“Home is a shelter from storms – all sorts of storms,” said William J. Bennett. This profound sentiment rings true when envisioning a platform like Airbnb. Every user faces unique “storms,” and your platform’s primary objective should be to meet their most intrinsic desires. This idea is at the heart of Airbnb’s personal touch.
Recognized globally as a leader in the online rental marketplace, Airbnb has achieved incredible success. But what’s the secret to its operations, and how could one potentially make a similar platform?
Through this article, our aim is to deepen your understanding of Airbnb and provide a roadmap to create your own peer-to-peer renting app. We’ll discuss the technical requisites, regulatory matters, and strategies to draw in users.
To begin, let’s explore the particular business models that Airbnb employs.
Table of Contents
What’s Airbnb’s Business Model?
Airbnb’s business model is based on the sharing economy concept, meaning that it doesn’t provide rental services directly but connects people who want to rent out their property (the sellers) with those looking for accommodations (the buyers).
The primary source of Airbnb’s revenue comes from commission fees paid by both hosts and guests for every transaction. Hosts usually pay a 3% fee per transaction, while guests pay a fee of around 6-12% for each booking. The exact commission rate for guests can vary depending on the value of the property being rented.
In addition to this, Airbnb has a host-only fee structure, which is applicable to specific hosts like hotels. This fee is generally between 14-16%. However, for hosts with stringent cancellation policies and other select host groups, the fee could be higher.
Airbnb also offers a unique feature to support its hosts — an insurance service. This means if a host suffers a loss due to unexpected damage to their property (like extra cleaning requirements or damage to valuable items), Airbnb provides coverage. As of the time this article was written, Airbnb appears to be the only rental marketplace platform offering this type of support to hosts.
For People Renting Out Their Places
The primary benefit for hosts is that Airbnb provides a platform to earn extra income. It guarantees safety, allows complete control over bookings, offers protection against property damage, and has a support system that can be reached 24/7 through multiple means.
For Those Looking For A Place To Stay
Guests have the opportunity to save money compared to conventional hotel stays. They can easily find accommodations that suit their preferences directly from their device without any negotiations. They also have the option to learn about the host and, in some instances, engage with them during the stay. Airbnb also ensures secure payments.
How Airbnb Reaches Out (Channels)
- Airbnb primarily connects with hosts and guests through its website and smartphone app.
- It also utilizes social media and digital marketing for outreach and an affiliate model for growth.
- A considerable part of their growth strategy is based on word-of-mouth recommendations.
- The Relationship Airbnb Builds (Customer Relationships)
- Airbnb’s relationships with customers are underpinned by trust, developed through secure transactions within the marketplace.
- Effective communication between hosts and guests is encouraged to uphold Airbnb’s reputation.
- The platform works on preventing disputes and dealing with inappropriate behavior.
- Airbnb also commits to safeguarding users’ private data.
- The platform aims to be user-friendly and offers 24/7 customer support.
- It further enhances the user experience by providing personalized recommendations via the app.
How Did Airbnb Start?
The history of Airbnb started in 2008 when two designers from San Francisco, Joe Gebbia, and Brian Chesky, needed to make some extra money. They decided to rent out airbeds in their living room to guests, which became the seed idea for Airbnb (originally named “AirBed and Breakfast”).
The duo created a basic website to list their living space and soon began enhancing the platform with additional features, like the ability to sign up/log in, choose between being a traveler or a host, and monitor new listings. Over time, what started as a room booking platform has grown into one of the world’s leading accommodation rental marketplaces.
Market Valuation & Historic Performance
Since Airbnb started in 2008, it has become super popular all over the world. As of April 2023, Airbnb is worth 73.34 billion U.S. dollars, which is a lot more than the 54.13 billion U.S. dollars it was worth the year before. The most it’s ever been worth was in 2021 when it hit over 100 billion U.S. dollars.
However, Airbnb’s rapid growth hasn’t been all smooth sailing. There have been issues like not enough rental properties for locals, illegal renting, and safety worries. But despite these problems, Airbnb still has a lot of loyal users. This is because the company offers less expensive and more ‘real’ options compared to traditional hotel rooms. So it’s not surprising that Airbnb’s earnings have been going up in recent years.
