How Does Airbnb Make Money?

Over the past decade, we’ve all come to know and love Airbnb as the app where we can find a home away from home wherever we travel. 

It offers competitive rates and unique living experiences compared to hotels, inns and traditional bed-and-breakfasts. 

It connects avid travelers to warm hosts, bridging the gap between empty nests and people looking for homely accommodation. 

Airbnb’s claim to fame has thus been its ability to deliver a different brand of hospitality for all kinds of travelers. With over 8 million active listings in over 220 countries, it is today worth a whopping $83 billion! 

It posted an annual profit worth $4.7 billion in 2024 alone. 

So, how does Airbnb make money? 

What is the business model of Airbnb?

Can you make money with Airbnb? 

And, most importantly, how can you launch a business like Airbnb? 

In this blog, we’ll answer all your burning questions about Airbnb and give you some ideas on how you, too, can make money like it. 

Let’s dive in. 

A Brief History of Airbnb

Before we discuss the Airbnb business canvas model, let’s trace the company's meteoric rise. This will also tell us how Airbnb was established, how it has evolved and why it has succeeded. 

2007 - A Small Start 

Two roommates, Brian Chesky and Joe Gabbia, have a small idea that would turn the hospitality industry upside down: they put an air mattress in their living room and turn it into a bed-and-breakfast. 

2008 - Airbed and Breakfast 

Joe’s former roommate, Nathan Blecharczyk, joins them as the CTO: together, they founded their new venture, “AirBed & Breakfast.” 

Their website, airbedandbreakfast.com, was launched on August 11th, 2008. The first guests were courtesy of the Industrial Design Conference, during which all the hotels were booked up, and travelers were finding it hard to get a room. 

The founders raised $30,000 selling cereal named after the two presidential candidates, Barack Obama and John McCain. 

Seeing their entrepreneurial spirit, investor Paul Graham invited the founders to a training session at Y Combinator, the now-famous incubator. Paul offered them training and $20,000 in funding in exchange for 6% of their company. 

2009 - Airbnb is Born

By March of this year, the website had 10,000 users and 2,500 listings. 

At the same time, the name was shortened to Airbnb and the company as we know it was finally born. 

Plus, their listings had expanded from living room air mattress accommodation to entire rooms and even whole properties. 

In a significant breakthrough, it received $585,000 in seed capital from Sequoia in April 2009. 

2010 to 2013: Airbnb Grows

The four years following the company’s founding witnessed spectacular growth. 

By 2010, customers had used the app to book over 700,000 nights of accommodation. 

In 2011, it won the “app” award at the South by Southwest Conference. 

In 2012, the company launched “Neighborhoods,” a travel guide to 23 cities to help travelers choose where to stay based on their preferences. This was also the year that the company harnessed cutting-edge mobile travel app development to launch its application. 

By 2013, Airbnb had served over 9 million guests in the five years since its establishment. Almost 250,000 listings were added in 2013 alone. 

2014 to 2017: The Years of Development

From 2014 onwards, the company re-invented itself and expanded relentlessly. One of the most important advancements was “Airbnb for Work,” which targeted business travelers going on corporate trips. Today, this service is used by over 700,000 business travelers and forms a significant revenue stream for Airbnb. 

It introduced a new logo called “Bélo” to symbolize “belonging.” It also represents the Airbnb business model: the head represents the people, the location icon represents the company’s chief function, the heart symbolizes love, and A represents the company’s name. 

In 2015, Airbnb expanded to Cuba and, in 2016, hired Attorney General Eric Holder to draft an anti-discrimination policy for guests. Following this, the app started hiding guests' details until their lodging requests were accepted by the hosts. 

Also, in 2016, it launched the “experiences” service to allow users to book unique events and activities. In 2017, the company invested $13 million in Resy, a restaurant booking app, with serial investors Gary Vaynerchuk, Ben Leventhal and Mike Montero. 

2018 and 2019: Airbnb Adds More Experiences 

In 2018, Airbnb rolled out “Airbnb Plus,” a collection of pre-vetted homes for quality services, premium comfort and unique designs. It also announced “Beyond by Airbnb” (now Airbnb Luxe), a collection of vacation rentals for tourists looking for a luxurious vacation experience. 

