bad reviews can be devastating for a host (or for a guest), so it is in their benefit to provide a satisfactory or more than satisfactory experience for their guests. I have had many hosts who have gone above and beyond to please me and my family during our travels and I have no doubt that if it wasn’t for the review process, this wouldn’t happen as often as it does!
Positive impacts of Airbnb
Whilst there has been a growing body of public literature which views the use of Airbnb and the wider sharing economic as negative in terms of its impacts, particularly economically, there are also a number of positive impacts of Airbnb.
#1 Airbnb encourages economic activity in communities that wouldn’t normally benefit from tourism
Many Airbnb accommodations are in areas away from the usual tourist hot spots. I have stayed in rural areas of Costa Rica, inner city Cape Town and in a suburban apartment in Calgary, for example. Read more about why I love Airbnb here.
This can help to bring much needed income to areas that otherwise would not benefit from tourism. Whether its from buying your tea at the local supermarket or going out for dinner in a restaurant round the corner, tourists typically spend money in the vicinity of their accommodation location.
#2 Airbnb saves the traveller money
Most people know that Airbnb can save the traveller money, which is one of the biggest motivating factors for opting to use the company when choosing their accommodation options.
Airbnb accommodations can cost a fraction of the price of a traditional hotel or other accommodation option serviced by the tourism industry.
#3 Airbnb allows travellers to learn about the local communities
As I pointed out earlier on in this article, Airbnb provides travellers with a more authentic and local experience because they are living with locals or staying in local communities.
#4 Airbnb provides an income to people who need it
Airbnb has welcomed many entrepreneurs and businessmen and women into the sharing economy industry. It has allowed people to make an income when they may have previously been unable to. This can provide economic benefits to marginalised communities, impoverished areas and people experiencing economic hardship, which is particularly prevalent in developing countries.
Negative impacts of Airbnb
Unfortunately, there are also many negative impacts of Airbnb, namely economic impacts. According to the Economic Policy Institute, the costs of Airbnb businesses are likely to outweigh the benefits. Here are some of the negative impacts that have been noted:
#1 Airbnb causes increases in housing costs
Airbnb can be a big revenue earner. Once home owners begin to realise this, they are likely to snap up further properties in the same, or alternative, locations. The increases in demand for properties raises the prices, it’s simple supply and demand theory.
#2 Airbnb enhances likelihood of gentrification
Because the price of property goes up, many local people begin to be pushed out. People can longer afford the accommodation available to them in the area that they live and are therefore forced to relocate to cheaper areas. There are many examples of throughout the world, which is explained at length in this academic article.
#3 It is more difficult to collect taxes from Airbnb stays than from traditional hotel transactions
Another economic impact of Airbnb is the difficulty in collecting taxes. Traditional tourism accommodation providers are subject to a range of tax laws, from employment taxes on cleaners and cooks to city taxes.
It is a lot more difficult to collect taxes from Airbnb providers. This loss in revenue means that there is less money in the pot for community investments in areas such as healthcare or education, therefore having a knock on effect on the overall welfare of the community.
#4 Airbnb guests may be unwanted in local communities
Some local communities may not welcome Airbnb guests.
Tourists may be ignorant to local customs, for example by wearing revealing clothing in a Muslim country or by swearing in the street. Tourists may be inconsiderate to neighbours by playing loud music or by littering. Tourists may flaunt expensive gadgets and jewellery that the locals cannot afford, therefore encouraging feelings of resentment and perhaps even rises in crime.
In fact, many of the wider negative social impacts of tourism in general, can be applied to smaller communities that house Airbnb properties.
#5 There are privacy and safety concerns with Airbnb
Lastly, there have been a number of concerns over the privacy and safety of Airbnb.
From hidden cameras to doors which don’t lock properly, there have been many reported complaints from Airbnb and guests throughout the world.
Although the review system should help to reduce such incidents, unfortunately this does not always seem to be the case.
Is Airbnb safe?
Unfortunately there are some bad apples in the Airbnb industry, both hosts and guests.
From hosts placing meth pipes in their accommodation and watching guests on hidden cameras, to guests using the accommodation as a brothel and having huge parties, Airbnb is not without its fair share of dramas.
Fortunately, horror stories like these are not common, and most people have a perfectly pleasant and safe stay in their Airbnb accommodation!
In fact, Airbnb have several measures in place to ensure safety for their guests. This includes risk scoring, background and watchlist checks, handing out free carbon monoxide and smoke detectors to hosts, having a secure payment platform and a multi-layer defence strategy to prevent scams.
Whilst Airbnb is most certainly the biggest name in the game, there are also a number of companies with a similar business approach and offering on the market. You may also wish to check these out when doing your accommodation research!
Booking.com (they now offer apartment rentals alongside hotels)
What is Airbnb? Conclusion
As you can see throughout this post, Airbnb is a ground breaking company that has seen incredible growth in a short period of time. A prominent name in the sharing economy, Airbnb has become a household name.
Despite being remarkably popular with travellers and hosts alike, however, it has not been without its critics. Many academics and industry professionals have raised concerns over the sustainability of Airbnb, with negative economic impacts demonstrated the world over. Despite this, the company and its competitors continue to grow and to increase their share of the accommodation market.
Not tried Airbnb yet? Sign up today using this link and receive up to £30 off your first booking!
Airbnb further reading
- The Airbnb Story: How Three Guys Disrupted an Industry, Made Billions of Dollars … and Plenty of Enemies– The remarkable story behind Airbnb and in-depth character study of its leader, Brian Chesky, the company’s curious co-founder and CEO.
- Airbnb Listing Hacks – The Complete Guide To Maximizing Your Bookings And Profits– Bestselling Airbnb host user guide.
- Optimize YOUR Bnb: The Definitive Guide to Ranking #1 in Airbnb Search– A culmination of Daniel’s five-year experience with Airbnb from being an employee and a guest, to a host, to Superhost, and to starting an Airbnb property management company.
- The Future of Airbnb and the `Sharing Economy’: The Collaborative Consumption of our Cities– a conceptual analysis of the `sharing economy’ and accommodation sector and Airbnb.
- Tomorrow 3.0: Transaction Costs and the Sharing Economy– Munger brings a fresh perspective on the ‘sharing economy’, assessing companies such as Uber and Airbnb in relation to economics and transaction costs.