There is a Streamlined and Not too Difficult Way to Make Money on Airbnb

The vacation rental business is maximizing the post-pandemic setting.

‍

Almost every day a tech company announces employment reductions. Despite being unsettling for employees, tech managers seeking proof that their businesses would function better with fewer employees need not accept Twitter Inc. slash and burn Elon Musk's word for it. Instead, they can take inspiration from Airbnb Inc.'s evolution since 2020, when the pandemic drove it to fire 25% of its workforce and halted travel.

‍

On Tuesday, Airbnb announced that it had generated $8.4 billion in revenue, which was a 75% increase over the year just before the pandemic and its first full year of profitability.

‍

It certainly helps that average nightly rates have climbed by a staggering 36% since 2019, which sparked customer ire over opaque pricing and excessive cleaning fees and resulted in platform upgrades to guarantee Airbnb stays a competitively priced option to hotels. However, despite a 5% decrease in headcount, the number of annual nights and experiences booked has climbed by 5% since 2019. The company's 23% net operating profit margin for the entire year implies it is striking the appropriate mix.

‍

Airbnb Does More With Less 

‍

While sales at Airbnb rose by 75% since 2019, headcount decreased by 5%.

‍

Instead of having a full navy, Chief Executive Officer Brian Chesky likens Airbnb's ranks to military special forces, noting that this has advantages that go beyond the company's financial results. He said on Tuesday to analysts, "What ended up happening is we had fewer people in meetings, and individuals can move a lot faster." If you've read reports of what it's like to get even modest product changes authorized at behemoths like Google owner Alphabet Inc., his optimism won't seem surprising. "I think it's made us a much more appealing place to work because it's much easier to get stuff done."

‍

And no, Airbnb workers don't all show up to work five days a week wearing hair shirts. The business has embraced a "live-and-work-anywhere attitude," as you might anticipate from a company that has greatly benefited from customers having more freedom to travel and book longer stays.

‍

Airbnb likes that everyone gets together more infrequently for a specified reason, which makes sense, rather than having staff show up to the office on random days in the hopes that they'll churn out ideas by the water cooler. Employees are free to relocate anywhere in the nation, and if they choose a location that is less expensive than San Francisco or New York, their salary won't be reduced. As a result, Airbnb only needs half the office space it did before the recession, which has increased profitability even more.

‍

Of course, Airbnb has several distinctive benefits that make it challenging to adapt its strategy. You don't have to spend as much money getting your product promoted on search engines when your company name has turned into a verb. 90% of the traffic to its website is organic or unpaid.

‍

It also helps that Airbnb has established a cash reserve of almost $14 billion, which includes about $5 billion in funds from customers who paid for their travel in advance. A huge $103 million in interest, or 30% of pretax profit, was made on that capital in the fourth quarter as a result of higher interest rates. 

‍

The price increases by hosts have also had a significant positive impact on Airbnb, which takes a cut of each booking's total fee. According to the report, recent initiatives to draw attention to more economical options throughout the booking process may lead to a slight decrease in the average daily price this year. The business intends to reduce costs even further in order to counteract this challenge and sustain its high-profit margins going forward.

‍

Airbnb needs to do a better job of persuading customers that it still offers good value, but it appears to be doing so since the stock increased by about 10% in Wednesday's pre-market trade. In the present tech landscape, that's no small accomplishment. It could teach others something.