Couch for Hire Airbnb Shakes Up German Accommodations Market
Airbnb is a revolutionary online platform that lets people offer and book lodgings in private homes around the world. The for-profit couch-surfing service is alarming the German hotel industry.
You can find a bit of Berlin even in San Francisco. On the third story of a gray industrial building near the city's hip SoMa neighborhood, visitors can find themselves plunged into an old East German living room that seems to have come straight out of Berlin's Friedrichshain district in the 1970s.
Lounging on one of the sofas, Brian Chesky yawns and explains that his designers hunted through flea markets, online and at secondhand shops until they had gathered all the original items they needed to reproduce the Berlin room down to the smallest detail. Chesky has also recreated studios based on originals in Hong Kong and New York as well as a mushroom-shaped tree house from southern California known, appropriately enough, as the "Mushroom Dome."
Chesky isn't doing this just for fun. These rooms are copies of apartments offered by his company, Airbnb. Short for "airbed and breakfast," the Internet portal allows private individuals to offer rooms or other sleeping accommodations in their own homes.
Customers pay a commission to the company in addition to rent for the days they stay. The predetermined amount is charged to the guest but held by Airbnb for 24 hours and only released to the host once it's been determined that everything is in order.
The eBay for Accommodations
Though it might sound like some half-baked idea dreamed up by students, the business model is being hailed as the next big thing on the Internet. Chesky is one of three company founders, and Airbnb recently reeled in $112 million (83 million) in fresh financial backing.
The German business journal manager magazin reports that even Axel Springer AG, Europe's largest publishing house and a major multimedia company, was interested in investing a further 70 million, but that Airbnb had to dash its hopes.
"We closed financing in July, and there are no plans for another round at the moment," says Gunnar Froh, Airbnb's manager for Germany. Springer's proposed investment amount, Froh adds, is pure wishful thinking. "Previous backers have a say in subsequent investments," he explains, "and 70 million would be far too much." The entire company is now valued at $1.3 billion.
"What eBay has done as a broker of possessions, Airbnb does for unique accommodations," Chesky explains. The idea of an agency for temporary lodgings is not a new one, but Chesky has perfected and professionalized the principle and expanded it to a global scale.
Alongside cheap, simple apartments, Airbnb offers luxury accommodations that won't be found in any traditional hotel catalogue. Examples include boats in Panama, wooden cabins in Yosemite National Park and the "Twin Palms" villa in Palm Springs, which was built in 1947 for Frank Sinatra and his first wife Nancy.
Not everyone is thrilled about this new way of matching guests and accommodations, though. The German Hotel and Restaurant Association, for example, is responding with commensurate alarm, noting that these places often don't meet traditional standards in terms of hygiene, fire safety and safety in general. Besides, the association says, it's surely not acceptable for individual providers to develop a gray market for hotel accommodations.
Born of the Necessity of Many
Still, Airbnb's financial backers have a more relaxed outlook, and the financial magazine BusinessWeek has even named Chesky one of the best new entrepreneurs in the world of online business.
The irony is that Chesky basically owes his career to an idea born of necessity at a time when he needed money. After completing a degree in industrial design in 2004, Chesky, then 26, packed up his Honda Civic and moved to San Francisco. Apartment-hunting there left him sobered by the city's horrific rents. In the end, he settled on the "cheapest" option: $1,000 a month for a small, run-of-the-mill apartment.
At a conference, Chesky heard people saying that all of San Francisco's low-budget hotels were full and that conference participants were desperately looking for places to stay. Chesky and Joe Gebbia, his housemate at the time, had the idea of letting trade-fair visitors help pay their rent by creating a website on which they could offer cheap accommodation in their apartment. Since neither of them knew anything about programming, they asked a friend named Nathan Blecharczyk if he could throw something together for them. Then they put out flyers at the conference advertising the website. Within a few hours, all the beds were taken -- and they'd covered their rent for the rest of the month.
Buoyed by their success, the trio used the same formula in Denver a year later. The city was hosting the Democratic National Convention, at which Barack Obama would be officially nominated as the party's presidential candidate, and more than 80,000 people would be looking for somewhere to stay. For the first time, Chesky, Gebbia and Blecharczyk used their website not only to offer accommodations in their own apartment, but also as a platform on which others could offer theirs. And, thus, Airbnb was born.
Imitators and Insurance
Each year since, the site's number of bookings has increased eightfold. "My mother thought the idea was pretty dumb," Chesky says now. "She couldn't imagine there were people out there who would enjoy sharing their homes with strangers. Her biggest concern was whether we would ever be able to pay back our start-up capital."
But since the company's launch in 2008, over 2 million overnight stays have been booked through Chesky's website. The Airbnb staff has ballooned to over 130, and it reportedly already manages over 100,000 accommodation offerings in 19,000 cities and 190 countries. Likewise, it has spawned several imitators, including 9flats and Wimdu in Germany.
Still, not everything is rosy. The business isn't without its problems, and Airbnb's image has already taken its first hits. This summer, the home of a woman in San Francisco was trashed so badly by her short-term renters that she had to completely refurnish it. At first, Airbnb didn't react at all, and then only slowly. Under increased pressure, the company now offers a guest warranty, a voluntary settlement scheme worth up to 35,000, and meant to protect hosts against theft and vandalism.
Chesky prefers not to discuss the particular circumstances that bring the warranty into effect or how often it has been used. Instead, he speaks about having given up his own apartment a year ago and stayed in over 40 apartments since then.
Still, he says, he won't be truly satisfied until "at some point we can offer a room in Microsoft founder Bill Gates' house."
Translated from the German by Ella Ornstein