When a new business starts up with either a solo entrepreneur or a couple of co-founders, it’s an exciting time.
It’s all new. It’s fresh. A great deal of testing takes place to assess whether there is a genuine painpoint that a customer will pay for. Mistakes are made and learned from quickly. These learnings then feed into the improved proposition and so it gets better and more refined and hopefully profitable. Such was the way when tech giant Airbnb started off. But things have changed since then…
The co-founders at Airbnb started out testing whether folks would come to their apartment and sleep on what essentially were airbeds. It worked. The whole model was based on trust and respect. You, the customer, come to my home. A key point to note here! I make you feel welcome. I set some basic rules on things like the space you can use and whether you can bring your doggie. Then we trust each other to show respect and co-habit for a short while. In return, you pay me a small fee. This fee allows me to make a small profit, while allowing you to benefit from not paying hefty hotel charges. It’s a social contract that has been hugely successful for Airbnb. But my experiences recently show a less comfortable proposition.
As with all good things in business, there are forks in the road that throw the original proposition and vision awry. These forks in a tech business like Airbnb are called investors. Investors love the fluffy story of how it all got started. Whoopee! But once the money is on the table, these investors want their return. And there is nothing wrong with that. I have no doubt the team at Airbnb presented some magnificent figures that secured decent rates from its investors. But the spreadsheet has to match the reality. And here is where I believe that Airbnb needs to change.
Whereas many hosts on the platform are genuine people opening up their homes or even a buy-to-let they have bought, there is a new trend emerging that is changing the way we adopt Airbnb. It’s called the professional property company and I recently experienced it. Here is how it works. A new property developer will build 40 new condominiums in a hip part of town. Many of these will be bought by the likes of you and me to live in. Some will be rented out. But a large chunk will be sold to the “professional property” company. These units will then become part of a spreadsheet and the investors will want their payback. Best place to get that, it seems, is by listing on Airbnb.
So, when I look for a two-bedroom condo in the likes of San Diego, I can find a ton of these at roughly the market rate of the solo host, who is renting out her private digs. But this is the only similarity. On checking more closely, these professional property companies are introducing fees. A three-day stay at one of these apartments can attract admin fees of $100 and – wait for it – cleaning fees of $197!
A whopping 25 per cent can be added to a typical stay as these professional property outfits make sure they sweat the asset and do not lose out on anything. We recently challenged one of these companies on the high cleaning fees. We were told that we could pay more for the room and a lower cleaning fee. That kind of said it all for me. I estimated that it would take one hour to clean the room. So one can see where these companies are making big profits.
This is becoming the norm in many big cities. And I wonder if it is time for Airbnb to have a rethink. Perhaps, Airbnb domestic and Airbnb commercial as propositions would allow us the consumer to make a more informed choice on how we want to consume the app.
I love using Airbnb when I travel. But if it becomes more expensive than a stay at a very decent hotel with all the amenities that come with it, then something has gone wrong. I do hope the co-founders take note. But, alas, it’s about the spreadsheet now.
Jim Duffy MBE, Create Special.