Airbnb

Airbnb, a better place to stay.

Friday 8 June 2012, by albertmalagarriga, iddqd, ingridportella, RoyBeemer

7 inspired

A. How did you find this company? What are the main facts about its activities?

Airbnb started as a solution to a problem: where to stay when traveling. Established in 2008 and headquartered in San Francisco, Airbnb is a community market place for travellers to rent flats from locals at very low prices. Airbnb has 10 offices all around the world (San Francisco, London, Paris, Barcelona, Sao Paulo, Copenhagen, Moscow, Hamburg, Berlin, Milan) with users from 192 countries. There are 100.000 owners al around the world, present in 19.000 cities.

The key resource, apart from trust and reliability, is the users of the network. The network has more that 2.1 million registered users. This base is growing at about 250% year-over-year, expecting 4 million users by August 2012 and possibly 6 million by December 2012.

This year Airbnb has been named to the list of the world’s 50 most innovative companies. The reason is that they reinvented digital accommodations marketplace. Their business model enables the user to rent empty rooms online. They believe in a sharing economy where the user and the host can share expenses.

Airbnb has already booked more than 5 million nights, and is said to have facilitated roughly $500 million inflow-through sales last year. The firm has attracted the attention of investors, and it has already raised $120 million in its fourth financing round. It registered close to $60 million in sales in 2011.

B. What are the Ethical challenges this company is addressing?

When it comes to rent your house to some strangers, several aspects of the deal must be taken into account. Fraud can come from either side of the deal. For instance, the owner might not tell the whole truth about the facilities and services he is offering, and that could end up in a deception towards the customer. Cleaning service is a key issue regarding this. Also, not only pictures of the house might not be coherent with what you will find later, but also the spaces you are allowed to use may not be as stated on the website.

On the other hand, customers might not carry their duties, such as respecting the place they are staying at. They should treat the guesthouse as if it was their own. There have been some cases where the owners found their houses sacked and trashed after the strangers had gone through. Airbnb was accused of not giving adequate support to these people.

Mechanisms to enforce correct behaviour have been carried out by Airbnb. As for reliability and coherence, official photographers take and upload pictures that are to be attached to the ads. Recently, the company has offered up to $1 million insurance to owners who are deceived by customers in terms of rules and behaviour. This one in particular has come too late, some say.

In addition to that, a reputation system, similar to the one that is used by eBay, was installed from the beginning. Both owners and customers are encouraged to leave a short review of their experience. This is to help other people to know who to trust.

The most important challenge however, comes from the founding. Airbnb has risen $120 million and the company is worth more than $1 billion according to Sarah Lacy of TechCrunch. Much of these have been used to cover up their leaders’ lack of skill in management and to make sure safety is guaranteed. $22.5 million were given as a dividend, and 21 out of these $22.5 million went straight to the founders. Their offices are brand new, spacious and some might say way too luxurious. In the meantime, some of the problems stated above are still happening. This might be interpreted as a misuse of the funds they acquired. Most part of that fund raising could have been used in solving those situations, in enhancing customer experience and give a better coverage to the owners; instead of using it to increase its own wealth. Volume of people who has been using these services is remarkable for a short-aged enterprise, and yet this fact (i.e. the volume of users) has been used to promote their services. The conclusion of this point is that they should probably reinvest their funds better and in higher amounts, thus allowing greater growth and better future expected revenues.

C. What makes this company really inspiring to you and why would you trust it?

“Imagine one day, millions of people from and in different cultures, are living with each other. What kind of world would that be? I think it would be a better one.”

“If you ask someone: What would you do with a million dollars? Most of the people would answer they would use part of it to travel”

Brian Chesky, AirBnB Co-Founder, has repeated these two quotes in a series of interviews, and it is what inspires us to say that this community marketplace helps the world to be a better place.

No one can argue that travelling opens peoples’ minds. Travelling makes all of us more tolerant, more curious for what goes on around us and more lively and passionate of meeting more and more people and more and more places.

Travelling helps individuals cross culture barriers, it helps people cross personal barriers, but most importantly, it helps people cross personal barriers and helps people liberate themselves from limiting thoughts and believes imposed by their environments.

So if an organization, call it a company or a peer-to-peer marketplace, can promote travelling by connecting travellers to locals, helping them share their private spaces and getting in intimate touch with local cultures, we believe it promotes respect, it promotes education, and it promotes love for others, even those who are still strangers. This is why we believe that Airbnb promotes ethical values and helps to make the world a better place.

