Why Airbnb can be the one to finally disrupt the broker business model


Disclaimer: I do not work for Airbnb or have any affiliation. These are just my own thoughts…


For anyone who has searched for an apartment to live in, you know one of the biggest frustrations with the process is dealing with a broker.[1] No matter where you live in the US it seems that if you are looking for a new place to live, you have to go through a broker.

This process is stuck in the past. Don’t get me wrong, real estate brokers used to serve an important role. When the internet wasn’t around and everyone didn’t have a super computer stuck in their pockets, brokers were there to keep you informed about what was available in the market. They helped sellers reach more buyers and buyers know about more listings. It was a win-win for both sides and served an important role in the market.

But we’ve moved on. In the time it takes you to read this article, you could have found out about all the potential places you could rent. Anywhere in the US[2]. From a number of different (and dare I say free) sources. We are living in the information age, yet when it comes to finding a place to live, we still have gatekeepers.

This is an obvious frustration that many of us have, particularly the younger generations. Just doing a quick search on AngelList, there are 405 startups that come up when you do a search in the Rental Housing market.

I have personally tried building something to address this issue. Long story short,[3] the project didn’t work out, a similar result to everyone else who has tried in this space. But it gave me some key insights about how the broker model works. Before going through this experience, I had generally always thought that it wouldn’t be too hard to go around brokers. It seemed simple enough, the internet gave us a way to connect anyone in the world. You just needed to build a site that could connect landlords looking to rent out properties with tenants looking to rent properties. How naïve of me to think this.

What I didn’t realize was that there were many different incentive structures set up along the way that helped entrench the vested interests in the market. For instance, I learned that landlords have incentive to use brokers instead of going directly to the consumer. The fee that brokers charge tenants is sometimes split with landlords to make sure that the brokers keep their positions solidified as the middlemen of this market.


So that brings us to Airbnb. Where do they fit in all of this? And why do I think they will succeed where so many others have failed? Airbnb is in a unique position because of the platform they have built. Just like it wasn’t just a website for sleeping on someone else’s couch, it’s not just a website for booking vacation rentals. The key component is that they have been building a platform of trust between people. We all use Airbnb today to sleep in a stranger’s home! Think about how amazing that is for a second. Before Airbnb, the only homes most of us ever stepped foot in were either our own home, a close friend’s home, or a relative’s home.

The possibilities that a platform of trust unlocks are enormous. It opens the door for a variety of transactions. On a platform you don’t have to predict how users are going to use it. A platform is flexible, it allows users to use it in new and creative ways. And one of those ways is long-term stays.

I think this is even catching Airbnb off guard. Take a look at a recent tweet from Brian Chesky their CEO:

I think even Brian was surprised by this and was one of the reasons he chose to share the data. This should make brokers start to worry. You can see the similarities between how major hotel chains used to look at Airbnb in the beginning and how brokers look at them today. 20% of their business is a huge number. I don’t know what the actual size of their business is but just about 17 million people alone booked a place in the summer of this year.[4] So it is not a small number. And I would put money on it that the rate of long-term stays is only growing. And like the rest of the Airbnb business, it’s growing fast.

Take a look at the chart showing their growth below. That’s only up to 2012. And the rapid rise of nights booked? The longer people stay, the more nights are booked. The point of all this is to show the huge potential for Airbnb to take over a large chunk of the rental market.

We live in a world now that is much more transient. We are increasingly living in more places for shorter periods of time. Not everyone plans their life according to 12 month increments. We should have the flexibility to choose how long we want to live somewhere, not be forced by some arbitrary schedule. Airbnb is perfectly set up for this changing world. Their mission statement is Belong Anywhere and there is no better place to belong then home.


Since I believe Airbnb will become the place to go for both short and long-term rentals over time, I wanted to test it out. I needed to rent out my apartment for 6 months so instead of going the usual route and using something like Craigslist, Lovely, or one of the other options, I used Airbnb.

What the long-term price and stay requirement sections look like for a host on Airbnb

The basic setup for hosting long-term rentals is basically the same as the setup for short-term rentals. This hasn’t always been the case and a nice new set of tools for a host have been added. The new tools include long-term pricing, minimum and maximum stay lengths, and stay requirements. When setting up a long-term rental, you need to make sure you set the minimum stay to whatever it is you’re looking for as well as the particular time frame you are looking to rent your place.

Another nice part about the Airbnb platform for long-term rentals is payments. It was easy to add a security deposit (a must for long-term rentals) as well as receive payments. Receiving payments is often an under recognized burden for a landlord. Collecting payments from renters can be difficult. There is also the issue of credibility (will this person be able to pay this rent in 6 months time?). Landlords spend both time and money ensuring that payments will be collected but Airbnb makes it easy by taking the brunt of this work. Each month on the 28th, I received payment that was electronically deposited into a bank account. They even handle the taxes with W9 forms which can get tricky for landlords come April.

While a lot of features do now exist with long-term renting in mind, there are still some remaining challenges. Hopefully, as Airbnb realizes the potential for long-term rentals, they will start to address these issues. One feature that would help both renters and hosts alike would be a dedicated section for long-term rentals. It would be helpful to search for a place to rent without having to specify exact dates and instead use ranges for the length of stay. If I am going on vacation, I know when I will be somewhere and for how long. But if I am looking for a place to live, I might not know exactly when I want to move. I also might be somewhat flexible with the length of stay. Maybe I am a student and only need a place for one semester or maybe if I find a great place, I’ll want it for the whole year.

Another part of the experience that could prove to be a challenge is reviews. At the time of looking for our renter, our place had other roommates already living there. I wasn’t sure how this dynamic would impact the review I would get. And on a platform where trust is an important feature, reviews hold a lot of weight. Granted, ultimately I would be responsible for knowing the situation and for choosing who lived in the house. But as we all know when you live with other people for more than a week or two, you might find you don’t get along. Should roommate relationships effect the review of a host? Is it the host’s responsibility to make sure the interaction between roommates goes well, even if they are not the other roommate? If I use Airbnb to rent out multiple rooms at varying lengths of time, the interaction between renters might cause issues, but should that reflect poorly on the review of the host? Maybe there needs to be a way to review other roommates or renters (if they were also booked through Airbnb) as well as hosts? These are particularly challenging questions but ones that need to be addressed by Airbnb if it is going to be a force in the long-term rental market.

All that said, I really enjoyed the experience of using Airbnb for long-term rentals. It ended up working out really well. After the initial trepidation that comes any time you are letting another person stay in your home for an extended period of time, it really was a breeze. I’m glad I tried it and can report back that others should try it too!


So where do we go from here? I hope that I have left you with the impression that the rental broker business model is broken, but it may finally be up against its best challenger yet. And I hope I also left you with the idea that technology platforms can be amazingly powerful. The successful ones usually end up accomplishing a lot more then even the original team first thought they could.

Next time you’re looking for a place to live or need new tenants, give Airbnb a shot! I know of at least one great long-term rental that’s on there! :)


Update: So this made it to the front page of Hacker News (which is awesome :). There’s a pretty good conversation going on there if you wanted to weigh in. Thanks for reading!


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[1] The focus for this post is on the apartment rental market in major US cities. Although many of the points from this article can probably be extracted to other parts of the real estate market as well. Also, I have now learned this isn’t true everywhere but it has been my experience in Boston and NYC.
[2] And if you can’t, it’s most likely because brokers prevent you from accessing them.
[3] If you want to find out more about this story, email me!
[4] http://techcrunch.com/2015/09/07/airbnb-hosted-nearly-17-million-guests-this-summer/?ncid=rss

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