What’s the Opportunity?
An Idea Unlikely to Disappear Any Time Soon
Since Airbnb’s founding in 2008, there have been over 300 million total guest arrivals to Airbnb listings all around the world.
Total guests have grown more than 5,000x in under 10 years...
On any given night, 2 million people are staying in other people’s homes around the world thanks to Airbnb. Airbnb currently operates across 81,000 cities and 191 countries. There are more than 5 million active listings globally on Airbnb (more listings than the top five hotel chains combined have rooms!)
More guests traveled on Airbnb over the summer of 2015 than the entire populations of Greece, Sweden or Switzerland. 20% of the 600,000 people who went to Brazil for the 2014 World Cup stayed in an Airbnb. And throughout Thanksgiving 2015, one quarter of a million Americans chose to stay in an Airbnb too.
According to a recent Morgan Stanley report, half of those who used Airbnb in 2016 used it to replace a traditional hotel stay. In the graph below, you’ll see how the search term “Airbnb” has now caught up (and exceeded) to search volume levels of traditional hotels (such as Hilton and Marriott) as well as travel-booking brands (such as Expedia)...
Airbnb also remains the more cost-effective option, with an Average Daily Rate $16 cheaper than hotels ($160 vs. $176).
Travel and tourism now account for almost 10% of global GDP ($7.2 trillion in revenue), making the sector bigger than the oil industry. Airbnb also benefits from the rise of the sharing economy and increased adoption of (both travel-specific and general) digital platforms:
- In 2016, the number of sharing economy users in the U.S. was 44.8M. This is expected to almost double to 86.5M by 2021.
- In 2014, the number of US adults using lodging-specific sharing economy services was 7.7M. This is expected to almost triple to 19.3M by 2020.
- As for Airbnb, in 2016, the number of Airbnb users was 30.4M. That number is expected to double to 60.8M by 2021!
Within the U.S., the number of Airbnb homes almost doubled in Los Angeles, New York, San Francisco and Washington throughout 2015. In cities like Paris, San Francisco and Seattle, the size of Airbnb’s host and guest community have now exceeded 20% of the general population. And throughout 2015, there was a 259% annual growth rate of people staying in Airbnb properties whilst on work trips.
These impressive results are reinforced by Airbnb’s stellar brand awareness. Airbnb's consumer awareness sits at 76%, ranking it above almost all other online vacation booking portals for consumer awareness, and exemplifying why it has become one of the world’s leading accommodation websites.
By 2020, Airbnb’s revenue is projected to be as much as $8.5 billion, which would place it at #325 on the Fortune 500 and make it more valuable than other blue-chip companies such as News Corp, Charles Schwab Bank and JetBlue Airways. These funds will fuel its continued growth and entrench its dominance within the vacation rental industry.
Gain Additional Income
You’re probably thinking… that’s great for Airbnb, but what’s in it for me? Well, if you’re like the majority of other Airbnb hosts, then the primary motivation for listing your home on Airbnb is to gain an additional and lucrative source of income.
Airbnb hosts now receive an average of $174 per guest arrival, representing an 11% increase from 2016. An Airbnb host renting out a full two bedroom apartment or house in a major US city can expect to earn an average annual profit of $20,619. And your typical U.S. Airbnb host (across all property types and rental offerings) makes an average of $7,300 each year.
U.S. Airbnb hosts make more than 2.5x the average incomes of Uber drivers, and far surpass the incomes of other sharing economy service providers on other platforms too (e.g. 6x the average incomes of Etsy service providers and 9x the average incomes of Fiverr service providers).
So how do Airbnb hosts from all around the world use this supplementary income?
- 53% say it has helped them stay in their home
- 48% say it is used to pay for regular household expenses (like rent or groceries)
- 6% say it has been used to start a new business
And here are some of the ways that hosts in 10 big cities all around the world use their Airbnb earnings…
- Amsterdam: 30% say the money they earned using Airbnb has helped them launch a new business or pursue a new project
- Barcelona: 53% say it has helped them stay in their homes
- Berlin: Hosts spend 48% of their Airbnb income on essential living expenses, such as rent or mortgage payments
- London: 63% say their Airbnb income has helped pay bills they would otherwise struggle to pay
- Los Angeles: 33% say they have avoided eviction or foreclosure by hosting their homes on Airbnb
- New Orleans: 71% say their Airbnb income was used for typical household expenses like rent/mortgage, bills and savings
- New York: 62% say their Airbnb income has helped them stay in their homes
- San Francisco: 42% use their Airbnb income to pay for regular living expenses
- Sydney: 60% say that their Airbnb income has helped with monthly rent and mortgage costs
- Toronto: Hosts spent 39% of their Airbnb income towards paying monthly mortgage and rent payments
How much do hosts in places like these make? How many guests are visiting their countries looking for a place to stay? And how frequently are hosts renting out their homes? Here are some numbers and figures to help you gain perspective on the opportunity for you…
These figures tell only part of the story. Hosts often want to compare the money they could be making on Airbnb against their current financial obligations, like rent or a mortgage. On average, a typical Airbnb host in a major US city is able to pay 81% of their rent just by listing one room in their two bedroom home on Airbnb. What about renting out their entire place? Below is a profitability comparison for 50 U.S. cities...
SOURCES: Airdna, Apartment List, RENTCafe
There’s an entire section dedicated to pricing your place on Airbnb, which will provide you with detailed insights into how much you personally stand to make by placing your home on Airbnb. But if Airbnb is something you’re considering with any degree of seriousness, it’ll be worthwhile doing some 'back-of-the-envelope' calculations of your probable costs, likely revenue and potential profitability.
When it comes to costs, think about the 'hosting essentials' you’ll need to stock and furnish your place with. Some of these will be one-off costs associated with starting up your Airbnb, such as...
- Bed linen
- Cooking utensils
- Dinnerware
- Electrical equipment
- Furniture
Others will be recurring costs such as...
- Cleanings
- Home supplies
- Rent
- Toiletries
- Utilities
And when it comes to your profitability, don’t just think about how much you’ll be charging for each night, but also...
- How many nights do you anticipate your place will likely be occupied?
- Will you have a weekend (vs. weekday) rate?
- Will you offer a weekly or monthly discount?
- Do you plan on charging a cleaning fee?
All of these things will influence how much you stand to make and may also vary at different times of the year or by season too.
Social Benefits
Beyond the allure of making money on Airbnb, many hosts simply enjoy the opportunity of sharing their home with interesting people from all walks of life. Airbnb provides the opportunity for hosts to form connections with colorful personalities they would otherwise not have met.
Unlike hotel-stayers, Airbnb guests are not looking for 'cookie cutter' accommodation options. Many guests are looking for more than just a roof over their heads – they’re also looking for experiences and an opening into local cultures and communities too.
79% of Airbnb guests claim that they choose to stay in an Airbnb so they can live like a local...
79% of Airbnb guests also specifically want to explore a particular neighborhood and 89% of Airbnb guests said that they choose Airbnb because it was more conveniently located throughout the city than hotels. As an additional side benefit, Airbnb guests also stay 2.1x longer in their destinations than non-Airbnb travelers.
All of this adds up to an opportunity for not only turning a decent profit, but also having some fun and meeting interesting people along the way too.All of this adds up to an opportunity for not only turning a decent profit, but also having some fun and meeting interesting people along the way too.