Page 72 - Forbes Magazine-October 31, 2018

FORBES BRIAN CHESKY AIRBNB

holders like guests, hosts, employees and cities. Chesky views ger,” Gebbia says. “It’s something that we’ve all been taught
this not as touchy-feely corporate-culture stuff but as surviv- since we were kids.”
al: Decision-making must be driven by what’s best for every- The founders couldn’t fix the problem from their desks
one in Airbnb’s community. Only then will his investors thrive. in San Francisco. They began staying with Airbnb hosts to
“The public is not going to put up with companies in the next learn what needed to be done. They built out a peer review
50 years that are only kind of myopically, narrowly focusing on system so people could rate each other, added around-the-
the very short term or just a few parties,” Chesky says. clock customer service and worked on the quality of the
The result is tension between Airbnb’s need to scale rap- photos. The financial meltdown of 2008 also pushed travel-
idly and Chesky’s desire to take it slow and build something ers to tighten budgets, and cash-strapped hosts were more
that’s responsible and sustainable. “The reality is that you’re willing to brave “stranger danger” in order to earn a little
not going to be around long-term unless you’re able to grow extra income.
and generate attractive economics,” says Kenneth Chenault, Early on, Airbnb dropped the requirement that guests
the former American Express CEO and an Airbnb board had to sleep on air mattresses and be served breakfast, and
member. “You’re also not going to be around long-term if everything from backyard treehouses to single bedrooms in
your brand is not meaningful in people’s lives.” a shared apartment was soon listed on its website. By 2013,
Airbnb had 500,000 listings. Now it counts over 5 million.
KNOCK TWICE ON THE BOOKCASE and a hologram of Joe Those folks typically learned about Airbnb by word of
Gebbia appears. It’s a parlor trick of the real Gebbia, the mouth—even today, the company spends more than 90% of
37-year-old Airbnb cofounder, as he settles into a confer- its advertising budget on attracting the guests, not the hosts.
ence room that is a mock-up of his old apartment, half a That strategy has worked so far. In 2008, roughly 100 people
stayed with Airbnb on its peak night. In August 2018, nearly
10 years later, 3.5 million people stayed with Airbnb on its
“WHEN SOMETHING COMES best night. (The average is around 2 million.)
After so many years of effortlessly signing up hosts, Air-
EASY, YOU DON’T HAVE TO
bnb is facing an unexpected supply problem. The reason is
BUILD THE MUSCLE. AND twofold. First, its success has attracted deep pocketed com-
WHAT CAME EASY WAS A petitors. Booking Holdings—the $12.6 billion (2017 reve-
nue) owner of properties like Priceline and OpenTable—and
LOT OF LISTINGS.” Expedia (2017 revenue: $10 billion) have started empha-
sizing apartments and vacations rentals on their sites. This
mile northwest of the company’s San Francisco headquar- spring, Booking Holdings split “alternative accommoda-
ters. Behind him, the ghost version of Gebbia drones on: tions” into their own category, reporting for the first time
“You’re standing on the exact spot where we put the first that it has 5 million listings, the same number Airbnb has.
three air beds . . .” Secondly, local authorities are starting to crack down.
It’s a founding story that has achieved mythical status in The beefs range from charges that property owners are
Silicon Valley and remains at the core of Airbnb’s identity. using Airbnb to create unregulated hotels to accusations
Gebbia and Chesky, graduates of the Rhode Island School of that the company is exacerbating housing shortages. Cit-
Design, were short on rent, so they charged people visiting ies like Berlin, Santa Monica and San Francisco all saw
San Francisco for a design conference to sleep on an air mat- monthly listings drop—in some cases by more than 30%—
tress on their floor in 2007. They tapped a third friend, Na- after strict regulations were passed, according to the Den-
than Blecharzyck, to help them build a website. ver-based data analysis firm AirDNA. New York City and
Originally called Air Bed and Breakfast, the startup Paris have also targeted the company. In Japan a change in
wasn’t an overnight success. After 12 months it was doing the law in June forced Airbnb to cancel thousands of book-
only 10 or 20 reservations a day. But the trio were already ings and establish a fund of $10 million for inconvenienced
looking for outside money: In June 2018 they sought intro- customers.
ductions to seven angel investors and were rewarded with “When something comes easy, you don’t have to build
five rejections and two ignored emails. The ask? $150,000 the muscle,” Chesky says. “And what came easy was a lot of
for 10% of the company, a position that, undiluted, would listings.” So in February Airbnb expanded its focus to be
be worth over $3 billion today. Broke, the founders collect- more welcoming to established operators, from bed-and-
ed credit cards like baseball cards, organizing the maxed-out breakfasts to vacation rentals and even boutique hotels, giv-
plastic in binders. The biggest problem: Lack of trust. People ing each a category on its website. It’s an obvious way to
weren’t comfortable inviting strangers they met on the inter- grow, even if it tends to undermine what purportedly makes
net to stay in their homes. Airbnb unique.
“It was a real battle to figure out how can you cross this One advantage: Airbnb takes a smaller cut from hosts,
bias that was working against us, that strangers equal dan- only 3% compared with the traditional 15% an online trav-

44 | FORBES OCTOBER 31, 2018