Airbnb and the rise of the sharing economy

The vision

Since Airbnb's heralded arrival we have seen the company significantly disrupt the status quo in both the real estate and hospitality industries. The company grew over 200% in the past two years and still the company's growth shows no sign of slowing down. The company is now more valuable than esablished players like Marriot, Starwood and Wyndam and the list goes on!

Airbnb vs Public Competitors Analysis.

Airbnb's vision is huge but unlike the other big players in the industry, the company owns virtually no real estate. The company is basically a highly scalable marketplace that effectively leverages real estate assets of the individual spread across diverse markets globally. They employ a revenue sharing model where the lions share of revenues return to the local hosts.

The company has achieved scope through innovation and the team has consistently demonstrated their capacity to execute. Risks are significantly reduced because they do not assume the ownership of a large amount of possible non-performing real estate holdings. Asset classes are instead organically distributed across diverse markets through the independent hosts that list properties on the platform.

Sharing is caring

Airbnb represents the power of the sharing economy. It is really a colloborative effort with the hosts. I have seen anecdotal evidence where Airbnb literally saved one family from the sinking into the depts of despair after the husband died. The banks threaten to reposess the family home and that's when the brave mother and now sole caregiver decided that this wasnt going to happen! Defiantly, she decided to list a room on the platform at the beckoning of her close friend and in the process created a consistent semi passive income stream that helped her to finish payoff her mortgage and helped her to take care of her family.

This epitomizes the beauty of sharing economy.

There was always a consensus among travelers that the traditional hotels represents an inaunthentic, prepackaged commoditized experience. People wanted a more authentic experience when they travel. Airbnb filled that void in the market as locals opened up their home to the traveler, they opened up their home to the world.

We want to embrace the local community and connect with locals. We want to find that amazing restaurant off the beaten path. We want to go to that secluded beach in the middle of nowhere with that special person. We really just want to create beautiful memories to last a lifetime!

Airbnb and the Investor

Currently only about 10% of investors are using the platform as an investment instrument. They basically leverage several income producing assets, sometimes across different georgaphic locations for maximum ROI and exposure to different segments of the market. The majority of the hosts list their personal property on platform to earn a casual income to supplement their primary income. Short term rentals via the platform outperforms traditional rental income up to 400% depending on market conditions and location, you could earn less or even more, it really depends.

Example:

Property A in Nevada is leveraged on the vacation rental market (Airbnb) has 90% occupancy rented @ $80.00 per night.

Projected revenue = 80*328 (90% occupancy)

=$26,280.00

Now lets compare this with the traditional rental model:

Property A is now renting @ $500 per month

Projected Revenue= 500*12

= $6,000.00

Now let's calculate the yeild percentile of the traditional rental vs Airbnb:

26280/6000*100

=438%

The income disparity is mindboggling when you compare the income generation potential of Airbnb compared to the traditional rental model.

I can only image how Jeff Bezos felt when he saw that publiction that indicated that the ecommerce industry would grow by a whopping 2000% in a few years and he took the initiave and started Amazon and the rest as we know it is history!

I kind of feel like a low level version of Jeff in a sense when I think about Airbnb. Imagine that you could possibly earn 4x (400%) more income by listing your property on Airbnb. How about acquiring 10 properties and just take a step back for a second and just imagine the revenue generation potential?

Anyone who really wants to supplement their income should seriously consider using this platform!

Effects on the poor and marginilized

The facts makes it tempting for the strategic landlord/investor to forego the traditional rental model in favor of the vacation rental model (via Airbnb).

"For every action there is an equal and opposite reaction"

- Sir Issac Newton

My favorite physicist couldn't have put it any better. Don't get me wrong I think Airbnb is amazing and all however the displacement effect is real. This can have serious implications for lower income families in accessing affordable housing. This concern has already already manefested itself in mature markets, where it was reported that tenants were having difficulties finding long term rental accomodations. This can be attributed to the disruptive impact Airbnb is having in the supply chain. While I am all for disruptive innovation I don't think it's fair for already vulnerable people to face the prospect of becoming homeless because of technology. I think the governments in markets with supply issues should probably create legislation or something to help protect it's poor and vulnerable from being left out in the cold.

" I've been both poor and homeless at different points in my life, so I get it!"

Conclusion

Do your research, be a good host and add as much value as you can for your guests and you'll earn a good income.

Check out this out if you're just getting started.

http://learnairbnb.com/airbnb-hosting-beginners-guide/

What are you waiting for, you can do this!
:)