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How Airbnb Makes Money — The 2 Key Metrics You Must Know

In this article, we breakdown Airbnb's business model (how they make money) and the metrics they use to measure the performance of their business.

Caleb Dismuke
Caleb Dismuke
4 min read
OVERVIEW
Ticker ABNB
Headquarters San Francisco, CA
CEO Brian Chesky
Founders Brian Chesky, Joe Gebbia, Nathan Blecharczyk
Year Founded 2008
IPO Date December 10, 2020
Industry Travel and Lodging
Revenue (as of 9-30-20) $2.5 billion
# of Employees 5,465

Highlights:

  • They have over 4 million hosts from 220 countries and 100,000 cities.
  • 86% of its hosts are located outside of the United States.
  • 825 million guests have stayed in an Airbnb.
  • Hosts have earned more than $110 billion.

Airbnb's Business Model — How They Make Money

They make money by taking a cut (%) of each transaction.

Their revenue consists of service fees, net of incentives and refunds, charged to hosts and guests.

Currently, they have two products: lodging and experiences. They take a small cut every time a guest books a stay or experience.

An transaction example:

Host:
Price/night set by host $100.00
Less: Host fees $3.00
Total paid to host $97.00
Guest:
Price/night set by host $100.00
Guest fees $12.00
Lodging taxes $4.00
Total collected from guest (gross GBV) 116.00
Airbnb:
Total service fees (collected at booking and
recognized as revenue upon check-in)
$15.00

GBV (gross booking value) is the dollar value of each booking on their platform during a specified period. The amount includes host earnings, service fees, cleaning fees, and taxes, net of alterations and cancellations.

In 2019, their GBV was $38 billion.

  • $31.3 billion went to the hosts.
  • $5.3 billion went to Airbnb.
  • $1.4 billion went to taxes.

Airbnb's Key Business Metrics

This section is updated quarterly. Last update: 12/10/2020.

Airbnb tracks two metrics to measure the performance of its business:

  • Number of nights and experiences booked
  • Gross booking value (GBV).
  • Number of nights and experiences booked is the total number of nights booked for stays, and the total number of seats booked for experiences, net of cancellations.
  • Gross booking value (GBV) is the dollar value of each booking on their platform during a specified period. The amount includes host earnings, service fees, cleaning fees, and taxes, net of cancellations.

Financial Highlights

This section is updated quarterly. Last update: 12/10/2020.

  • In 2019, 84% of their revenue came from stays with existing hosts who had completed at least one guest check-in on or before December 31, 2018.
  • During 2019, 69% of their revenue was from repeat guests.
  • In 2019, they had $38 billion in gross booking value (GBV). That’s a 29% increase from 2018’s GBV of $29.4 billion.
  • In 2019, they had $4.8 billion in revenue. That’s a 32% increase from 2018’s revenue of $3.7 billion.
  • For the nine months ended September 30, 2020, its GBV was $18 billion, down 39% year over year. Its revenue was $2.5 billion, down 32% year over year (obviously, this was due to COVID-19. They expect to exceed their 2019 numbers in the decade ahead)
  • They generated $520.1 million of free cash flow (FCF) from January 1st, 2011, through December 31, 2019.
  • In 2019, net cash from operations was $227.7 million, and FCF was $97.3 million, compared to net cash from operations of $595.6 million and FCF of $504.9 million in 2018.

Results of operations

$ in thousands Nine Months Ended September 30, 2020 Year Ended 2019
Revenue $2,518,935 $4,805,239
Cost of revenue $666,295 $1,196,313
Gross profit $1,852,640 $3,608,926
Gross profit margin 74% 75%
Operating expenses $3,008,902 $5,306,782
Income (loss) from operations ($1,156,262) ($1,697,856)
Operating margin N/A N/A
Free cash flow (FCF) ($520,111) $97,275

Airbnb's Competitors

  • Online travel agencies (OTAs) like Booking Holdings and Expedia.
  • Search engines like Google and Baidu.
  • Hotel chains like Marriott, Hilton, and other boutique and independent hotels.
  • Other companies that offer homes and condos for booking like VRBO.

Some of its competitors are copying parts of their business. Marriott recently released Homes & Villas. It’s a curated offering of professionally-managed, high-end properties.


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Caleb Dismuke

Enjoy writing, cooking, and brainstorming business ideas.