In terms of where Airbnb is most popular, Latin America, the Middle East, Africa, and North America are top of the list. In 2022, when people booked on Airbnb in these places, they typically stayed for more than four nights each time.
The Competitive Peer-to-Peer Rental Landscape
In January 2023, the Airbnb website was the third most popular in the travel and tourism industry worldwide, receiving 105.8 million visits. The websites with more visits were Booking.com and Tripadvisor.com, with 564 million and 161 million visits, respectively.
Additionally, when looking at travel apps, Airbnb’s app was the fourth most downloaded globally in 2022, with 52 million downloads. Booking.com’s app was more popular, with around 30 million more downloads.
Despite not being the top in website visits or app downloads, Airbnb has a high value in the stock market. By April 2023, the company’s value on the stock market was a staggering 73.34 billion U.S. dollars.
Here are the biggest competitors of Airbnb and their strengths.
Strengths: Booking.com offers a huge variety of accommodations, including hotels, hostels, apartments, villas, and more. The site also has an effective rating system that allows users to read past guests’ reviews. Furthermore, Booking.com has been in the business for a longer time than Airbnb, giving it a strong reputation and wide user base.
Strengths: Expedia is not just an accommodation platform but a full-fledged travel agency. It provides flights, hotels, car rentals, and cruises all in one place. This makes it extremely convenient for users who want to plan their entire trip through one website.
VRBO (Vacation Rentals by Owner)
Strengths: VRBO focuses primarily on vacation rentals, which makes it a direct competitor to Airbnb. It has a robust property listing and has been in the business since 1995, even before Airbnb was established. VRBO is also part of the HomeAway family, a network of sites dedicated to vacation rentals, which increases its visibility.
Strengths: As part of TripAdvisor, this service allows users to book not only accommodations but also see reviews of local attractions, restaurants, and experiences. This platform provides a holistic approach to travel planning, and its connection to the popular review site TripAdvisor adds to its credibility.
What distinguishes Airbnb from these other services is its user dynamics. Unlike other platforms, which mainly connect customers with hotels or motels, Airbnb connects guests directly with homeowners.
The platform hence involves three primary parties:
- travelers looking for a place to stay;
- hosts offering their property for rent;
- and administrators ensuring seamless and transparent interactions between guests and hosts.
Step-by-Step Approach to Developing a Website Like Airbnb
There are three main methods for building a website like Airbnb: utilizing a ready-made solution, building on top marketplace APIs, and opting for custom development.
- Use No Code Software
If you’re aiming to launch your platform quickly and cost-effectively, you might consider Software-as-a-Service (SaaS) tools designed for marketplace buildings.
No-code software is a tool that lets you build a website without needing to know any programming languages.
This method is very handy for people who don’t have technical skills, as these tools provide the essential features of a marketplace website. You won’t have to worry about the technical side of things like hosting, maintenance, backups, or updates. You can launch your marketplace without needing to write a single line of code.
It involves using pre-existing templates that can either be customizable or non-customizable, allowing for some level of adjustment to suit your business needs.
However, a ready-made tool does have limitations. It might not support some functionalities that are unique to your marketplace idea.
But remember, these templates might need to be scaled or adjusted as your business grows. There are many popular platforms for this, including Sharetribe and Shopify, which offer a range of features and price points.
- Use Marketplace APIs
API-based marketplace software solution as an alternative for the next stage of your business. This software combines the benefits of custom development and no-code marketplace tools. Sharetribe Flex is an example of such software.
With this kind of solution, you get all the essential features of a marketplace without having to build them from scratch.
This can save you time and reduce costs. But you also have the flexibility to custom code unique features and third-party integrations, allowing you to create a unique user interface.
Keep in mind the information for your marketplace will be stored on the servers along with many other websites. And scaling on top APIs doesn’t guarantee a comprehensive or unique process for users.
- Custom Develop Your Site
If you want a platform that reflects your unique business model and is fully tailored to your users’ needs, you might choose custom development.
This method involves building a fully functional web application from scratch with the help of a professional software development team.
