Airbnb facing growing pains

NEW YORK • "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 is 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 its chief executive 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 US$30 billion (S$40.4 billion), Airbnb is worth about 30 per cent more than the world's biggest hotel company, Hilton, and nearly eight times more than its closest competitor, HomeAway, which Expedia bought for US$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 behind those of 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, it has been routinely passing that figure on most evenings. (On a recent weekend last month, it hit 1.3 million guests.)

Last Monday, Airbnb celebrated 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 Mr Chesky, Mr Nathan Blecharczyk and Mr Joe Gebbia in a San Francisco apartment in 2008, operated without much regulatory scrutiny. Its hosts, as private home owners, were not subject to traditional hotel regulation. Later, Airbnb offered to collect hotel taxes, winning over sceptical municipalities.

"Our approach is let's figure out how to facilitate a community that works for cities," says Ms Belinda Johnson, the company's chief business affairs and legal officer. The company, she adds, 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 the place and kick the renters out," says Ms Kitty Mrache, a long-time Airbnb host who rents out a cabin on her Santa Cruz, California property. "That goes against the principles of Airbnb."

Her concerns are shared by regulators in New York and San Francisco.

Late last month, the New York State legislature passed a law that would subject many hosts to fines of up to US$7,500. If Governor Andrew Cuomo signs the measure, backers have warned that it would amount to an outright ban.

And in San Francisco, Airbnb filed a suit last week over new rules that hold it 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 last year 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 travellers began posting their experiences on social media using the hashtag #Airbnbwhileblack. One customer filed a civil rights lawsuit and two others formed Noirbnb, a start-up home-sharing site that aims to be more inclusive.

Mr Chesky says the accounts of racism were eye-opening and "very painful" to read. He recently hired Ms 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," he says. "That's why we're making a big deal of it."

The company wants to minimise discrimination on the site, but Mr Chesky says Airbnb can only be as welcoming as its hosts. Unlike a hotel, which can fire a discriminatory employee, Airbnb cannot 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 law-breaking hosts may hinge on how it ultimately defines itself. Is it an online travel agency and therefore not responsible for hosts' behaviour or is it a full-service hospitality company that controls the entire guest experience?

Until now, it has 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 pick-ups. The plan is to formalise this with a new product, code-named "magical trips", to be unveiled later this year. "The future of Airbnb isn't about spaces," Mr Chesky says. "It's about hosts."

Even so, as Airbnb hurtles towards an inevitable initial public offering, it may also need to embrace a more utilitarian vision of travel, both as a way to quiet its critics and to continue growing.

The company is now trying to make its site friendlier to business travellers and has been encouraging hosts to sign up for an Expedialike feature called Instant Book, where they agree to accept guests automatically.

And while Airbnb does not talk about this, the site has quietly added a number of listings for hotel and motel rooms, sprinkled among the funky spare bedrooms and homey treehouses.

"In the long run, we don't want to be an OTA (online travel agency)," says Mr Chip Conley, Airbnb's head of hospitality and strategy.

But he adds: "If a hotel is giving some sort of personalised, localised experience, then maybe it does belong on the site."

In other words, the door is open for travellers who just want to go to Paris.


A version of this article appeared in the print edition of The Sunday Times on July 17, 2016, with the headline 'Airbnb facing growing pains'. Print Edition | Subscribe