So far this year,

this listing has brought in over $20,000 for its host.

The typical U.S. host in 2021

earned over $13,800 according to the company.

- The tiny home doesn't cost a lot to build,

and yet it could charge hundreds of dollars a night.

- [Presenter] Airbnb posted a profit in its second quarter,

as guests booked a record number of stays and experiences

and hosts increased prices for rentals amid high inflation,

but people didn't book as much as analysts had projected,

and the company's summer bookings forecast

fell short of expectations.

- Obviously it's an incredibly dynamic period of time,

but I'm still expecting

an incredibly strong period of travel

even if people pull back spending some.

- [Presenter] So how did the largest

home sharing platform in the U.S.

navigate its biggest crises?

And could it borrow those lessons

to weather fears of a recession?

This is The Economics of Airbnb.

- Airbnb started

around the time of the 2008 financial crisis.

This was a time when people were really hard hit

by the recession,

and they were looking for a way to make an extra buck.

- [Presenter] In 2016,

the company launched Airbnb Experiences,

which let travelers book classes, tours, and outings.

Airbnb also spent more as it grew.

- The CEO branched out into all kinds of things

like he wanted to have a media studios,

he wanted to branch into transportation.

- [Presenter] And then the pandemic hit.

Business was down 80%

forcing Airbnb to take on $2,000,000,000 in debt,

and pause all non-essential projects.

- I hope I never do a side project again in my life.

I learned a lesson,

and I think the lesson is

when you try to do new things as side things,

they don't work.

- [Presenter] Summer of 2020 was a turning point for Airbnb.

- [Rana] People started quarantining with their families.

Friends started taking staycations

while they could work remote.

So that's something that definitely benefited Airbnb.

- [Presenter] Local travel became its stronghold,

and people started using the platform for longer stays.

The company was one of the hottest public listings of 2020,

though with stock price has fallen since then

amid a broad market cool off.

In August, Airbnb projected record third quarter revenue

on the back of higher rental prices,

and said it expects to post its first full year profit

this year.

- A lot of businesses have lucky moments,

but there's something to be said about getting lucky

and also being able to ride that wave and capitalize on it.

- [Presenter] That's what Airbnb says

it has done from the start.

- Back then in 2008, a lot of people turned to hosting,

because they were losing their homes,

high housing prices,

and a lot of people because they didn't have as much money

were looking for more affordable ways to travel

than ever before.

- [Rana] That really helped them

bring a lot of people who were looking for

ways to make up for lost income onto the platform.

And you can really see them capitalize on timing

during the pandemic as well.

- [Presenter] Airbnb redesigned its app and website

to focus on local stays during the pandemic.

Last summer, it launched a flexible search feature,

which curates trips for people

who don't know where they want to go.

- [Rana] The pandemic and remote work

gave us that flexibility.

You know, we could travel during the week

and still work remote.

So Airbnb starts noticing this trend and it says,

oh my God we can,

you know, we can sort of capitalize on this, and they do.

- [Presenter] In May,

Airbnb launched another redesign of its search tool

that split homes into more than 50 categories

as a way to steer people to places

they wouldn't otherwise have picked.

- [Rana] So what they're trying to do is

they're trying to fill existing homes

instead of adding more and more homes.

- [Presenter] Some analysts say

this is key to the company's future growth

since global occupancy rates are low.

When it comes to addressing safety issues on its platform,

some cities have complained that

Airbnb has been too hands off.

- They're not actively monitoring these properties

because frankly they can't, they don't own them.

So that's really where a lot of their problems stem from.

- Four people killed, another four hurt,

all of it happening in a house rented out on Airbnb.

- [Presenter] After a 2019 Halloween shooting,

the company announced safety measures

including a 24/7 neighborhood hotline to field complaints.

- [Brian] We've banned all parties globally on Airbnb.

We have a risky reservation queue

where we looking at any suspicious activity,

and we have a pretty hands-on team that's using

some pretty advanced like machine learning technology

to essentially identify anything we think is suspicious.

If it is, we'll continue to seek more information.

- [Presenter] The company says

the number of party complaints

have dropped 44% in the last two years.

Airbnb has also been trying to reduce that rate further

by doing things like blocking one or two nights stays

on new year's Eve and Halloween

for guests without a history of positive reviews,

but incidents keep happening.

- [Rana] Earlier this year,

we had a shooting in Pittsburgh,

and again, you know, people were injured.

- [Presenter] City officials have also blamed Airbnb

for ruining the long term rental market

in some small communities

- What's happened is a lot of people

are just snapping up properties and renting them.

And as a result,

locals don't have enough properties to rent long term.

Airbnb doesn't think that it's actually

affected the long term rental market,

but you know if you ask city officials,

they have a different story.

- [Presenter] For example, in 2020,

the Mayor of Sedona, Arizona, a tourist hotspot,

said that the demand for Airbnb rentals

worsened the shortage of affordable housing

and demolished the long term rental market.

- If we are, you know, part of the problem,

we are gonna work with cities.

That's why we've done numerous agreements with cities

to create restrictions.

We actually do want Airbnb

to get more and more into long term housing.

We want people to really feel invested in the community.

- [Rana] One of the things that Airbnb is doing now

is it's trying to direct people

to areas where it has supply,

and that sort of also takes the load off of certain places

that everyone might go to

and that might get sort of overburdened

- [Presenter] In April,

Airbnb announced

that its employees can work from almost anywhere

without a pay cut.

- So if more businesses do follow Airbnb's lead,

Airbnb stands to gain in its home rental business

because that would mean, more digital nomads,

more people traveling, and likely booking more Airbnbs.

- [Presenter] But some travelers are concerned

about rising nightly rates,

and some analysts believe that hotel chains and competitors

like Expedia Group,

stand to gain as business travel picks up this year.

So the question is, can Airbnb keep up the momentum?

- We're an incredibly lean company.

We've already been preparing for a storm

that we thought was inevitable for years to come.

- [Presenter] Airbnb dramatically cut costs

during the pandemic,

and analysts have credited the company

for keeping those down even as travel rebounded.

While a potential economic downturn could decrease demand,

Airbnb says it could also bring more hosts to the platform.

- As the economy is gonna be slowing down,

I think more and more people

are gonna be interested in saving money,

and I think they're also gonna be interested

in new ways to make money.

- [Presenter] And unlike hotels with fixed properties,

Airbnb can adapt quickly

by spotlighting properties

that serve travelers changing needs,

like it did during the switch to local travel.

- I think even as we're entering a recession,

people have been kind of isolated for years

and they're yearning to get out.

And the one thing

I think you're gonna see them spend money on,

is they're gonna continue to travel.

(upbeat music)