By Luanne Teoh on 06-24-2011

Luanne Teoh

June 24, 2011

Airbnb.com, the startup company which allows you to rent out your home, room or even couch recently raised $100 million round in funding at a $1 billion valuation. In the highly competitive travel space, Airbnb has achieved some remarkable milestones since its inception in 2008. Straight out of the gate, it has shown monetizing capabilities through the following:

• Average of 1,000 new listings in over 11,500 cities and 184 countries.
• It takes 6-12% service fee per listing with an average service fee of 10%
• It has booked around 1.5 million nights roughly equivalent to $150 million in revenue.
• 30-50% growth month over month.

Its social experience plus a one-stop shop where you browse reviews, pay and get a confirmed reservation makes the site an effortless choice for travelers. It’s 100% upfront payment requirement from all reservations also makes it safer by minimizing fraudulent transactions and bad debts all around.

Airbnb CEO Brian Chesky says there are three major markets Airbnb addresses:

1) Someone renting an extra bedroom,
2) Someone renting homes and apartments in big cities,
3) Someone subletting (30-day rentals)

According to TechCrunch, “on any given night in New York there are more people staying in homes via Airbnb than there are rooms in the biggest hotel in Manhattan.”

I took a look around at the listings and found one for New York City and one in Honolulu Hawaii — Accommodation in these two places especially New York City can be pricey in general. Here’s what I found within 2 minutes of browsing the featured listings on the front page.

New York City for $42 per person a night for an entire apartment.

Honolulu Hawaii for $20 per person a night for an entire apartment with a view.

These prices are not only affordable but also serves as a booster to travel and tourism. Airbnb came at the right place at the right time when a price-sensitive market was ready for more options and deals in general. The platform also provides renters with the option to make money through renting out an extra bedroom which would otherwise be sitting vacant.

This win-win situation has definitely created an industry in itself.  When Brian Chesky was asked how big is the market to rent a one bedroom? His response was, “we don’t know. We’re creating the market. So, it’s hard to size it… We think it’s similar to the vacation rental market $24 billion in the US and $100 billion around the world.”

If the site is adding an average of 1,000 listings a day, within the next 12 months it can very well be the largest single site to find a place to stay online with over 365,000 listings. The opportunities to integrate with the airline industry or become a travel reservation portal could also be another lucrative business development channel for Airbnb.

Because of the fact that private homes and apartments are being opened up through this channel, it provides the traveler with a more cultural and local travel experience compared to hotels. Will this mean the decline and eventual shut down of hotels especially “boutique” ones across the world?

That fact remains to be seen.

20 years ago, if the same question was asked whether an obscure mail order and online movie streaming company called Netflix could shut down Blockbuster’s retail outlets, the answer would have been nothing less than “preposterous!”

About Luanne Teoh

Luanne is a senior correspondent for BizTechDay focused on Small Business Tech, Mobile and China based in San Francisco. In the last 17 years, she has helped launch start-ups and turned around failing operations. Her international work experience include both public and private corporations in Southeast Asia, Australia and North America. She has previously worked for Oracle Corporation, SonyBMG Music, Universal Music, Catcha Media and SOH Inc. Apart from a keen interest in technology, Luanne is also and avid explorer of the globe, cultures and people.

3 Responses to “Airbnb = Death of Hotels?”

1. Paul Says:
   July 5th, 2011 at 7:00 pm

   How are the legal issues handled here like paying the transient lodging tax when people stay less than 30 to 90 days depending on the local law?

2. Sarah Michealson Says:
   July 6th, 2011 at 6:51 am

   The only disadvantage of airbnb is that it is not regulated and hosts can change their mind, or decide they don’t want to rent to you for whatever reason, be vague about their calendars, etc. It becomes hard to rely on, vs a hotel which can confirm private rooms. When there is a problem with airbnb there is no-one to talk to.

3. Rufus Says:
   September 3rd, 2011 at 3:40 am

   This what Sarah is saying is not true, at airbnb there is 24 hrs some one you can reach 7 days a week.The only thing is I think the costs are not really clear written for the guest, they pay between 7-12% of the rent every day extra to airbnb and the landlord 3% or more. Also the homeowner can block off any time he wants through the calender on the own page. But I do think they should check home owners much better by asking for the deed of the house, is the house yours at all.There is no checking on that and I did have a scammer guest already.

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