They are the two most prominent examples of what used to be called the “sharing economy”. Founded in 2008 and 2009, respectively, Airbnb and Uber pioneered asset-light platforms to bring together providers and consumers of particular services—accommodation for the first, transport for second. Both firms became bywords for entire categories: startups now claim to be Airbnb for dogs or Uber for doctors. But Uber’s stockmarket flotation in May did not go well. Its share price has fallen by nearly 35% since its listing (and that of its rival Lyft, which went public in March, by 50%). As Airbnb prepares to go public next year, its boss, Brian Chesky, has been making the case for his company, both to the press and behind closed doors. He is keen to get across that, sharing-economy heritage notwithstanding, Airbnb is no Uber.
Mr Chesky founded the firm with his friends Joe Gebbia and Nate Blecharczyk, after he and Mr Gebbia, both unemployed designers, began renting out an airbed in their San Francisco apartment to make extra money. He originally thought it would be a side-hustle while he started a social-media startup. As is often the way, the side-hustle turned out to be the better idea. After an initial focus on renting spare beds in cities during conferences, when hotel rooms were scarce, the startup expanded into rental of entire properties. In 2009 Airbed and Breakfast became Airbnb. Since then more than 500m stays have been booked through its platform, which now offers more than 7m properties (including 4,900 castles and 2,400 tree-houses) in over 100,000 cities. Each night, around 2m people around the world stay in an Airbnb.
Having been in roadshow mode for several months, Mr Chesky has polished answers for everything up his sleeve. Not that there is much room up the former bodybuilder’s sleeve: his rippling physique sometimes strains the buttons of his shirt. Oof! He cleanly dispatches a question in a television interview about safety and hidden cameras, then flips it around into an opportunity to talk up Airbnb Plus, a premium tier of properties that are even more closely vetted. Pow! He bats away the notion that he is worried about Marriott, a hotel giant that is launching a rival to Airbnb called “Homes & Villas”, instead seeing it as an endorsement of his model. Indeed, Airbnb is punching back, letting hotels list rooms on its site and investing in properties custom-built for Airbnb rental.
The firm has grand designs to move beyond accommodation, and provide the entire trip: where to go, what to do and how to get there, not just where to stay. It intends to team up with airlines to “elevate” the experience of air travel. As part of this effort earlier this year Airbnb hired Fred Reid, the founding chief executive of Virgin America, though Mr Chesky is cagey about details. Already, users of the Airbnb Luxe service (where those castles, and other fancy venues, are listed) are assigned a “trip designer” to help them arrange transport, restaurants and other perks. Indeed, Airbnb’s main growth plans hinge on offering users not just a bed but an experience, “designed and led by inspiring locals” to boot. Airbnb Experiences, launched in 2016, uses the Airbnb platform to link guests with locals who can provide things like guided tours or cooking workshops. In June it added Airbnb Adventures, which arranges trips for up to 12 people in exotic places. People don’t travel to sleep, Mr Chesky likes to say, but to have an experience.
So far, so Uber. The ride-hailing giant, too, has expanded into areas like food delivery and road freight. But here the similarities end, starting with money. Whereas Uber has yet to turn a profit (and, sceptics say, never will), Airbnb says it is already profitable (to be precise, ebitda-positive) and has been since 2017, when it is thought to have earned $93m on revenues of $2.6bn. That is not the only distinction. For ride-hailing firms like Uber and Lyft, supply and demand must be matched in the same city; a driver in Manhattan is no use to a rider in Mumbai. Airbnb’s listings, by contrast, are global. Any property anywhere can potentially appeal to any user; a Mumbaiker may want to stay in New York. A telltale sign of Airbnb’s superior “network effects” is that whereas drivers for Uber often drive for Lyft, and vice versa, doing their utmost to play the platforms off against each other, most of Airbnb’s listings do not appear on any other platform.
Unlike Uber drivers, few of whom were previously riders, Airbnb hosts typically start out as renters first. Since it is a middleman for property rather than labour, Airbnb has avoided the controversy about “gig economy” exploitation, and the vexed question of whether ride-hailing firms should treat drivers as employees.
An accommodation with regulators
More broadly, Airbnb decided earlier than Uber to work with regulators rather than fighting them. It has struck deals in more than 500 big cities around the world. It says it has collected more than $1bn in hotel and tourism taxes in America alone and is “on track to become the world’s largest single collector of these taxes”.
A few worries linger. One has to do with its long-running feud with regulators in New York, who in February demanded data about New Yorkers who are listing properties for short-term rental on the site, in violation of local laws. Another pertains to protests in cities, such as San Francisco, where residents gripe that renting properties to tourists leaves fewer for long-term renters, making already high prices unaffordable. Airbnb has also grappled with the problem of some hosts being racist towards guests.
These concerns pose the biggest threats to a smooth stockmarket debut (expected to be by the trendy mechanism of a direct listing) in 2020. Airbnb’s most recent funding round valued it at $31bn. In the meantime, Mr Chesky tirelessly talks up its growth potential. This month Airbnb launched Animal Experiences, a subcategory of experiences, from honeybee therapy to llama-trekking to elephant-spotting. It is a reminder, if one were needed, that although they are often lumped together, Airbnb is not at all like Uber and Lyft—but a different beast entirely.■
