From Renting Out a Single Bedroom To an Entire Castle, How Airbnb Got There
Airbnb has carved a niche for itself in the international tourism and lodging market. Founded by Brian Chesky, Joe Gebbia and Nathan Blecharczyk on August 11,2008, Airbnb primarily offers an online marketplace for offering lodging and homestays for tourists. When the Great Recession hit later that same year, suddenly the need for short-term, low-commitment living quarters exploded exponentially. Currently employing over 12,000 people and offering listings in over 191 countries, the company has come a long way from its humble roots as a startup offering bed-and-breakfast. But this long journey has been marred by its own set of problems.
One of the early problems faced by the fledgling startup was of substandard listings on its site by the host as well as damages done by the guest to the lodging.Airbnb required the host to provide pictures of the lodging. Many hosts exploited this by uploading fraudulent images to the website, misleading the guests. On the other hand, many hosts who expected a quiet family as tenants were shocked when hordes of party goers turned up in their lodging.
All these problems forced Airbnb to revamp its review system.
A slew of acquisitions followed. DailyBooth, an app similar to Instagram, allowing users to share their life in pictures was acquired in July 2012 to enhance its mobile application platform. For an efficient review system on its platform, Airbnb bought Fondu, an app that offered reviews about places, in October 2012. PencilLabs was acquired in 2014 to facilitate better communication between host and guest at the time of booking.
Till date, the most serious problem faced by Airbnb is widespread cases of discrimination by hosts against guests.
In 2015, a study by Harvard Business School found that hosts racially discriminated against black guests. The report also said that if the host of the lodging had a suspicion that the tenant was a black person, he would cancel the booking. Such users, who say their travel plans had been denied or canceled because of their race had rallied under the hashtag #AirbnbWhileBlack. Three US senators wrote a letter to the government on this issue of racial discrimination on short-term-rental platforms.
Airbnb took up these claims seriously. Chief Executive Brian Chesky made a statement announcing that
“The biggest challenge facing Airbnb is not the regulatory crackdown from cities such as New York, but blatant discrimination occurring on the company’s platform”.
In July 2016, former attorney general Eric Holder was roped in to draft a Non-Discrimination Policy for the company.
The newly drafted policy (Airbnb’s Non Discrimination Policy can be viewed here) clearly stated that hosts may not refuse accommodation to a guest based on race, color, ethnicity, national origin, religion, sexual orientation, gender identity, or marital status. In early 2014, Airbnb faced accusations of discriminations against guests with disabilities. Airbnb responded by acquiring Accomable and rolled out a checklist allowing hosts to provide a more detailed information about accessibility of their properties.
In 2015, Airbnb was accused of causing an increase in the price of housing, in the areas where it operated.
The main cause for these protests was the fact that many property-owners listed their second homes on Airbnb all year long, as if they were hotel rooms. Such residences that were occupied by Airbnb-using travelers all year long created a shortage of available homes in that area. This shortage led to increased cost of houses in that area. Several universities, including Harvard, MIT and UCLA, conducted studies on this issue. They came to the same result: Areas where Airbnb operated experienced a spike in the house rents.
In response to these accusations, regulations were imposed on Airbnb in many states of America.
Airbnb agreed to work together with the government to curb malpractices indulged by the landlords resulting in lack of affordable housing in that area. Airbnb started a process of registering all hosts on its platforms who rented out their homes, in accordance with the short-term-rental laws. The law required that all hosts on such a platform should register with the city and obtain a business license to rent their properties. San Francisco ruled that hosts can only rent out their primary residences on Airbnb, and not second homes.
The most recent challenge faced by the 12-year-old startup is due to the COVID-19 pandemic.
There has been a three-fold loss to the company on account of the pandemic. First, reports estimate that there has been a 41% to 96% drop in bookings across the platform. Secondly, in order that guests don’t feel pressurized to stay in the lodgings, they booked earlier on the platform; the company has announced that it will refund the full amount of the booking if any guest wants to cancel. And lastly, in order to compensate the losses of the hosts due to widespread cancellations, the company has pledged a US$250 million fund.
In the words of Peter Thiel, a lean startup is one that can adapt and evolve to a changing environment. Even if the pandemic ends in the near future, the situation will be far from normal for startups like Airbnb. People will avoid staying in hotels and lodgings because of social distancing. It will be a huge obstacle to overcome. In order to offset its own losses, Airbnb has announced that it has laid off up to 2000 workers. Born during the 2008–09 recession and to have survived that period and flourished, it will be interesting to watch how Airbnb tackles this situation and prepares itself for the coming future.