On October 4th, 2019, World Animal Day, Airbnb launched a standalone category of experiences focusing on interactions with animals. It also introduced its Animal Welfare Policy, backed by World Animal Protection. 

By October 2019, as many as 2 million guests were booking their accommodations with Airbnb each night!

2020 to Present: The Years of Covid and Post-Covid Recovery 

Due to the global lockdown enforced to prevent the spread of COVID-19, the company lost as much as 96% of its bookings in certain areas. Overall, the bookings fell by 70% On the flip side, reservations rose in rural areas. 

The company pledged a whopping $250 million to compensate hosts for canceled bookings. Due to the lockdown, it also laid off around 25% of its employees. 

How did the company recover from the Pandemic? 

In December 2020, Airbnb went public and raised $3.5 billion with its Initial Public Offering. 

It scaled back to focus on its core competency: the home rental business. They also introduced new services: property management, enhanced cleaning, amenities and insurance. 

By 2023, it had already surpassed its pre-COVID valuation and booking volume. 

As of 2024, it has over 8 million active listings, has served over 2 billion guests and helped over 5 million hosts earn over $2.5 billion in revenue. 

So, how can you develop a business model like Airbnb? Let’s get down to brass tacks and examine how Airbnb makes money.

Airbnb Revenue Model 

The best way to understand Airbnb’s revenue model is to envision it as a bridging service that charges a commission each time you pass through the bridge. However, it also charges commission from the hosts on the other side of the bridge. 

This is called a split-fee model, which allows the guests and the hosts to split the costs of involving Airbnb as their agent. 
Here’s how it works: 

Commission from Hosts 

Hosts form one of the two main aspects of the business model of Airbnb. 

It charges the hosts a commission on each booking in the form of a host service fee. This can be anywhere between 3% to 5% for regular hosts. 

It can go up to 14% for hosts with a Super Strict Cancellation policy. 

Plus, it charges a 20% commission on events and experiences you can book online. These include:

• Iconic city tours

• Private photo shoots

• Culinary experiences

• Cultural events

• Quadbike escapades

• Excursions into nature

• Encounters with wildlife parks

Commissions from Hotels

Since Airbnb has disrupted the traditional hospitality industry, the hotels have taken a “if you can’t beat them, join them” approach. 

As a result, they have actively listed their rooms and suites on Airbnb. 

For this, hotels pay a strict 14% commission to Airbnb. 

• Commission from Guests 

The other primary source of revenue is commission from customers. 

Airbnb calls this commission a service fee.

On average, customers pay up to 14% service fee to Airbnb on the booking subtotal. The subtotal includes the nightly price of accommodation and any additional fees charged by the hosts. It does not include taxes and the guest service fee itself. 

Thus, the guest service fee is the second answer to the question, “How does Airbnb make money?”

Additionally, Airbnb offers subscription-based services to its hosts. In return, it provides them with advanced tools, including property management and cleaning services, to make their properties more attractive to potential guests.

It also lets hosts advertise their properties for a small fee, allowing them to market their listings right where they are likely to get the best prospects. 

In some cases, Airbnb follows a “Host Only” fee model rather than a split-fee model. Under this model, the service fee can be up to 15% of the booking subtotal, and the guests don’t pay any part of the commission.

Recap of Main Sources of Airbnb Revenue: 

To recap, here’s how Airbnb earns most of its revenue: 

• Service fees from hosts for accommodations

• Service fees from hosts for events and activities 

• Airbnb for Work targeting corporate clients and business travelers 

• Airbnb Plus and Airbnb Luxe (previously Beyond by Airbnb) offer high-end and luxury homes with special amenities to guests 

• Subscription-based services like property management and cleaning 

• Advertising options for hosts 

• Partnerships and Affiliate Programs with other businesses focusing on travel, such as airlines, travel agencies, event hosts and more. 

How do Airbnbs work ?

So, how do Airbnbs work? What does Airbnb offer in return for its service fees? 

