When Brian Chesky and Joe Gebbia started the small, informal company AirBed & Breakfast in their San Francisco loft in 2007, they stumbled onto something interesting. There was an incredible demand for short-term lets, and it didn’t seem to matter that they couldn’t even provide real mattresses; it was the connections visitors made with locals that counted. Now valued at a reported $2.5 billion, Airbnb has 12 offices worldwide, listings in over 30,000 cities across 192 countries, and more than 140,000 people staying on any given night. They are changing the face of the travel industry, offering a range of unique experiences – from rooms in city apartments to castles, water towers and tree houses. Tank Form managing director Oliver Forder spoke to Airbnb CPO Joe Gebbia about the success and struggles of a rapidly growing company in a changing environment.
Oliver Forder The success of Airbnb has always been based on winning hearts and minds in a personal sense. Could you explain the philosophy behind your original approach?
Joe Gebbia It’s funny to look back at the early days, when we had no growth, or sometimes even negative growth. The idea that you’d be sharing space with someone you’d never met was strange. I think that over the years more and more people have opened up their minds to a new way of experiencing travel. And after people use the service, more times than not they come back not to save money, but because of the experience they had with the host. There’s constantly so much digital in your face since the emergence of mobiles, laptops and the internet. I think what people discover with Airbnb is how enjoyable a conversation with somebody really is.
OF So this is your vision: everybody has connected online, and now it’s a question of marrying the online with the offline and getting them back into the real world?
JG Yes, to me it’s about people starting to rediscover the value of human connection, and not through a text message, Facebook message or tweet. The real human connection we used to have.
OF But with strangers rather than friends?
JG We can do that now, which we couldn’t before. I feel that there was a shift from openness to isolation post-WW2, as America suburbanised. Previously, an inner-city neighbour was somebody you knew and shared things with, contrasted with the new neighbours of the suburbs, where suddenly it was about competing for status in pursuit of the American Dream. Somewhere along the way we started to lose touch with each other; we started to put up a fence and not invite people in. I feel like I grew up in an era influenced by that closed-off mentality of my parents’ baby boomer generation. But then the internet came along when I was in high school, and suddenly people were able to connect with each other online and newly establish trust. I believe we’re now at the tipping point of bringing that online trust back into the real world, back to the face-to-face.
OF Do you notice a difference between your community members in the urban places compared to the suburban places? Is this more popular in cities? Are people more willing to go for it?
JG We started in cities, but we certainly don’t limit ourselves to them. We were so insanely focused on getting New York to work in the early days that we started to get a critical mass there. Most importantly, it’s a destination for other city-dwellers to visit, and attracted people from London, Vancouver, Tokyo, Barcelona, Rome. The idea of Airbnb got seeded by other metropolitan travellers from around the world, and they brought the idea back with them to their own cities.
OF So cities have been good to you. But now, with New York and its clampdown on “illegal hotels”, some of them are not being so good. Do you think that some of the people of these cities will stand behind you against the administrators?
JG Well, close to 50 per cent of the people on our site use the income from Airbnb to pay their mortgage or their rent, so I think taking this away would have a big impact. What I’m seeing on Airbnb is people finally getting ahead in New York City, despite the out-of-control rents. They’re paying off their student loans, saving up for a wedding ring, or putting funds towards their kids’ college education one day. For the first time I’m hearing these stories from our hosts in New York: they feel this sense of freedom that Airbnb has brought to them. That’s a very powerful thing. And if this is threatened by policy makers, I think they’ll have a lot to say about that as voters in that city.
OF What sort of scale are you currently operating on?
JG To date we’ve had, I believe, four million guests stay on Airbnb. And to give you a sense of scale, three million of those guests were in 2012 alone. Our original idea was simply to rent out rooms, but that evolved into a decision to create an open platform, so that any type of space could be shared on Airbnb. This included, of course, entire homes and apartments; suddenly we were getting some really unique types of spaces that no one had ever really known you could stay in. For example, there’s a tree house in Vermont that has become somewhat famous because of us. So, the hosts are named Harrison and Ellie and are both retired Harvard professors and many years ago they built this tree house in their backyard for their kids. Their kids eventually go off to college, and they’re left with this structure. And so their kids suggested to them that they list the tree house on Airbnb. They started to get so many reservations from people all over to world to stay in their tree house that they were able to pay the monthly mortgage for their main home. They’ve got hundreds of reviews, they’ve hosted people from dozens of countries and it’s changed their lives.
OF Your business is growing exponentially; why do you think people choose Airbnb over a hotel?
JG Ninety per cent of our hosts rent their primary residence, and that’s our bread and butter. The whole notion of Airbnb is that you can travel somewhere and stay in a home. I used to think you had to know somebody in the city you were travelling to, which meant that the world was very limited in terms of where you could access it. Everyone was a stranger. Then skip ahead to today, when there is someone in virtually every country around the world waiting for you with a home.
OF Your business model, where you charge a percentage fee of whatever the guest pays the host, is hugely profitable, with a valuation in the billions after just six years. Do you plan to sell the business in the future?
JG We have a long way to go before we think about next steps; we’ve only scratched the surface. Nearly 400,000 rooms are available on Airbnb, but how many rooms go empty every single night worldwide? We’re interested in growing a very long-term independent business, on a similar scale to eBay’s. If eBay has a near $40 billion business based on stuff in your house, how big is the market for the house?
OF How will you stop people just creating a “me too” version?
JG To be honest, our design expertise is one of the key factors in our success. We employ all the great practices in industrial design to make delightful products for people. It’s been a little bit of our secret sauce because Airbnb does not have the traditional composition of a founding team. We are two designers and an engineer, which means that we approach problems in a different way from other companies. Design actually comes first – it’s not an afterthought.
OF But you’re not talking about the design of the website, you’re talking about the design of the experience people have.
JG It’s like we’re designing this vessel through which a relationship can be formed between two people who never otherwise would have met.
OF Finally, I wondered what it was that kept you going in the darker early days of Airbnb. Why did you persevere, when for several years the community wasn’t growing and people weren’t latching onto this idea?
JG It really goes back to that point of conception for us, when we hosted three guests in our living room for five nights. It started as a way to pay our rent and it became something much more beautiful, in large part due to the conversations we had with them. We got to take them out to our favourite spots in San Francisco. We showed them a truly local experience and they were grateful for that. And in return they shared with us tips on website design. Whenever times got tough in the years that followed, we could always return to that experience and say: “You know what, we’re sticking with this because we know that if the world can taste what we tasted, they too will fall in love with sharing their place with other people.” §