What lays behind Airbnb’s technological success in hospitality market?

18 April 2017

Part 1. How Airbnb got financially successful?

The hospitality industry that has been set in stone for decades was officially disrupted by Airbnb’s launch in 2008. Could you have ever imagined that you would choose to stay in a stranger’s apartment on a couch rather than in a traditional hotel? Such an absurd idea came to life through a combination of modern technological advances and the rigidness of the hotel industry.

The current user base of Airbnb is more than of any hotel group and has space in almost 200 countries and 34 000 cities. Being the eBay for space, it boasts around 1 million listings and has offices in all over the world.

The key to financial success was in part due to Airbnb’s pioneering the sharing economy. It was supported by the great tech ideas suitable for collaborative consumption with the aim to hack the standard growth pattern.

If you’re looking to achieve high levels of financial success like Airbnb, you’ll have to deal with a few major technological issues:

Payment provision

Providing safety & faith in hosting

Ensuring financial viability

Creating mobile app that pushes sales

Let’s focus on how the Airbnb's technology stack helped them deal with these issues and succeed in the long-term.

Payment provision

Think about processing thousands of transactions daily from Airbnb’s customers in over 190 countries,and you can only imagine the hassle. The key point here is that Airbnb is licensed money transmitter. But to achieve smooth and legal payment processing it had to integrate with most local payment providers,set up bank accounts inmost countries and adhere to strict and sometimes contradictory legal and financial regulations imposed on the business by state and local governments.

In the US, Airbnb employs the services of Braintree,one of the top payment systems providers that is used by the likes of Uber and other large online companies. In Airbnb’s blog, the company’s developers go into detail on the cooperation and how they’ve built-up and continue to manage the deadly waters of international payments by using Ruby on Rails as a key development platform. Softermii is proud to offer such expertise as well.

Recently Airbnb has bought asocial payments company Tilt that launched in 2012.The deal is beneficial for Airbnb in several instances: it’s gaining top talent that has knowledge and stamina to compete with the big names like PayPal; it complements its trip-booking feature by easing the financing and payment processing that can bring in even more revenue.

Providing safety & faith in hosting

Short-term rental is often considered to be risky, to say the least. And ensuring the safety of your temporary home is among the few vital criteria for Airbnb users. Initially, an email address and a phone number were required, but those things are disposable and don’t provide enough security. Having a complete user profile is no more a solid bedrock for trust. Bad things can happen in a number of ways. Not to let them reach a crescendo Airbnb ensures safety through its:

   A secure messaging system that doesn’t allow to share contact details before the transaction is finalized through the site. Due to the need to input credit card details, the users are 100% identified, and this provides extra insurance if people go AWOL. Only after the completion of booking can emails and phone numbers be exchanged, although Airbnb recommends its on-site app communication tools. We believe that having your own messaging system is key to your product’s success, as can be seen in our latest case study.

   $1,000,000 Host GuaranteeAccording to Airbnb, “When in an emergency situation, the host should first contact the police, emergency personnel, or the proper authorities…[and] submit their request within 14 days from the guest’s check out.”If the property has been booked via the site according to the principles mentioned above then renting out your place is safe from the potential damage by guests.

   Review sand social references are an essential part of the system as they help improve business for responsible renters and eliminate the ones that provide inadequate services. Once the booking is over, users can write reviews and endorsementsMoreover, hosts and guests can find each other directly on Facebook through friends, or friends of friends. This option adds more personality to the booking process, but the company strongly recommends not to rent out directly, as the process is not insured and all adversary situations won’t be covered.

   High-quality images of accommodations can be taken with the help of a photographer provided by Airbnb for free. This lets prospective guests evaluate the property beforehand and decide on whether it suits their needs.The good example of the positive impact of such an approach can be seen in one of the Airbnb’s first user cases. When the company had only launched, people tended to showcase their listings poorly and the co-founders had to visit every location to take proper pics. The end result was in Airbnb doubling its revenue in a matter of months.

Ensuring financial viability

Airbnb is not stipulating the exact price tag a host should put on the rental property. The company though can provide a guide or a median on the similar properties to help get the fairest price on the market that ensures that the accommodation is not undervalued and fully booked at the same time. It is up to the property owner to decide if he/she will pass on the reservation fees onto the guest or include them into the overall price shown at the time of booking.

The company’s main source of revenue is through the fees associated with a booking made online or through the app.The usual fees guests have to pay range from 6% to 12% and they are non-refundable. The more expensive the booking is, the lesser is the associated fee. Airbnb also has separate 3% service charge for the hosts charged upon booking confirmation. Depending on the local laws, Airbnb may be responsible for charging taxes as well.

Creating mobile app that pushes sales

The vital point in Airbnb’s success is not in customers being stuck in front of a computer screen; by traveling and renting out someone else’s place, you are becoming a part of the local community. During this adventure you are getting immersed in the scenery: by getting directions to the fun and exciting places nearby, contacting your host to inquire about top sightseeing spots and just wandering around exploring the new city.And all of this is usually done with the help of your smartphone.

On iPhone,you can book,confirm and pay for your rental using Apple Pay. If you have an Android phone,you can install Android Pay.And this is of major importance to the company, as according to a recent MIT study, customers are more willing to spend more when the process of paying for something is handy, streamlined and overall easy. Following this logic, implementation of a mobile payment system into your rental business will directly lead to an increase in revenue.There are multiple ways real estate and rental companies can go about implementing such services.

Recently, the Airbnb team overhauled the company’s app and placed emphasis on its appealing look and natural feel. By adding a set of highly requested new features, the interface and the app’s style became much more consistent, taking into account the firm belief of the company’s founders in fine pics and top-notch design. Click the link to download the app here and experience its versatility. And if your company needs an app of similar quality and usability feel free to look at our latest works and cases.

In our next article,we’ll elaborate further on Airbnb’s and other rental companies success by providing smooth and effortless communication with a focus on data science, driving engagement and social aspects to secure the best UX.

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