Airbnb and How It Grew

Airbnb was one of the first companies to make use of technology news: digital platforms and crowdsourcing to grow a popular business that was, on its face, not about digital technology. It was about travel.

Several years ago, the company expanded from its classic model, host homes advertised on a platform directly to people looking for a place to stay, to a Trips division that is intended to move the company toward a more multidimensional travel company. Is the expansion business strategy working?

Experiences Gets a $5 Million Boost

Recently, Fast Company reported that Airbnb was infusing a segment of Trips, Experiences, with $5 million to grow the number of Experiences offered. But there is also an indication that the company is changing the focus of Experiences slightly.

Since 2016, when Experiences was launched, 4,000 Experiences have been given in 50 locations worldwide. Experiences, as the name of the division implies, is a set of experiences led by travel guides. Participants may go on a tour of a tattoo parlor or gospel singing in Harlem, for example.

Approximately one-quarter have taken place in the U.S., so they have had a more global focus. The $5 million, though, is expected to focus on the U.S., increasing offerings by 200.

Fast Company notes that CEO Brian Chesky, who is very much behind the initiative and sees Trips and Experiences both as crucial steps toward growing Airbnb into a more full-service travel company, indicated that the recent infusion will go toward shorter hops. In other words, more advertising the tattoo parlor tour 75 miles away, and thus doable on a weekend, than surfing near a beach in Thailand.

The most recent expansion aims at weekend travelers going an hour or so from home.

More Profit Margin?

Chesky told Fortune last Fall that the Trips division overall was growing 13 times faster than the Homes division (the standard Airbnb) at a comparable point in its history.

Trips and Experiences also brings in more to the company. Experiences hosts charge more and the company takes proportionally more of what they charge than they do of what home hosts charge, at 20% versus 3-5%, respectively. However, as Fast Company points out, there are many more Airbnb homes than there are Experiences, even with the recent expansion.

Chesky also alludes to the fact that Experiences may cost the company more. Airbnb, for all its popularity and eventual reach, was relatively simple for the company. Sign hosts up to sell space in their living quarters, initially with no real vetting or intensive background checks. Have those hosts do a lot of the work of advertising said living quarters, for the privilege of posting it on an accessible platform.

Experiences is a much more hands-on business for the company, with real business development and far more regulation in the areas in which it operates, so it is not clear whether the greater monies flowing in have so far meant more of a profit margin.

Eventually, it is thought that the company will go public, once Experiences contributes to the bottom line. There may also be more travel offerings in the future, such as car rentals or flights.

For now, Experiences will grow in the U.S. on a relatively small travel hop scale, on its way to becoming a larger travel company. Airbnb’s expansion into travel is working, but it remains to be seen how far it will go.

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