On top of that, its business model, being a market place, makes sure that everyone gets what he or she deserves. Users who offer their flats for rent are getting 85% output for their inputs, so we feel Airbnb is born with a mission of simply making something possible, and not of exploiting an opportunity. This business model is based on confidence and trust by part of the users, so it is only possible when users have certain attitudes towards their peers. In this manner, it is also promoting good peer-to-peer behaviours, and actually impacting and changing the way people travel and the way they behave, to our point of view, for good.

D.What are the possible challenges facing the company in the future and how do you think this company may improve?

Threat: A core characteristic of Airbnb’s business is reputation, or more specifically trust. In order for Airbnb to do business and let people make transactions the suppliers and demanders of the rooms need to have confidence in each other. Trust is something that could, today and in future, be of problems for Airbnb.

The suppliers (or hosts) will have to believe that the guests staying in their property will not ruin it. Moreover, the guests, before booking, must have confidence that the room will be of the stated quality. This is not something Airbnb can’t do a lot about but it is essential for their business. Nowadays, with the internet there are lots of people spreading their ideas to a wide range of readers. If, due to blogging and newspaper articles, there are a lot of negative experiences of people being spread over the internet this could highly damage the reputation of Airbnb. Whenever both suppliers and demanders of the rooms lose their trust, it will have a negative impact on Airbnb’s business.

Proposed Solution: We consider it impossible for Airbnb to check whether the rooms offered are of the stated quality but it could eliminate the ones that are of poor quality and thus harm the guests. Moreover Airbnb could also eliminate guests that, in the past, caused damage to a room they rented. A kind of blacklist on the internet could give transparency for the customers of Airbnb.

Threat: Another problem which the company will definitely face in the future is the tax problem. Airbnb hosts are supposed to pay income tax. Since Airbnb is a company providing places to sleep, through hosting, it is a direct competitor to hotels. In some regions hotels are required to pay an extra fee called "hotel tax". Since Airbnb hosts were not obliged to pay this extra fee they had an advantage. However, this has changed. Since April the hosts must also pay this hotel tax and thus the cost advantage disappears. Prices for renting a room via Airbnb will probably go up which makes them less attractive.

Proposed Solution: For Airbnb to solve this problem they will have to focus their marketing on the positive aspects of renting a room using their internet site. Airbnb should try to differentiate itself from hotels and through advertisement state that it will be a great experience renting a room using Airbnb’s services.

Threat: As the firm grows, there are more and more property owners who are simply posting extra houses, living from the opportunities that Airbnb offers, but loosing the essence of offering assistance and local knowledge to their hosts. This sharing market place runs the risk of becoming a traditional business based simply on cash inflows for some of the property owners, something which already happens in New York where property owners can make as much as $26.000 a year by renting their spaces.

Proposed Solution: Airbnb could impose regressive commission models in order to give incentives for property owners not to fall into making their own scalable renting organization within Airbnb, and therefore conserve the magic of travelling and sharing spaces with local people.

Bibliography

http://www.airbnb.com/terms

http://www.airbnb.com/home/story

http://www.businessinsider.com/airbnbs-revenue-2012-3?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

Financial Times (23/05/12): Home rental site Airbnb offers m insurance, Tim Bradshaw

GigaOM (24/07/11): AirBnB gets 2M in new investment ,Om Malik

Quora (29/11/11): Why does Airbnb need 0M in funding?, Dimitry Rokityansky

Cnet.com (29/07/11): Airbnb horror story goes from bad to worse, Rachel King

Fast Company (2012):For turning spare rooms into the world’s hottest hotel chain, Austin Carr.

Tech Crunck (22/05/2012): Airbnb Makes Good, Will Now Cover Up To M In Property Damages , Rip Empson.

Fast Company (27/04/2012): Airbnb By The Numbers: 85% Of Users Inactive?, Austin Carr.

Start a new discussion

5 Discussions / 5 Messages

  • Airbnb 18 June 2012 at 17:58 , by Vasyl Davydko

    The Airbnb has really impressed me with its creativity. The firm has been able to integrate into its business model what other firms almost never take into account – human values. Airbnb uses principles of trust and hospitality in order to make profit. Often, we forget about those values in our day-to-day life: we are nice with strangers and we trust very people. This is what economic models tell us: individuals always try to maximize their own utility even if it can harm someone else. But this is not true. Behavioral economics experiments have showed that we are way more complicated to be explained by a “profit-maximization” model.

