N1583 Entrepreneurship Finance and Accounting. Airbnb.

Airbnb
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The word “unicorn” was originally coined by Aileen Lee in 2013. The term was used to refer to startups that were growing at a higher rate. The term refers to a privately held company that is valued at more than $1 billion. Such startups have been growing at such a high rate because of fast-growing strategy, the increase in private capital, and technological advancements among others. One company that has attained the unicorn status is Airbnb, which currently is valued at $38 billion.
Background
Airbnb was founded in 2008 by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk in San Francisco. The idea of the founders was to create a lower-cost alternative to a hotel room. The company aimed to offer local experiences at inception (Guttentag, 2019). Initially, the company was referred to as Air Bed and Breakfast. The name came about since the founders used air mattresses to accommodate people in their apartments. The move was motivated by the desire to provide accommodation when there was no hotel room space in San Francisco because of an ongoing conference at the time. The founders sold rented their apartment and offered breakfast to the guests. The founders also went ahead and showed the guests around the neighborhood.
In 2008, their idea began to gain acceptability during the 2008 Democratic National Convention in Denver. The founders had managed to develop a basic online system that allowed them to rent out space to the convention attended. In March 2009, the firm shortened its name to Airbnb.com. Over since Airbnb has grown tremendously. The company has made it possible for individuals to leave in a place, rather than traveling to it (Guttentag, 2019). Airbnb is different from hotels because the hosts are in a position to offer memorable experiences to their clients, beyond a place to spend the night. The company has succeeded in offering packages for all clients ranging from high spenders to those on tight budgets. Currently, Airbnb operates in more than 191 countries and continues to expand internationally to more countries.
Business model
Airbnb’s model follows the following phases. Firstly, hosts list out their apartment particulars on the company’s website. The hosts submit information about the property like location, pricing, and the amenities offered among others. Secondly, Airbnb allows a professional photographer to access the listed property and take photographs. The company compensates photographers accordingly. Thirdly, when travelers search property, Airbnb provides them with the list of available properties together with details like prices. Travelers can then choose from the available options. Fourthly, the travelers book through the company’s website and pay the amount quoted by the host. Additionally, travelers pay more cash as transaction charges. Lastly, once the host accepts the booking, the traveler stays in the property. The company eventually pays the property owner the amount indicated then deducts a commission. Both parties are allowed to rate each other depending on what they have experienced.
Owners are allowed to make free listings on the company’s website. All the booking and financial dealings are carried out on the Airbnb website. The primary source of revenue for Airbnb is service fees from booking that are charged on both the hosts and the guests. The company’s share of revenue comes from two major sources (Mody & Gomez, 2018). The first one is a commission from the hosts or owners. The hosts pay a commission of 10% for every successful booking through the platform. The hosts further pay a fee of 3% for the processing of the payments of the travelers. This fee may, however, be higher for Airbnb Plus listings. As soon as a reservation is made, the guests pay the service fee, unless the host decided to cancel the booking. The second revenue source is a transition fee from the hosts the travelers or guests. The guests are required to pay a non-refundable fee of no more than 14.2%. The company believes that individuals can save money on booking fees if they do it in large numbers. In addition to the named charges, the users are also charged a value-added tax (VAT). In this case, the guests pay in a different currency apart from the one the host has chosen are subject to the exchange rates that keep on changing as determined by the company.
The industry
Airbnb operates in the hotel industry to offer travelers accommodation services. However, unlike traditional hotels, the company does not own properties. Instead, Airbnb collaborates with property owners and connects them with guests. The company acts as a link between the two and earns a commission from the arrangement. Due to the trust that both hosts and guests have on the platform, they can do business. The company enables individuals to get accommodation in any part of the world...