Image: Unsplash
Image: Unsplash

Airbnb’s $100 billion float

In 2007, Brian Chesky and Joe Gebbia came up with the idea of Airbnb. Little did they know that Airbnb would not only transform but completely transcend “traveller accommodation”. In fact, Airbnb became the biggest company ever to double its value on its first day of trading on the stock market and is now estimated to be worth over $100 billion.

So, what is Airbnb?

Airbnb is an online vacation rental company based in San Francisco, California. The company offers lodging and activities around the world from local hosts. This allows locals to profit from tourist economy, and it gives tourists a more personal perspective. Airbnb created a platform that allowed anyone with a spare room, apartment, or island to start running a B&B with access to a global market of travellers, holiday goers, backpackers, and tourists.

5.6 million listings worldwide, operates in 100,000 cities in 220 countries and has served more than eight million guests

Airbnb has become one of the biggest names in the travel industry and puts to shame huge chain hotel companies and businesses, therefore it is no surprise that its share prices were huge. To put Airbnb’s value of $100bn into perspective, Hilton Hotels is worth $29bn, Marriott $42bn, and the London-listed InterContinental Hotels $11.3bn (which “only” equates to about $82bn).

According to the Airbnb site, as of 30 September 2020, the company has 5.6 million listings worldwide, operates in 100,000 cities in 220 countries, has more than four million hosts, and has served more than eight million guests. 12 million people, at least, have been involved with Airbnb somehow. The Airbnb investment property podcast stated that “a total of 140 billion dollars was raised in the IPOs” (initial public offering, which refers to the process of offering shares of a private cooperation to the public in a new stock issuance).

Airbnb’s valuation coming to $100.7 billion, more than five times what Airbnb was valued at in April

On the stock market

The podcast “Commercial Awareness with Watson’s Daily Business and Financial News” (W’sDBFN) summarised that Airbnb’s share price was initially $68, but there was an incredible increase in value once it opened on Nasdaq at $146. The stock hit a high of $165 and closed at $144.71. This led to Airbnb’s valuation coming to $100.7 billion, more than five times the $18 billion Airbnb was valued at in a private fundraising round in April at the outset of the pandemic. The spike makes the company the biggest ever to double its value on its first day of trading, and it will have massive implications for the future of travelling and the tourism industry as a whole. Brian Chesky (CEO) has a net worth of 11 million dollars.

Airbnb is the embodiment of innovation and futurism. This company serves as an example of how today’s tech start-ups compete with traditional industries (hotel chains in this case) without seeming to do so. When a platform like Airbnb comes in, the established companies tend to dismiss it on the basis of inferior quality. Surely someone with a mattress in a living room isn’t competing with a motel with room service?

The company is driven by a desire to solve a problem in a unique way and create new value by doing so

Why is Airbnb so successful?

Airbnb has solved a problem that larger companies were trying to solve through ineffective strategies. Airbnb is a technology start-up, and it has been so disruptive in the travel industry because the company was, and still is, driven by a desire to solve a problem in a unique way and create new value by doing so. Whereas large and established companies, like chain hotels and motels, are often motivated by a single desire to defeat competition, according to thenextweb, Airbnb capitalised on the opportunity that the travel industry offered in three ways:

  1. Generated a new type of supply – anyone with a spare mattress or room could run their own BnB.
  2. Creation of new user behaviours – travellers would previously turn their noses up at staying with strangers in their apartments in a new city, but Airbnb brought in a new behaviour.

Creating a strong curation mechanism – in order to establish a rapport of trust between travellers and hosts.

We start with the perfect experience and then work backward. That’s how we’re going to continue to be successful

– Brian Chesky, CEO of Airbnb

While hotels represent Airbnb’s primary competitors, the company manages to differentiate its product with its fun, local appeal. Many websites, journalists, and business researchers say that the Airbnb experience starts when customers first browse the website, and this continues through the booking process and the stay. Unlike other travel accommodations, which are becoming traditional and less popular in some ways, Airbnb manifests personality and escapism due to being individually owned. This completely differs to hotels which feel dissimilar to the city that you are staying in. Perhaps customers become involved in a storyline that they can choose to take part in by booking a stay. Once they arrive for the stay, they can see the story through to the end as they “live like locals”. It gives the feeling of choosing your path suited to what you want to get out of your travels.

Chesky defines the drive of Airbnb as: “We start with the perfect experience and then work backward. That’s how we’re going to continue to be successful.”

Finally, Airbnb now offers its hosts free professional photography services from more than 2,000 freelancers who have visited 13,000 listings across six continents. This has had huge impact on the company as it improved the aesthetics, quality, and experience of the website entirely. In fact, travellers are two and a half times more likely to book these captivating listings.

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