A Business Model for the Sharing Economy

Startup companies have been functioning in a space commonly referred to as the

"sharing economy" for several years. According to Chesky, the previous model for the economy was based on ownership. ${?}^2$ Thus, operating a business first necessitated

ownership of the assets required to do business. Any spare capacity the business faced$-$either within production or service$-$was a direct result of the purchase of hard assets in the daily activity of conducting business.

Airbnb and other similar companies, however, operated through offering a

technological platform, where individuals with spare capacity could offer their services. By leveraging the ubiquitous usage decrease in technology costs, these companies provided a platform for individuals to instantly share a number of resources. Thus, a homeowner with a spare room could offer it for rent, or the car owner with spare time could offer his or her services a couple of nights a week as a taxi service. The individual simply signed up through the platform and began to offer the service or resource. The company then charged a small transaction fee as the service between both users was facilitated.

Within its business model, Airbnb received a percentage of what the host received for the room. For Airbnb, its revenues were decoupled from the considerable

operating expenses of traditional lodging establishments and provided it with

significantly smaller operating costs than hotels, motels, and bed and breakfasts.

Rather than expenses related to owning and operating real estate properties, Airbnb's

expenses were that of a technology company. Airbnb's business model, therefore, was

based on the revenue$-$cost$-$margin structure of an online marketplace, rather than a

lodging establishment. For example, Marriott International, Inc. reported over

$120,000$ employees in $2021,{?}^3$ while Airbnb, Inc. reported under $6,000$ employees. ${?}^4$ Yet, Airbnb's net losses had increased from approximately $$17$ million in $2018$ to more than $$4\mathrm{.}5$ billion in $2020,$ leading to a deficit accumulating to $$6$ billion. However, the company had significantly reduced its net loss to $$352$ million in $2021.$A comparison of Airbnb's $2020$ revenue to the world's largest hoteliers in that same year is presented in $$ Exhibit $6.$