Airbnb International Growth Strategy
International growth is up and to the right for Airbnb, the home-sharing company. The Airbnb community spans the globe and includes hosts in more than 35,000 cities and 191 countries. The amount of total guests using Airbnb has surpassed 60 million in 2015. It’s valued at a $25.5 billion valuation, the second most-valuable private startup in the San Francisco, behind Uber’s nearly $68 billion valuation. Marriott, which manages more than 4,000 hotels and last year had $13.8 billion in revenue, is valued at about $21 billion.
Founded in 2008, Airbnb makes money by charging fees to users who book stays with local hosts through the Airbnb website. Airbnb is an example of the sharing economy, more precisely, it can be defined as an economic model in which individuals are able to borrow or rent assets owned by someone else. And it continues to expand aggressively into new foreign markets: when Cuba became more open to American businesses last December, Airbnb jumped in. Airbnb already has more than 1,000 listings in Cuba.
Airbnb’s international expansion started in 2011 with the acquisition of Accoleo, a German competitor company providing a similar service to that of Airbnb’s. This acquisition launched the first international Airbnb office in Hamburg. Then, in October 2011, Airbnb established its second international office in London. Given the growth of international users, Airbnb opened 6 additional international offices in early 2012. These cities include Paris, Milan, Barcelona, Copenhagen, Moscow, and São Paulo. These are in addition to existing offices in San Francisco, London, Hamburg, and Berlin where Airbnb maintains its international presence for the EMEA markets within a German incubator space. Airbnb announced in September 2013 that its European headquarters would be located in Dublin.
Russia and Brazil were the first psychically distant locations Airbnb expanded to. Following these expansions Airbnb expanded to Australia, the second largest Airbnb market behind the United States, in 2012 with a plan to consecutively expand into Thailand and Indonesia. To support this effort, Airbnb opened its 11th office in Sydney. The Australian consumer accounts for one-tenth of the Airbnb user base. Weeks after announcing the focus on Australia, Airbnb announced its strategy to move more aggressively into the Asian market with the launch of their newest headquarters in Singapore.
Airbnb has seen strong growth in South Korea and Singapore and is looking to invest more across the region. The company’s goal is to acquire an additional 2 million properties within the continent. Following the Obama administration’s easing of restrictions on U.S. businesses to operate in Cuba, Airbnb expanded to Cuba in April 2015, making it one of the first U.S. companies to do so. To comply with current U.S. regulations, the Airbnb platform in Cuba is currently only open to licensed U.S travelers, but the company plans to seek authorization to support non-U.S. travelers in the future.
“The number of Chinese guests staying in Airbnb properties around the world increased 700 per cent last year, growing faster than the number of guests from any other single nationality. When we see this growth and hear the stories from our community, it is clear that Airbnb is uniquely positioned to connect Chinese guests to amazing travel experiences. And as we move into our next phase of expansion in China, we know we will need deep local knowledge and expertise to keep this momentum going.” said Brian Chesky, co-founder and chief executive of Airbnb. Airbnb’s new commitment to China follows a push from Uber, the $50bn ride-hailing app start-up, which is booking more than 1m trips a day in China, despite facing tough competition from local rival Didi Kuadi.
Today, Airbnb is available in 30 different languages, allowing it reach users around the world. Like many U.S.-grown businesses interested in global revenue, Airbnb has made sure to invest in the translation and localization of its brand and its services. “People from over 150 different countries travel on Airbnb, so it is important that we are both international and local at the same time. Because of this, we’ve taken many steps toward localization, one of which is translation.” said Jason Katz-Brown, an software engineer at Airbnb.
Airbnb engineers built up their own translation tool for translators to collaborate more efficiently. Whenever new content is added to the website in a given language, a notification is sent to translators, with the new translations going live automatically. The translations relied partially on crowdsourcing, but also on a network of professional translation agencies. Impressively, in 2013, the firm launched a functional Japanese version of their website at a week’s notice by prioritizing the most important translations instead of trying to convert the whole 400,000-word block of English content.
“The real challenge of global strategy isn’t how big you can get, but how small you can get,” said Dennis Goedegebuure, the former head of Global SEO at Airbnb. It’s a good point to keep in mind: when many developers launch a global strategy, they keep everything centralized. But the best localized content will always come from local partners. They’ve tapped into roughly 3,500 local photographers and videographers to produce the real-life photos that welcome and captivate visitors on the site. This guerilla-like tactic has made digitally re-creating global neighborhoods a possibility—and the result is a surprisingly realistic, evocative online experience for users.
Neighborhoods section of the site has around 580 pages, spread over 20 cities, and localized to more than 30 local Airbnb sites around the globe. Airbnb builds each neighborhood site, and then contracts with thousands of local photographers and videographers to provide the core content. This far-flung network of freelancers lets each neighborhood’s page develop a distinctive, authentic, and local feel.
Airbnb generates revenue by taking a 3% cut of each booking along with a service fee of 6% to 12% from guests. It is still a privately held company and does not disclose detailed financials. According to private company research firm PrivCo; during the third quarter of 2015, AirBnB recorded $2.2 billion in bookings on which it earned $340 million in revenues. Its revenues for 2015 could reach $900 million.
Money from Airbnb transactions in 191 countries, goes directly to a payment center in Ireland. This lets Airbnb shield most of its profit from the country where the service was delivered. AirBnB is not profitable and expects to turn in profits by 2016. Once it makes a profit, Airbnb’s corporate structure will give it an array of options to legally sidestep federal taxes in the U.S. and elsewhere. Two of its subsidiaries are in Ireland, where local tax laws allow U.S. multinationals to avoid both the 35 percent top rate in the U.S. and Ireland’s 12.5 percent income tax.