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.
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.
Links:
If you want to understand Airbnb, it helps to understand its history: a discovery, followed by a year of grinding persistence, followed by explosive growth when they finally got everything right.https://t.co/roYbZAZ1kR
— Paul Graham (@paulg) December 10, 2020

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