While it’s typically more time-consuming and costly than using a ready-made solution, the end product is uniquely designed around your specific preferences and business requirements, which can offer long-term advantages.
If you opt for custom development, the subsequent steps should be as follows:
Step 1: Start the Discovery Phase
The Discovery Phase is an important first step when building a website like Airbnb.
It’s like a planning phase before you start building the website. Here’s what happens during this phase:
- You verify if your idea is good or if it needs changes.
- You take a look at other companies that are doing something similar to see what you can learn from them.
- You decide what features your website needs to have.
- You make a plan or roadmap for how to build your website.
In simpler terms, the Discovery Phase helps you avoid wasting time and money on building something that might not work out. It helps you plan everything out before you start building, so you’re more likely to succeed.
Step 2: Choose the Tech Stack
The technology stack refers to the set of technologies, programming languages, and software products used in the development of a web application.
Selecting the right technology stack is very important for several reasons:
- It affects the budget: Each technology tool varies in complexity, thus, the cost to use them can differ greatly.
- It impacts product scalability and the time required for development: Some technologies are better suited for scaling up (adding more features and handling more users) than others.
The existing Airbnb platform uses a diverse and powerful set of technologies. However, for the creation of a Minimum Viable Product (MVP), you may not require the full range of tools that Airbnb uses.
In this context, Ruby on Rails is suggested as the main application framework for building a website like Airbnb. This framework can assist in rapidly and affordably developing an MVP website, and it’s also great for building a scalable, efficient, and secure online marketplace platform.
Notably, Airbnb itself, despite using a vast technology stack, still runs on the Ruby on Rails framework, making it a suitable choice for building a similar site.
Step 3: Define the Functionalities Based on the Users
In order to select relevant functionalities for your rental marketplace, consider the core features that such a platform should include. The user’s perspective must also be aligned in shaping the features.
These features are separated into categories for two types of users: travelers (or buyers) and hosts (or suppliers).
Functionality for Tenants
Travelers should be able to add and edit profile details, search for properties, get apartment details, book properties, use an integrated messenger to contact hosts, view booking details, receive notifications, submit reviews, and add/delete payment methods.
Functionality for Home Owners
Hosts should be able to list properties, set pricing, and availability, set payment details, use an integrated messenger to contact guests, accept or decline booking requests, view booking details, submit reviews, and add/delete payment methods.
Additionally, the platform can have extra features like a comparison of multiple accommodation options, 360-degree virtual tours, advanced filters, options for flexible dates and stays, and more.
These attributes are crucial for any platform reminiscent of Airbnb, regardless of the user’s role.
Access and Role Differentiation
Distinct roles with separate functionalities should be set up for travelers and hosts. Role switching should be a feature, if necessary.
Users ought to be able to adjust their account settings effortlessly, which aids in establishing trust.
Both travelers and hosts should have the ability to input pertinent information. For hosts, this would include details about the living space, location, and rate.
This attribute aids users in navigating the local vicinity and locating the most suitable lodging.
This functionality enables travelers and hosts to discuss crucial details.
Travelers have the capacity to reserve lodgings for certain dates, and hosts receive alerts regarding these reservations.
This accelerates user navigation to specific web pages, thereby enhancing the user experience.
The platform should incorporate secure online payment systems.
Hosts have the capability to outline their own terms for reservation cancellations to optimize the experience for both parties.
This accommodates remote employees and others with adaptable timetables.
The platform becomes more user-friendly with the automatic translation of descriptions and reviews into numerous languages.
Providing support services 24/7 can assist in resolving user issues.
Step 4: Structure Your Marketplace Using Basic Design Guidelines
When building a site like Airbnb, you may wonder about its design. Should it be appealing and high quality? Some people believe the most important thing is to focus on getting users and making the site work well.
The design is the first thing people see when they visit Airbnb. So, your first impression, and whether or not you decide to buy anything, is influenced greatly by how the site looks.
But it’s just about how the website looks; it’s also about how easy it is to use.
As Grady Booch, Software Engineer and Co-developer of the Unified Modeling Language, puts it: “The function of good software is to make the complex appear to be simple.”
