Airbnb has been on a tear recently. In late January it announced that it had 5 million nights booked through its peer-to-peer housing rental platform. That’s up from 1 million nights booked in February 2011.
We’ve taken a stab at estimating Airbnb’s revenues.
Airbnb makes money by charging renters a 6 to 12 per cent booking fee on the listing price. It also charges listers a 3 per cent commission on the listing price for every night booked. If you assume a 9 per cent booking fee, Airbnb makes $12 off of a $100 per night rental.
Airbnb users booked an estimated 4 million nights in 2011. We estimate that Airbnb users booked approximately 700,000 rooms in 2010 based on previous company releases. They had booked 100,000 nights at the beginning of 2010, virtually all of which we assumed came in 2009.
Finally, we modelled the average cost of a night booked on Airbnb, which we estimate rose from $95 in 2009 to $100 in 2010, to $110 in 2011. While the site is undoubtedly still used by many bargain hunters, we believe that as the service goes more mainstream it will increasingly be used by vacationers who are willing to pay a bit more for an “authentic” or “unique” experience. Furthermore, its biggest markets are New York, San Francisco, Berlin, Paris, and London—where $110 is still a bargain compared to a hotel. In other words, Airbnb is starting to compete with Priceline (read our explainer on Priceline’s business here).
Using these assumptions, we calculated that Airbnb booked approximately $52.8 million last year, up from $8.4 million in 2010, and just over a million in 2008 (see chart below). As we discussed in our recent note on collaborative consumption, peer-to-peer marketplaces have an incredibly capital-efficient business model with virtually no inventory or fixed costs. In other words, we would expect Airbnb to be wildly profitable given its growth trajectory.
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