For The Hosts

First, Airbnb offers hosts a chance to turn their dead investment into a source of revenue. The average American Airbnb host earns $14,000 annually from their listings. 

Second, it gives them a cost-efficient way of listing their accommodations and advertising them to millions of people. Plus, the listing itself is completely free, so you don’t pay Airbnb till you start earning money yourself. 

Lastly, it also provides hosts with insurance against damages or accidents. 

As we have seen, Airbnb coughed up $250 million to compensate the hosts hit by COVID cancellations. And $10 million of this was just to help hosts pay mortgages on properties they had bought with the express aim of listing them on Airbnb! 

So, if you’re wondering how to make money with Airbnb, the simplest way is to become a regular host.

For the Guests 

For guests, Airbnb is one of the best options to rent snug accommodations that suit their requirements at a competitive rate. 

In a world where hotel revenue management systems are helping the traditional hospitality industry maximize profits, Airbnb offers an attractive alternative for guests with varying budgets.

Far from monotonous hotel rooms, claustrophobic hostels or makeshift travel dorms, Airbnb lets you book villas, boats, treehouses, holiday homes, luxury vacation rentals and more! 

As a guest, you also get to specify your preferences when filtering rental options, including: 

• Free WiFi

• Smart and self-check-in 

• Fully functioning kitchen

• Pet-friendly accommodations

• Free Parking

• Luxury amenities like hot tubs

• Work-from-home spaces

• And more! 
  

Lastly, Airbnb provides guests with peace of mind by acting as their booking agent. It gives them payment security and a third-party assurance against being conned by fraudulent listings.

In a new city, a faraway destination or a vacation spot, Airbnb is the friend that looks out for you. It tells you the best places to stay and recommends the hottest things to do. 

And, of course, it helps you reserve your spot at your preferred shelter. 

Thus, Airbnb is a vertically and horizontally integrated hospitality vendor that seamlessly integrates gracious hosts and enthusiastic travelers into one smooth operation. 

What is the Business Model of Airbnb, and How Has It Expanded? 

As we have seen, Airbnb has expanded from a living room with an air mattress to a multi-billion dollar giant that has changed the hospitality industry forever. 

So, how did the Airbnb business model evolve over the years, and what can we learn from it? 

Here’s how and why it has grown: 

New Places to Stay 

First and foremost, Airbnb has doubled down on expanding its core competency by adding a variety of accommodations that guests can book. 

Apart from single rooms or mattresses that Airbnb initially started with, it now lets guests book shared rooms, luxury villas, tree houses, boat houses, hotel rooms, and even igloos! 

Additionally, guests can now book events, unique experiences and special activities. This includes animal-centric experiences, luxury vacation rentals, wildlife adventures, culinary tours and more.

As a host, you can even invite specific guests to private experiences! 

So, whether you’re honeymooning in France and need a private photo shoot or shooting the breeze in a wildlife park and need a guided tour, Airbnb has got you covered.

New and Lucrative Segments  

A significant way Airbnb has expanded is by providing dedicated services to different types of guests. There are three main avenues of this expansion: 

• Airbnb for Work which focuses on corporate travelers going on business trips. 

• Airbnb Plus through which it provides high-end properties with quality services and extra comfort 

• Airbnb Luxe for travelers looking for luxury vacation rentals 

Thus, Airbnb has specifically targeted three different and high-paying segments to expand its revenue stream. 

New Markets 

Next, Airbnb has aggressively expanded into newer markets, starting with the USA’s neighboring and border countries like Canada, Mexico and Cuba. 

It has gradually increased its footprint to include Europe, Asia and Latin America. 

Wherever Airbnb has ventured, it has found willing hosts and curious travelers to partake in its mission to democratize the hospitality industry.

It's no wonder that you can find a place to stay via Airbnb in more than 110,000 cities and towns around the world! 

New Hosts  

The initial Airbnb business model targeted only people who had some room to spare and wanted to earn some money on the side. 

Soon, people who usually rented out spare properties became avid customers of Airbnb. 

