Airbnb: Setting the Take Rate

What about setting the price. Clearly, it’s different in that on eBay, you are setting the take rate for the supply side and at Airbnb, it’s more setting the fee for the guest, but also now shifting towards a more traditional take rate for the supply. How did you think about setting the take rate, firstly at eBay and then this fee at Airbnb?

That’s a really interesting question and I think there have been others that have asked that, relative to different platforms. If you think about food delivery, particularly given our current situation, with Covid-19. Not addressing that specifically to the current circumstances but, I think that by giving the buyer the opportunity and setting prices for the buyer, it will ultimately be up to the buyer to determine whether or not they are willing to pay that price. I reflect, as a kid growing up, the local market gardener would drive a truck around the streets and ring a bell and my mum used to go out and pay for her fruit and vegetables, directly from the market gardener. There was a level of convenience that came with that. There was certainly no middle man in the process but you were willing to pay, perhaps a little more or pay a premium, for having the opportunity to buy direct and to buy it from your home.

I think, in the current day and age, there have been some challenges, over time, in different businesses, in terms of charging fees for products to be delivered. Giving the buyer the opportunity to choose, do they pick it up, do they have it delivered, do they have it delivered faster and providing those variable prices for that, I think is a really interesting new normal. If we reflect on that, from an Airbnb point of view, giving the visibility to the guest, in terms of how much they’re paying for a fee, they will be able to make those trade-offs, particularly in a world where comparisons are so readily available, provided those comparisons can be provided on an apples to apples basis. I think putting the power in the hands of the consumer or the guest, in Airbnb’s situation, is really interesting.

Then it’s finding that price. What are they willing to pay and how can that be toggled and understanding that behavior, so that businesses can find that point of optimal return?

How did you look at finding that optimal take rate?

At Airbnb, the take rate, as part of the service fee, wasn’t necessarily defined at a set rate. It was based on an algorithm, in terms of the price of the property. Normally, the higher the nightly price, the lower the take. The length of stay – the longer the stay, the lower the take. So that, effectively, moved. But one of the things – and I imagine Airbnb will continue to look at this – will be, is there more margin available to the business? Should there be less margin available to the business? Provided that they are transparent and the guest knows what they are paying when they see the service fee and the total price. Of course, there are guidelines and regulations around how prices and pricing should be surfaced to the consumer, globally. Maybe it’s different, country by country. But those things are very important.

I think it’s understanding what can provide the optimal return to the business, without the consumer feeling as if they are paying too much.