As marketplaces evolve, the biggest question may not be how they attract customers, but how they create value once buyers and sellers find each other. In the latest Insights@Questrom Q&A, Andrei Hagiu, Professor of Information Systems at Boston University Questrom School of Business, examines Airbnb’s experiment with lower fees for host-referred bookings and what it reveals about marketplace leakage, seller incentives, and the evolving role of platforms in facilitating transactions.
Airbnb is testing lower fees when hosts bring their own guests. What does this reveal about the relationship between platforms and sellers?
It highlights two distinct services that marketplaces typically bundle together: helping sellers find customers and helping them complete transactions. Airbnb’s reported pilot is a way to unbundle those two services. Specifically, host fees are lowered from roughly 15.5% to 6% or 10% for qualifying bookings made through host-shared links–the bookings still happen on Airbnb.
The logic is that when a host finds a guest through Instagram, an email list or repeat business, Airbnb’s contribution to that particular booking is lower. It can still provide valuable transaction services, but charging the same commission becomes harder to justify.
My research with Julian Wright on discoverability explicitly examines differential fees: in our model, the platform optimally charges less for transactions with customers sellers bring themselves than for customers who discover them through the platform. Airbnb’s experiment is consistent with that logic.
How does this approach address marketplace leakage—and what are its limits?
Leakage occurs when buyers and sellers connect through a marketplace but complete their transaction elsewhere to avoid its fees. Our research examines the trade-offs platforms face in responding, including through transaction benefits, communication restrictions and alternative fee structures.
For Airbnb, the temptation is easy to understand: after a successful stay, a guest and host may feel comfortable arranging the next booking directly. A lower fee could make keeping that booking on Airbnb worthwhile.
That being said, I don’t think leakage is a big issue for Airbnb, particularly when compared to marketplaces where in-person repeat transactions are much more common, such as those for cleaning and other home services.
Instead, my sense is that a host who independently finds a new guest presents a different opportunity: attracting a transaction Airbnb might never otherwise have handled. That is additional business, rather than simply preventing leakage.
The lower fee makes sense if the profit from additional or retained bookings outweighs the revenue sacrificed on bookings that would have stayed on Airbnb at the full fee. Attribution matters: the link used to complete a booking does not necessarily tell you who originally generated the demand.
Your discoverability research identifies another tension. Why might hosts hesitate to bring their customers onto a marketplace?
Because those customers may discover competing hosts. A marketplace offers each seller access to other sellers’ customers, while exposing its own customers to those same rivals. Our research shows how that trade-off can discourage sellers from participating on the marketplace.
Applied to Airbnb, a host with a strong following might ask: “Why should I bring my guests into an environment where they can easily compare my property with alternatives?” That concern becomes more salient as hosts build their own customer relationships. This in turn becomes easier with AI-generated booking apps and websites.
Lower fees can help compensate hosts, but platform design matters too: how prominently alternatives appear, how recommendations work, and how easily guests can return to a particular host. Those choices also affect guests’ ability to find a better match.
The implication is that pricing and discoverability should be designed together. A discount alone may not address a seller’s concern about losing control of customer relationships.
Beyond lower fees, what gives hosts and guests a reason to keep transactions on-platform?
The platform needs to solve problems that remain after the two parties have found each other: processing payments, reducing fraud, resolving disputes and helping when something goes wrong.
These services can remain valuable even when a guest already knows and trusts the host. Familiarity does not eliminate the possibility of a cancellation, property damage or a payment dispute. But the value of that protection must be large enough relative to the fee.
My broader takeaway is that marketplaces can serve different roles for different transactions. For some, they provide discovery and transaction services; for others, mainly the latter. Charging accordingly can expand the business even if the average commission falls. The durable advantage comes from continuing to make transactions easier and more reliable after the introduction has been made. This will become increasingly relevant as AI agents make discovery easier across many marketplaces.
