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The Travel Accommodation Unicorn Company; Airbnb

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The days of lodging in hotels are about going into extinction with Airbnb bringing a difference to accommodation for tourist and visitors. In the past, people prefer to lodge in hotels because they wanted something classy and because that was the only way to get a roof over a head when in another place not home but as hotels wanted to improve their star ranks and become world hotel, price began to increase and people became worried about where to stay and how convenient it would be and in this time, Airbnb came to the rescue.

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Although still private, the company is one of the biggest Unicorn businesses in of the decade which serves as an intermediary between home guests and home hosts who want to give out a space in their home or an entire house to guest for a particular period of time thereby allowing the host to make money. Although the current economic slowdown has affected a lot of businesses of which Airbnb isn’t excluded, I will be discussing this $18 billion company (as at the time of writing) in this post.

The First Trail

Joe Gebbia and Brian Chesky wanted to work on something different after quitting their jobs only to get a notice that their rent had increased by 25%, I can’t imagine how this two would have felt being unemployed. Worried about their rent, they got to know about a conference which was to take place in San Francisco but one problem for people coming for the events was accommodation as all hotels in San Francisco were sold out. In other to solve this problem, Joe suggested that they rent their room space out to anyone who wanted to get an accommodation while coming for the conference. They charged $80 for the space and people coming for the conference were happy and comfortable with the hospitality. Soon they lunched their website, AirBed&Breakfast. You know success can be very captivating that you want to give it a try again.

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The two friends decided to target the net big conference in Texas so people could book rooms but it was a big failure as they had only 7 listing and 2 bookings. It was then that they decided to look into tourism, and travel sector. A lucky trial came with the Democratic National Convention which president Barrack Obama was going to give a speech. Denver was expecting about 100,000 guest for this convention but the Denver could only had 30,000 rooms combined for all hotels. This was a very good chance for AirBread&Breakfast to capitalize upon and in 4 weeks they had over 800 listings but will Obama keep speaking in Denver? After the convention, the site started losing traffic and this was now the point where they needed to do something.

The Limited Edition Cereal

The company didn’t get traffic and investors didn’t want to invest with them so they decided to use the political atmosphere of the 2008 election as a pivot. They printed 1000 packs of cereal cartons with Obama on 500 and McCain on 500 as cover for the cereal boxes. The two friends then went to a local supermarket to buy regular cereal and then put it into their Boxes which they then labeled 1-500 and made people knew it was limited (Limited collector’s item). Since it was politics, people wanted to show their support for their candidate and decided to buy it for $40, what a ridiculous price to buy cereal. They were able to sell about 800 boxes and were able to generate over $30,000 as profit after paying rent and removing capital.

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An Investor Came Onboard

With that act, an investor Paul Graham who was the co-founder of YCombinator. He decided to invest in AirBread&Breakfast not because he liked the idea but because he liked the spirit of the founders and how innovative they could become. He knew if they could sell cereal to make that amount of money, then they could sell the company’s idea to customers. YCombinator invested $20,000 into the company and soon they got over $600,000 in funding from other investors.

The company was successful because the 2008 economic crash affected a lot of people and they wanted a way out. They wanted to make money even though the real estate market was dying. This made people give their homes to travelers for cash. Since Wall Street was failing people at this point, they wanted something new and Airbnb gave them.

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Airbnb took a percentage of all business transactions and started to grow. Investors noticed the growth of this business and wanted to invest more into the company which fetched the company $7.1 Million. In 2011, Airbnb had 5 million listings with homes in 89 countries around the globe. Before the pandemic, an average of 2 Million people sleep at Airbnb homes.

Conclusion

It is really not an easy task to start a business and to get investors to invest in that business. What do you think about how Airbnb started, and do you think they will make it when this pandemic is gone?