    The critiques to its founder for its past as spammer or some other affaires might lead some people to the thinking about the fact that “something dark” could be behind Airbnb. But, is any human being perfect? Is there anybody who has made something wrong or committed a mistake? I wish I could meet Brian Chesky personally, but I think this guy has done a great job and the firm is a great example of an ethical business. At least me, I feel inspired.

  • Airbnb 22 February 2013 at 12:22 , by Aidamp

    I’ve been using AirBnb services as a Host and the experience was totally positive. I think it’s a great idea, allows people to travel with more flexibility as staying in hotels, and it’s also a diferent way to travel because you met people from the country you’re going to stay and helps or guides you. AirBnb also offers you as a host a free guarantee but doesn’t cover much things, so I think that the company could improve in that, I didn’t have any problem in fact my experience was 100% good, but I think it’s necesary.
    They also perform speaches where teach people how it works and if you are a host to teach you how to be a perfect host, so they really works in human values and that’s very encouraging. They’re really working on trust between hosts and guests, the hosts can value guest and the guests can value hosts and their offer. So reading the other users valuations you can know more about people you’re going to meet.
    I support the idea for sure, being an user it’s free an user, the only payments you make are when you use AirBnb services by paying some taxes, but some part is paid by the host and other by the guest, so it’s not expensive.

    The things they can improve:
    - The valuation sistems making more especific
    - The guarantee for hosts and guests
    - Offering services or acording discounts with organizations in the cities, for guests advantage

  • Airbnb 1 March 2013 at 11:30 , by mantas

    The principle of trusting each other appears to me to be the essential factor when using Airbnb. Reading the previous discussions I can absolutely understand that hosts would prefer some sort of full insurance. However, it is questionable whether insurance would be the effective feature to implement. I believe that exactly the absence of full insurances lead to as many positive resonances as is present to this date. Guests feel even more obliged to leave the apartments and houses in good condition, because of the awareness that there is no such thing as coverage for failing to do so.

    Users of Airbnb appear to be a special "species" of people, appreciating the service of affordable housing and welcoming the fact that hosts are available not only for questions of the housing per se but also in order to obtain further insights regarding the culture or insider tips by the hosts. The fact that a track record is kept for the guests as well as for the hosts ensures that both parties feel obliged to make this experience a positive one. The implementation of insurance would obviously provide hosts with more certainty and security, but in my opinion would also bear the risk that the guests start to become sloppy, with respect to keeping the places in a clean and orderly condition.

  • Airbnb 7 March 2013 at 01:02 , by angab

    An other problem for airbnb in the future could be that in some countries, for rent your flat to tourists you need to pay to the city hall for getting a permission, and the rest of the neighbours can also decide if you can rent your flat to tourists in that building or not, so the problem could be if the permission increases then the cost will increase to.

    But of course the values they are transmitting are respect, trust... I think is really important to travel because of the different cultures there are in the world. And when you travel you learn a lot and you open your mind, and you want to know new people, airbnb is a easy way to do that. Also if you travel with airbnb you can learn even more of the country than if you go to a hotel, because you as a guest can ask to your host (who normally lives there) about nice places to go, and maybe he can tell you places that are not so turistic but that are really nice to.

  • Airbnb 13 May 2013 at 00:10 , by LucasB

    I believe AirBnB has not only helped solve the ethical problem of adding human value to the use of their operations, but the recycling of un-used space within large cities. Much like managing and optimizing a company’s production line to make the least amount of time and effort invoked to make that particular item, the hotel/vacation industry can be considered as the same.

    This idea is quite a longshot, but if you take into perspective that communities as a whole are an organization, we could consider a city as a company. This company has people that live within it and other people that visit it. Before AirBnB, both of these segments had their own way of fulfilling the need of accommodation in a city, instead of optimizing to make these as minimal as possible. This leaves us with “wasted space”. The wasted space in this case is where people leave on holiday to another city, leaving a empty room available for use within the city they departed from. In terms of “environmental friendliness” this practice is not very green. However, if another individual occupies this empty space, then there would already be less demand of an expansion of space for visitors in that city.

    Hotels are not particularly pleased with the growth of AirBnB, as they are losing a large share in this market due to this particular growth; their reasoning being that the practices made by the company is not legal. I believe these laws need to morph to tolerate companies such as AirBnB, because the demand in general is increasing.

    (Click here for a document on the legal battle against AirBnB)

Location: San Fransisco (USA)

Sector: Other service activities

Official website: http://www.airbnb.com/

Key figures:

Annual revenue 2011: 52.8 million
Revenue growth 2011: 8.4 million
Number of registered users: 2.1 million
Number of countries operating: 192

Nbr. visits: 1401

Nbr. inspires: 7