Think of it like this – you could have a really fancy car with lots of cool features, but if the controls are too complicated or the seats are uncomfortable, no one would want to drive it. The same goes for websites. Your website could have lots of great features, but if it’s too complicated or difficult to use, people might not want to use it.
So when you’re designing your website, you need to think about every little detail. For example, it should be easy for people to find and look at the properties, read their descriptions, see where they are on a map, and book them. All these steps should be straightforward and easy for your users so they enjoy using your website and keep coming back.
When designing a site, here are a few important things to consider:
- Clear Message: You want to communicate clearly with your users. Use a simple design that helps users understand what you offer. Highlight what makes your site special compared to others.
- Easy Navigation: The journey a user takes on your site and how they navigate through it are key to its success. The easier it is for users to find and buy what they want, the better. So, create a user flow that’s easy to understand and efficient.
- Trust: Too much information on a page can overwhelm users, and they may leave without buying anything. So, use high-quality images, provide complete product descriptions, and allow users to leave comments or reviews. This helps build trust with potential customers.
Step 5: Develop the MVP (for Idea Validation)
Creating an MVP is an efficient strategy to quickly get your product to market. It focuses on developing a product with just the essential features, which saves both time and budget. An MVP allows you to test your concept with your target audience and possibly investors, gather their feedback, and validate your idea before investing more resources into it.
The core functionalities suggested for an MVP of a rental marketplace are:
- User Registration: Enable both guests and hosts to create their own profiles where they can control their personal details.
- Role Definition: Distinguish between platform roles to permit travelers to search and reserve lodgings and homeowners to list their properties with all the necessary specifications.
- Search Capability: Allow guests to effortlessly locate their desired lodgings and experiences, which is an integral part of platforms like Airbnb.
- Customizable Filters: Enhance the user’s search process by including filters such as type of property, cost, availability, in-house facilities, and room specifications.
- Search Outcome Display: Exhibit a variety of matching accommodation options through informative cards that provide crucial details and a map indicating property locations.
- Individual Property Information: Offer an in-depth account of each property, highlighting amenities, room details, and the type of accommodation. Also, prominently display the ‘Contact Host’ button for a smoother booking process.
- Contact Form for Hosts: Facilitate guests in booking a property by providing a form that collects important information and starts a conversation with the host.
- Communication Tools: Integrate online chat functionality for users to discuss specifics. Adding a calling feature could also be considered for immediate discussions.
- Suggestions for Similar Properties: If users decide against booking a particular property, provide alternatives that are similar, thereby improving the user experience and encouraging customer retention.
- Booking Cancellation Functionality: Incorporate a feature that permits guests or hosts to cancel bookings if they experience a change in plans.
- User Feedback: Gather user comments as they are a significant source of information for both guests and hosts, aiding in service improvement and providing an understanding of the property for future guests.
Step 6: Test, Launch & Monetize Your Platform
Once you’ve developed your rental software, it’s crucial to put it through testing before launching. Ensure that you conduct both functional and non-functional testing to make certain that the app is free of bugs.
When it comes to launching, consider deploying your solution either on the cloud or on-premise. Generally, cloud hosting is the preferred choice as it provides reliable security that’s been thoroughly tested, and it reduces future costs associated with scaling up.
Following the launch, the next step is to establish a strategy for monetizing your app.
Examples of monetization models you can use include:
- Commission-based model: This is where the rental platform, like Airbnb, takes a small slice of every booking that happens. So, when a host rents out their property and a guest pays for it, the platform takes a cut from each party.
- Subscription or membership fees: This is like a club membership. Hosts or guests (or sometimes both) have to pay a regular fee (like every month or every year) to use the platform. So, it’s like paying a membership fee to be part of the club.
- Listing fees: This is where hosts pay a fee to put their property on the platform. The fee can be a fixed amount or can change based on things like the size of the property, where it’s located, or how much they’re charging guests.
- Featured listings: Featured listings provide an extra service where hosts can pay more to get their property noticed. Their property gets put at the top of the list or is highlighted in some way to make it stand out to guests.
