Airbnb

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.