Advertising an Airbnb on Instagram

2019-12-31 2 min read
    An Airbnb ad on instagram

    I saw an ad for a specific Airbnb on Instagram and just don’t understand the economics. It seems unlikely that running this sort of campaign ends up being profitable. I’d expect the overlap between the audience targeted and those interested in booking the Airbnb to be extremely low and potentially non-existent.

    This Airbnb has a nightly rate of ~$350 and a cleaning fee of $199. If we assume that the average guest books for 3 nights the host is getting ~$1,220 after Airbnb fees ($350 * 0.97 * 3 + $199). Let’s also assume that the mortgage, maintenance, and utilities are $5,000/month with an aggressive occupancy rate of 75%. That leads us to an actual monthly profit of $2,638 ($350 * 30 * 0.97 * 0.75 - $5000) across 7.5 (30 * 0.75/3) guests, or a per guest profit of $351.73 ($2,638 / 7.5).

    Doing some minimal research it looks as if the cost per click of an Instagram ad is anywhere from $0.50 - $1.00. Using the low end of this range we see that we’re break-even so long as a single person books out of the ~700 ($351/$0.50) clicks. That actually feels doable - 1 sale out of 700 clicks doesn’t seem too bad.

    For this exercise I made some favorable assumptions and I suspect the actual economics are worse than this. The occupancy rate is likely lower than the 75% and is one of the key factors in determining profitability. Unlike an ecommerce site where multiple buyers can all buy the same item at the same time a house can only be rented by a single person at a time. Even if someone was interested in enough to book this Airbnb they would need to be the first ones interested in that specific date slot.

    It’s possible that this campaign actually works - it could have very precise targeting and only over an optimal time frame. In any case it’s impressive - either it’s possible to profitably advertise an Airbnb on Instagram or it’s close enough that it’s worth an attempt. Who knows - maybe their model takes into account a random blogger posting about it and driving additional reach.