By Anuja Mardikar
The one thing common to a majority of the start-ups or online businesses today is the light-asset business model. It is a business model wherein the business does not invest a lot of capital in fixed assets. Rather, it earns revenue by leveraging the assets owned by others. All the online marketplaces like Amazon, Flipkart, Ola, Uber and online educational sites fall under the ‘light-asset’ category.
Airbnb is another such example which operates as an online marketplace offering hospitality service for people who wish to rent out their homes, apartments, cottages etc. for short-term lodging. It also provides the usual hotel and restaurant bookings to its customers as well. The company does not own any real estate, it is a broker which receives a percentage of service fees in conjunction with every booking.
How it all began
Shortly after moving to San Francisco in October 2007, roommates and former schoolmates Brian Chesky and Joe Gebbia could not afford the rent for their loft apartment. Chesky and Gebbia came up with the idea of putting an air mattress in their living room and turning it into a bed and breakfast. The site, airbedandbreakfast.com, officially launched on August 11, 2008.
In March 2009, the name of the company was shortened to Airbnb.com but expanded its business scope from air beds and shared spaces to a variety of properties including entire homes and apartments, private rooms, castles, boats, manors, tree houses, igloos, private islands and other properties. Today, the company has over four million lodging listings in 65,000 cities and 191 countries and has a count of over 260 million check-ins.
India operations
Airbnb launched its operations in India in 2012 by setting up its office in Gurgaon and tying up with various bed and breakfast accommodations within the country. By 2016, Airbnb had over 17,000 listings in India and more than 5 lakh travellers had used these listings. Today, Airbnb is banking on India for future growth. In the past 12 months, the company has witnessed a 200 percent growth in India.
Airbnb says India is one of the fastest growing markets in the world for them. It believes Indias travel market is set to surpass $40 billion by 2020 and the company is banking on its India prospects for future growth.
So, what is working for Airbnb in the Indian market? According to Indian Ministry of Tourism, India registered an 11 percent increase in foreign tourist arrivals during 2016, with as many as nine million tourists visiting the country, excluding visits by non-resident Indians. This has facilitated the growth of online marketplace and hospitality service like Airbnb in the Indian market.
Airbnb has democratised tourism in India by bringing in economic benefits to untapped or off-beat destinations. The Indian government is favouring the growth of home sharing and Airbnb has taken advantage of this. Airbnb aims to gather government support by tying up with various state governments, to help boost local tourism.
For example, by a collaboration with the Department of Tourism, Government of Andhra Pradesh, Airbnb is helping promote the states rich art, cultural and craft heritage to a global audience. Through this partnership, Airbnb is helping rural artisans engage in creating the flagship craft works of Andhra Pradesh and list their accommodations and experiences on the Airbnb platform for domestic and international travellers visiting Andhra Pradesh.
Airbnb also announced its first airline partnership in India with Jet Airways to add momentum to their Indian growth. In 2017, Airbnb also launched their Trips service in India. Trips is another huge development in Airbnb which offers a tourist much more than just accommodation. Airbnb Trips will offer locals and visitors the chance to immerse themselves in the people, places and experiences that make a particular city unique.
Thus, by leveraging the growing tourism industry in India, adding new features to their holiday packages and collaborating with the Indian Government, Airbnb seems to be hitting all the right buttons of expansion in India.
The celebrity effect
In the recent past, a number of Bollywood and Hollywood celebrities and artists have travelled with Airbnb. From Britney Spears spending her last Valentines Day weekend at an ultra-luxe Malibu villa, to the King of Bollywood, Shah Rukh Khan, staying in a stunning Beverly Hills mansion, Airbnb has something for everyone. In India particularly, people are passionate about films and Bollywood has certainly been inspiring the choice of destination for Indian travellers.
More and more people are holidaying by emulating their favourite stars, opting for places where their favourite celebs have had a holiday. Bollywood is a trend that cuts across age groups and demographics and Airbnb sees this as an opportunity to connect with the Indian audience and enable them to resonate with the famous.
When a celebrity promotes a product or a service on Instagram or on Facebook, everybody from the company to the end customer is a winner. Airbnb is involved in facilitating these fabulous celeb vacations and the stars make sure to use the required hashtags (#Airbnb) in their social media posts. Travellers wishing to experience the glitz and glamour of the celebrity set can therefore rejoice. Airbnb allows users to list, find, rent a place to stay and also offers properties that once served as home to celebrities.
The big IPO question
Airbnbs Chief Financial Officer (CFO), Laurence Tosi, stepped down from his position this year to concentrate on his investment fund and the other boards he currently sits on. Following this, news about the delay in Airbnb going public surfaced. Airbnbs CEO Brian Chesky was quoted saying, We are not going public in 2018. Our primary focus is becoming a 21st-century company and advancing our mission. We’re working on getting ready to go public and we will make decisions about going public on our own timetable.”
The company was last valued at $31 billion and has been profitable since 2017. Also, in 2017, Brian Chesky had mentioned that getting ready for an Initial Public Offering (IPO) at the New York Stock Exchange is a two-year project and that Airbnb is halfway through it. Companies have struggled in the public markets and therefore Airbnb believes that the company needs to be responsible and take things slow on the IPO front. The investors of the company are very supportive and are allowing the management to be thoughtful and methodical in their approach towards the IPO issue.
From budget to luxury, Airbnb believes every traveller should be able to benefit from a unique, authentic and local travel. Airbnb has undergone an evolution since its inception. The one thing that has remained constant is the ability of travellers to discover a unique way of experiencing a new country, city, or neighbourhood, anywhere in the world.
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