- Freemium model: You can offer basic services for free, but if hosts or guests want extra features, they have to pay them.
- Advertising: This is where the platform makes money from ads. Just like TV shows have commercial breaks, the platform might have ads from local businesses that want to reach their users.
- Ancillary Services: Ancillary simply means extra services, like cleaning or property management, or things like tours or experiences you can offer. Your platform makes money by taking a cut of the cost of these services.
Step 7: Follow Marketplace Regulations
There are also different rules that can apply to rental marketplaces like Airbnb, and they can be different in every place.
Both the hosts and the platforms need to know these rules and follow them. If they don’t, they might have to pay fines or they might not be allowed to rent out their homes.
These are rules about what you can do on a piece of land. In some places, these rules might say that you can’t rent out your home for short periods of time, or they might only let you do this in certain areas.
Licenses and Permits
Some places require you to get special permission or paperwork to rent out your home on a short-term basis.
If you earn money from renting out your home, you usually need to pay taxes on this income. In some places, Airbnb will automatically collect these taxes for you.
Housing and Building Codes
These are rules about the physical condition and safety of your home. For example, there might be rules about fire safety that you need to follow.
Homeowners Association (HOA) and Condo Association Rules
If you live in a community with an HOA or condo association, there might be rules that limit or prevent short-term rentals.
Some places might require you to have a certain type of insurance if you’re renting out your property.
Data Sharing Requirements
In some locations, Airbnb and similar platforms might have to give information about their listings and bookings to the local government.
These are rules that prevent hosts from refusing to rent to people based on things like their race, religion, nationality, gender, or disability.
Cost of Airbnb-Like Site Development
Want to know how much it costs to build a website like Airbnb? Well, it can vary depending on a few things:
- The features you want on your site
- The way you choose to build it
- Where your development company is located, and their rates
Say you want to use ready-made software like Sharetribe Go. Here are some examples of what you might spend in your first year setting up a marketplace (as explained by Sharetribe):
- You’ll need to pay for a Pro subscription to Sharetribe Go for a whole year. If you choose semi-annual billing (paying every six months), it will cost you $1,428.
- You also need to register a domain name (which is like your website’s address) for a year. That’s usually about $10.
- You can get a logo designed for free by using a tool like Canva.
- You can also get stock images (pictures you can use on your website) for free by using a service like Unsplash.
- If you want to use a blog for marketing, you can use WordPress, which will cost you around $100.
- You can use MailChimp for your email marketing. It’s free if you have fewer than 2,000 subscribers.
- Google Analytics can help you track how people are using your site. You can use the free version.
When you add it up, your total budget for the first year running a marketplace with Sharetribe Go comes to $1,538.
The expenses for a custom project can vary, but given that the return on investment is often higher, the investment is certainly worth it. For instance, if you’re compensating your development team at a rate of $35 per hour, here are some potential costs for various aspects of a custom project:
- The design (making it look good and easy to use) might take 180 hours and cost $6,300.
- Setting up the project and creating the database structure could take 48 hours and cost $1,680.
- Integrating payment systems like Stripe or PayPal might take 50 hours and cost $1,750.
- Building the main features like security, user profiles, home page, search filters, reviews & ratings, payouts, notifications, messaging, geolocation, managing listings, booking system, and creating pages for properties, guests, hosts, and admin could take about 1,080 hours and cost $37,800.
- Other tasks like project management, quality assurance, and code review might take 170 hours and cost $5,950.
- Other tasks like project management, quality assurance, and code review might take 170 hours and cost $7,280.
- So overall, you might need about 1,528 hours and around $53,480 to create the site.
When developing a rental marketplace, there are specific needs and challenges that must be addressed. For instance, the platform must be able to handle financial transactions securely, integrate with various payment systems, and be robust and flexible enough to support a wide range of rental items and services.
An experienced development team will already have a deep understanding of these requirements based on their past work. This means they can use their knowledge to build these features more effectively and avoid common pitfalls. They will also know how to make the platform scalable, so it can grow as your business expands.
At Code&Care, we bring together years of experience and specialized expertise to make your marketplace vision a reality.