Airbnb, the “community marketplace” that connects travelers looking for lodging with hosts renting short-term spaces, recently made headlines seeking funding valuing it at $30 billion. Even now, with the economic instability of global markets (in part induced by the success of the ‘Brexit’ referendum), Airbnb as a privately-held startup has been able to attract billions of dollars worth of investments to make it one of the highest valued startup in the US (second only to Uber). But how does Airbnb actually work? And what is it about Airbnb that has made it so incredibly successful since its founding in 2008?

Airbnb: An Overview

  • Founded: 2008
  • Location: San Francisco, CA
  • Founders: Joe Gebbia, Brian Chesky, and Nathan Blecharczyk
  • Countries: 191
  • Cities: 34,000+
  • Listings: 2,000,000+
  • Castles as listings: 1,400+
  • Guests: 60,000,000+
  • Estimated Revenue in 2015: $900 million

Data found on the Airbnb website.

How It Works

As a guest: Travelers looking for accommodations create an account on the Airbnb website and then search for rentals based on their destination, dates of stay, and number of guests. Searches can then be refined by factors such as room type, size, price, amenities, keywords, and other details. The site allows guests to contact the hosts through an email service and book through the site itself but are not charged until the host confirms the reservation. Hosts provide instructions as to check in times and other details as needed.

As a host: Individuals wishing to list their property on this homesharing site create a profile that includes details about themselves and their space. Prices for renting are determined by the host, not the site, and hosts also decide what amenities are included and how much interaction they’d like to have with potential guests, along with available dates. When contacted, the host communicates with the guests and confirms bookings. Listings are free (though the company takes a 3% fee for each reservation) and Airbnb provides a $1,000,000 Host Guarantee for protection from accidental damage.

From the company’s perspective: Airbnb profits from the service fees attached to each reservation. In addition to the 3% fee taken from the host, there is a 6-12% service fee from the guest at time of reservation (the more expensive the reservation, the lower the service fee to accommodate larger families).

Pros and Cons

As its wild popularity might suggest, the pros of using Airbnb a numerous for both travelers and hosts. While travelers have more options for unique, custom travel experiences, hosts are able to monetize (and show off) their space to a global community of potential guests. Overall, Airbnb allows for travelers and hosts to connect and collaborate on a global level through homesharing, in ways that hotel stays simply do not.

However, there are some potential drawbacks to the Airbnb experience. For hosts especially, renting out a space does produce some risk, even with the Host Guarantee and insurance provided by Airbnb. Additionally, unlike in a hotel setting, every experience is unique for guests and it may not be exactly what they were expecting. Plus, in a homesharing situation it may be tougher than in a hotel to extend one’s stay if desired (though it may not). While there are some risks to using Airbnb, overall they in no way outweigh the potential, benefits.

Effect on Traveling

Since its founding in 2008, Airbnb has drastically changed the ways in which many travel, and some of the most profound effects can be seen in the realm of business traveling. Taking advantage of Airbnb allows companies to save money and employees to trade out the cookie-cutter hotel experience for a unique way to see their destination city, even around packed schedules full of meetings. Projected to land second only to Uber in privately held startup valuations, Airbnb’s incredible success and growth has effectively made homesharing a viable option when traveling.