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Airbnb Faces Growing Pains as It Passes 100 Million Guests

Published on Jul 12 2016 9:43 AM in Technology tagged: Dublin / Technology / tourism / Airbnb

Airbnb Faces Growing Pains as It Passes 100 Million Guests

Don't go to Paris. Don’t tour Paris. And please don’t do Paris.”

The advice, offered by homesharing app Airbnb in a series of television commercials that have been airing in seven countries, promotes a vision of small-batch, artisanal travel that’s more authentic than the dull, predictable quality of big hotel chains.

“It’s the humanity that makes our business different from every other travel company,” says Airbnb's chief executive officer, Brian Chesky. But as a company, Airbnb, which allows users to book private rooms and apartments in an EBay-like online marketplace, is anything but homespun.

With a valuation of $30 billion, Airbnb is worth about 30 percent more than the world’s biggest hotel company, Hilton, and nearly eight times more than its closest competitor, HomeAway, which Expedia bought for $3.9 billion last year. Airbnb’s 2.3 million room inventory makes it bigger than the three largest hotel chains—Hilton, Marriott, and InterContinental—combined. And its occupancy rates, while lagging the big chains, are high considering that most Airbnb hosts are part-timers. Last New Year’s Eve, the biggest night of the year for Airbnb, more than a million guests booked rooms on the platform. This summer, Airbnb has been routinely passing that figure on most evenings. (On a recent weekend in June, it hit 1.3 million guests.)

On July 11, Airbnb will celebrate its 100 millionth guest. Its success is forcing harder conversations about what the company is and what it should be. For years, the company, founded by Brian Chesky, Nathan Blecharczyk, and Joe Gebbia in a San Francisco apartment in 2008, operated without much regulatory scrutiny. Its hosts, as private homeowners, were not subject to traditional hotel regulation. Later, Airbnb offered to collect hotel taxes, winning over skeptical municipalities. “Our approach is, let’s figure out how to facilitate a community that works for cities,” says Belinda Johnson, the company’s chief business affairs and legal officer. The company, she says, seeks to “build for the future and work with cities in a collaborative, positive way.”

But goodwill is fraying in some cities. "The biggest problem has been created by people who get greedy and buy and place and kick the renters out," says Kitty Mrache, a longtime Airbnb host who rents out a cabin on her Santa Cruz, Calif., property. "That goes against the principles of Airbnb." Her concerns are shared by regulators in New York and San Francisco. In late June, the New York State legislature passed a law that would subject many hosts to fines of up to $7,500. If Governor Andrew Cuomo signs the measure, backers have warned it would amount to an outright ban. And in San Francisco, Airbnb filed suit last week over new rules that hold Airbnb itself financially responsible if hosts do not formally register listings with the city.

Charges of discrimination represent another challenge that the company is being forced to confront. Studies by Harvard University researchers released in 2014 and 2015 suggest that black Airbnb hosts make less money than white hosts and that black users are sometimes refused service on the basis of race. Airbnb brushed aside the critique until this May, when a number of black travelers began posting their experiences on social media sites using the hashtag, “#Airbnbwhileblack.” One customer filed a civil rights lawsuit, and two others formed Noirbnb, a startup homesharing site that aims to be more inclusive.

Chesky says the accounts of racism were eye-opening and “very painful” to read. He recently hired Laura Murphy, a former American Civil Liberties Union executive, to review the company’s operations. “Our mission is to create a world where people feel like they belong,” Chesky says. “That’s why we’re making a big deal of it.” The company wants to minimize discrimination on the site, but Chesky says Airbnb can be only as welcoming as its hosts. Unlike a hotel, which can fire a discriminatory employee, Airbnb can’t directly control the people using its service. “Discrimination exists in the world,” he says. “We can’t interview [every host] and just rip it out completely.”

Airbnb’s ability to deal with racist or lawbreaking hosts may hinge on how it ultimately defines itself. Is it an online travel agency and therefore not responsible for hosts’ behavior, or is it a full-service hospitality company that controls the entire guest experience? Until now, it’s been a bit of both, combining the legal status and business model of Expedia with the branding of an established hotel chain. Last year, Airbnb urged hosts to offer more services, including meals, tours, and airport pickups. The plan is to formalize this with a new product, code-named “magical trips,” to be unveiled later this year. “The future of Airbnb isn’t about spaces,” Chesky says. “It’s about hosts.”

Even so, as Airbnb hurtles toward an inevitable initial public offering, it may need also to embrace a more utilitarian vision of travel, both as a way to quiet its critics and to continue growing. The company is currently trying to make its site friendlier to business travelers and has been encouraging hosts to sign up for an Expedia-like feature called Instant Book, in which they agree to accept guests automatically. And while Airbnb doesn’t talk about this, the site has quietly added a number of listings for hotel and motel rooms sprinkled in among the funky spare bedrooms and homey tree houses.

“In the long run we don’t want to be an OTA [online travel agency],” says Chip Conley, Airbnb’s head of hospitality and strategy. But he adds, “If a hotel is giving some sort of personalized, localized experience, then maybe they do belong on the site.” In other words, the door is open for travelers who just want to go to Paris.

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