A blow-up success

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Even Heggernes, now UK and Ireland country manager, joined the company three years ago when Airbnb was three years old; he was employee number 100, or thereabouts. The global headcount is now over 900, and the peer-to-peer room rental service has provided beds for more than 11 million guests in 192 different countries. Its success and rapid growth is due to consumer thirst for unique travel experiences, not just a place to stay.

“When we survey our guests, one of the reasons people say they use Airbnb has nothing to do with price or the exact place they’re staying but the fact that they hate being a tourist, they hate being the person standing there with a map not knowing where to go,” Heggernes says. “They want to stay with a local who can give them guidance, and that’s something I can very much relate to. I want to go to New York and stay in Brooklyn and be one of the cool guys, and that’s of course easier when you have someone local telling you where to go.”

Airbnb is one part of the broader “sharing economy” – a socio-economic system, facilitated by the internet, that allows individuals to rent out anything, from spare seats in their cars, to rooms in their homes, tools from their shed or clothes from their wardrobe. It’s an alternative to the constant accumulation and ownership of things.

Room with a new point of view

The company was started in San Francisco by cash-strapped flatmates Brian Chesky, Nathan Blecharczyk and Joe Gebbia. Each is soon to be worth more than $1bn, after the latest round of investment in Airbnb valued the company at $10bn.

“They didn’t start Airbnb because they had a great business model,” says Heggernes. “They started the company because they had a problem. Their problem was that their rent was going up in San Francisco and they couldn’t afford it. One of them said ‘why don’t we turn our place into a bed and breakfast?’, but they didn’t have a spare bedroom.” They did have some airbeds, and, as there was a conference in town and hotel rooms were in short supply, the airbeds soon had takers.

“It solved the problem, they made some extra money, but what turned it into a business was the experience they had, opening their doors, sharing their lifestyle, sharing their neighbourhood and they had an amazing week. At the end of that stay, they thought, ‘Wow, this is so powerful’. They wanted to share it with other people around the world.”
Airbnb allows renters to list their properties free of charge, but takes a percentage of each booking. What motivates renters now is the same as the initial impetus behind the company. “People start doing it because they want to make some money. The reason they keep doing it is because they like the experience. It’s a mix of financial and personal motivation.”

Travel log

The company’s rapid expansion has been dictated primarily by broad tourism trends. Offices were opened in London, Paris, Berlin and Barcelona because of the sheer numbers of travellers in each market. The service itself provides much of the information that drives the way the business develops, along with in-depth, qualitative discussions with and between users of the service. “One of the beauties of running an internet company is all of the data we’re gathering every day,” Heggernes says.

In the first six weeks of 2012, Airbnb opened seven offices across Europe. “What we didn’t do when we started was a big marketing campaign. Instead, we brought people together – not for me to stand in front of the group and talk about how amazing Airbnb is, but to meet people and get them together to share their stories. This is something we continue to do every week,” he says. “Right now, I’m sitting in our London office and our community manager just went past with a couple of bottles of wine because tonight they’re bringing in 20 new hosts to understand who they are, to talk to them and to get them to meet each other.

“We really want to understand our community and who they are, and instead of me just looking at the numbers and looking at supply and demand, we’re more interested in knowing why and how. That’s also why we give all our employees a travel coupon every quarter to encourage them to try the product. If they’re not travelling, they can use it in London, to stay in another neighbourhood.”

Airbnb doesn’t employ a team of people to physically read the many user reviews it gets on its site, but there are triggers for action, such as a series of low ratings. The focus is on getting users of the service to have a positive experience so that they pass on the message and expand the pool of renters and guests. “More than 80% of our growth is organic,” says Heggernes. “It’s happening by people talking to each other and sharing their experiences. That’s great for the business as we don’t have to do that much marketing; our growth engine is taken care of by our community. We say it’s better to have 1,000 people love you than a million people like you.

The way forward

The growth of Airbnb has not been without problems. Claims that the whole business is illegal – most notably in New York City – have led to courtroom dramas that are yet to be resolved. In other markets, renters are subject to restrictions and have been ordered to pay tourism taxes or the same taxes paid by hotels – something the company is now offering to collect and pass on for those involved. The company admits having now-famously mishandled the case of a renter who returned to find her home had been ransacked by a guest and, initially, got little sympathy from Airbnb. The company now has a 24-hour helpline for users, and provides insurance for renters.

In terms of expansion, Heggernes rules out other verticals in the sharing economy. “We’re not considering renting out tools or anything like that; we want to focus on improving the travel experience,” he says. To that end, a director of hospitality has been hired by the company to travel around showing people how to be better hosts. Cleaning services for hosts are being piloted, to streamline the hosting experience, and the company’s lobbying has resulted in changed or clarified laws for renters in several markets.

Heggernes insists the future for Airbnb is bright; he says that while the company is now bigger than several multinational hotel chains, there remains huge untapped potential in hospitality and peer-to-peer renting, but accepts the threat of competition shouldn’t be underestimated. “I’m sure that the hotels 20 years ago weren’t afraid of a couple of guys renting out airbeds in their living room. Today we have 700,000 properties. And I’m sure there’s some bright kid sitting in their living room right now coming up with the next big idea, so of course there will be competition coming. It’s very exciting to see how this space will move forward in the future.”

This article was first published in Impact magazine, Issue 6 July 2014.