It didn’t stop there, people actually started looking at Airbnb as an investment opportunity. With minimum fuss, they could mortgage a new property and pay it back with the money they earned from Airbnb! 

Thus, Airbnb created different segments of customers and conquered existing ones! 

Disrupting the Hotel Industry

One of the best answers to the question “How Airbnb makes money” is “by disrupting the hotel industry.” 

Taking advantage of high costs, restrictive accommodations, low availability during peak seasons and the failure of hotels to cater to individual preferences, Airbnb completely changed the way people imagine hospitality. 

Travelers now prioritize the uniqueness of their living experiences over uniformity in services. Not to mention, they also get a homely touch from their cordial hosts! 

And if this was not enough, the traditional hospitality industry finally surrendered to Airbnb: seeing the growing popularity of its platform, they, too, have decided to compete with unconventional accommodation alternatives. 

Accessory Services

And lastly, the business model of Airbnb has been supplemented by accessorial services such as:

• Property Management Services 

• Insurance Services and Cleaning

• Amenity Booking 

Such services are not only additional sources of steady revenue but also help the hosts make their properties more marketable to their guests. 

Challenges Facing Airbnb

While Airbnb may be growing by leaps and bounds, it also faces several challenges. Let’s take a quick look at the problems you might also face if you’re planning to launch a business like Airbnb.

Legal Framework

Different countries have different laws that apply to the hospitality industry. 

Let’s consider two examples. 

In Singapore, Airbnb is not allowed to list properties that offer rental services for less than three months out of twelve. That is, it does not allow for short-term rentals. 

Similarly, in the Netherlands, the court has determined that it is illegal for Airbnb to charge both the hosts and the guests for its services. So, its split-fee model faces legal issues in different countries. 

And that’s not all. 

Hosts have protested their guests' illegal behavior, while guests have complained about issues like hidden cameras in their accommodations. 

Plus, hosts and guests have also been known to sue Airbnb for violating its promised standards in providing world-class services and accommodations. 

Thus, Airbnb and businesses like it face several legal issues in different legal landscapes and jurisdictions. 

Rising Real Estate Prices

As we have seen, Airbnb has provided investment opportunities to hosts. They often buy or mortgage new properties to list them as accommodations on Airbnb.

Further, people who used to rent their homes to students, families or workers now list them on Airbnb because it fetches a higher price in the lucrative tourism industry. 

This trend has led to popular unrest in cities like Barcelona, where protesters claim that Airbnb listings have driven up the prices of real estate in the city. There’s even talk of Airbnb being banned from the city!

The rising real estate prices due to Airbnb present it with another formidable challenge of its own making. 

Competition from Aggregators

A prominent challenge to Airbnb comes from hotel aggregators like Booking.com and Tripadvisor. 

While such apps operate within the traditional hospitality industry, they have also taken advantage of the internet's democratizing power. Their USP is that they provide reliable information on hotels, experiences, events and activities so travelers can make informed decisions to plan and improve their trips.

Plus, hotels are quickly catching up with travelers' demands. They are creating personalized experiences, offering more amenities and catering to travelers’ preferences like never before. 

The combination of hotel modernization and the rise of aggregators poses a significant challenge to the Airbnb business model. 

Conclusion

Airbnb has forever changed how the hospitality industry operates. 

It has removed barriers to entry for guests and hosts alike, bringing them closer together. From accommodations to events and local activities to unique experiences, it has created a one-stop hospitality solution for hosts and travelers around the world.

The genie is out of the lamp, and there’s no going back: thankfully, at Green Apex, we can help you move forward and carve out a competitive edge in the tourism industry. 

We have closely followed the rise of the Airbnb business model to understand how we can empower you to launch your own Airbnb-like business. 

With cutting-edge travel app development, we can create sophisticated and user-friendly apps for your hosts and guests. 

Check out how we collaborated with Yatra to build an end-to-end travel management system, and let us know how we can engineer one for you! From AI-powered itineraries to trip suggestions and automated chatbots to comprehensive booking services, we can help you create an app that can do it all.

If you’re looking to break into the corporate travel market, we will harness the power of automation in B2B travel to craft the perfect business travel software for you.