With this piece, we take a look at the Airbnb case study. We look at what Airbnb does, the industry, the growth, the Indian nuances and finally the summary.
Let’s get right in the piece!
The Idea and the pickup
Let’s first understand how Airbnb started. The idea originally popped up in the minds of the founders – Brian Chesky and Joe Gebbia – in 2007. They were roommates and were looking out opportunities in San Francisco. One fine day, when there was an event going on nearby and they noticed that the hotels were booked – they decided to help out by sharing their rooms with a few folks who were in need. This is how the idea of Airbnb popped up in their minds. They named it AirBedAndbreakfast.com (Airbnb) in 2008.
The idea, however, did not take off in the first few years. It was and it was only after a desperate attempt at securing funding by one of the RISD alum. They launched around the Democratic national convention because they knew there would be spacing issues and the launch was successful.
Over the next 7 years, this attention attracted a few of the most popular investors like Y Combinator, Ashton Kutcher, Andreessen Horowitz, Sequoia Capital, Keith Rabois, Founders Fund, and TPG Growth in a total of seven funding rounds—the last of which raised $500M alone – totalling to $776M. Fast forward to 2020, the company has raised billions and still raising more.
Their very simple idea was and still is “Home away from Home”. Even their logo is called “Belo” and represents “the universal symbol of belonging”.
Related: Take a look at how a startup is valued
The Airbnb Business model
The talk of funding may seem exciting – if the company has raised billions of dollars – it must have an exciting business model, too? For one, it does. The company is an aggregator, now what does that mean? It means it is a platform and not a hotel, at least not at the moment, they’re an asset-light company.
When you register on their platform as the provider, you become their “partner”. Just like on Amazon, Flipkart and OYO for that matter. And probably have to sign some sort of agreements to ensure the consistency of quality – which is important because you’re actually going to live in someone’s house. From these “partners” they take commission per stay (10-14%). And this is how they make money. Simple, no? Their revenue stream is their app. If the app fails, the business model fails.
The good part about this business model is a strong potential to grow. They don’t even have to buy a property – all they have to do is market their app and add more partners. And the cycle goes on. The model is both beneficial for folks who are looking to make a few extra bucks in exchange for the free space in their home and for the folks looking to stay conveniently when they’re travelling. See the image below.
Apart from the commission earned from the host, Airbnb also charges the guests. The commission for which has been estimated to be 20% of the booking total. Other value-add services of Airbnb include:
- Airbnbmag: It is a magazine service of Airbnb, to help people travelling know more about the area they’re in. It charges $15-$25 and came to light in partnership with Hearst.
- Business Travel: This service helps you with a business setup. If you have a specific requirement for a business desk or even a laptop, Airbnb can arrange that for you for a specific price. These are done in team-up with third-party vendors who are then charged commission on this.
As of today, Airbnb has >30 offices across the globe, has hosted >400mn guests, has >150mn users on the platform and >50% use it for the price, it also has >7mn listings worldwide with an avg. occupancy rates of 48% in the US. It is also projected to have 45.6mn users by 2022.
Airbnb Marketing Strategy
While the service of Airbnb speaks for itself and leads to a lot of word-to-mouth marketing. There are a few things that stand out. The first one being influencer/celebrity marketing: In 2015, Airbnb hosted a #FloatingHouseParty – it turned out to be a blast in the UK. The event was covered by 340 press pieces, adding 10k users to the Airbnb platform.
Related: Take a look at he rise of Influencer marketing
The second most important part of their strategy is content marketing: Airbnb puts the stories of their hosts and partners out in form of writing magazines and blogs. Their magazine is called “Pineapple” magazine and their aim here is to have “a tangible collection of our community’s stories and inspirations”. This effort helps them spread the good word about their service and obviously turn in more customers. Storytelling is the key to their success.
The two other content initiatives are Airbnb neighbourhoods: to help you navigate when you’re in a foreign country, AND, Economic impact studies: To showcase the impact of economic changes on the local region. Primarily done to showcase their commitment to supporting local communities.
Specifically, in India, Airbnb launched ‘That’s why we Airbnb’ campaign in 2019, the aim here was two-fold, the first one was obviously to spread the word about Airbnb in India. But, the second one was to showcase the fact that even when you’re away from home, you can have your freedom, just like you would at home. The campaign was executed beautifully, we recommend you take a look at the videos below.
After looking at the video, do you feel they’re in a hotel room? It’s like their own home! This communication is at the core of their strategy. The other video where a few Indian’s are in Berlin and felt like they’re at home.
Their next campaign focused on celebrating festivals away from home and was launched under the ‘Live There’ banner
All of these campaigns have a higher focus on the fulfilment of the emotional promise of the customers. And have made greater impacts in spreading word-of-mouth.
Airbnb in COVID
The hospitality industry has been hit hard because of COVID. Airbnb, too, has had to bear the brunt of this damage. During the initial days of lockdown, the company refunded all the bookings to ensure they keep their customers happy. Their website had a proactive focus on 3 things during the lockdown – online experiences, monthly stays (longer versions of their packages), and “frontline” where hosts offered stays to healthcare workers.
Of course, the company has seen heavy drops in bookings across the World. But it nevertheless attempts to keep their customers happy. It launched online experiences to keep the experiences of concerts and parties alive – virtually. It launched a virtual office for their employees to keep the employees happy.
To sum it up, they have a Great Business Model, Good word-to-mouth, Great Marketing, Happy employees, and customers. All they need to do is stay consistent. They’re currently in the midst of filling an IPO as this post goes live, they’re expected to do it early next week.
Hope you like the piece!