Airbnb become profitable for the first time in the second half of 2016, the report says, referring to unnamed sources close to the company. Profitable earnings are also expected in 2017 before interest, taxes, and amortization. As a private company, Airbnb does not disclose its earnings.
Airbnb allows homeowners and even apartment renters to post either a single room or their entire dwelling to be rented out for short stays. Airbnb’s website or mobile app facilitates the transaction between guest and host, taking a cut of the transaction. The company has grown to provide services in 65,000 cities in more than 191 countries and has more than 3 million total listings available.
Reaching profitability may be a sign that the on-demand business model could be a sustainable one, and not just a disruptive force that can grow revenue only while accruing debt. Bloomberg reports that on-demand car service company Uber Technologies Inc., for example, lost $3 billion last year. Yet Airbnb and Uber have the two highest market capitalizations out of all startups in the U.S., not to mention other aspects of their business models in common. Both seek to disrupt established industries using digital technology and claim to be simply operating as technology providers. Both have also had their share of court battles.
In Canada, Airbnb faces regulation in Toronto at some point this year after the City delivered a report for action in October 2016. Airbnb units in Toronto doubled between 2014 and 2015, which could have potential impacts on short-term rentals, neighbourhood makeup, housing affordability, tourism, and taxation, according to the report. The situation in Vancouver is even more conflicted, with the City filing a lawsuit asking an Airbnb host be shut down, saying a short-term listing violated city bylaws.
Legal costs are at least one expense that Airbnb’s profits have overcome. Last year, the startup launched lawsuits against the cities of New York and San Francisco over new laws restricting short-term rentals. In both cases, Airbnb settled with each municipality’s city hall.