Airbnb: Where Homeowners And Travelers Connect

Several new websites connect travelers, who are looking to save money, with homeowners who have a spare room. Airbnb is one of the fastest growing of these rental-by-owner sites. But as with other fast-growing businesses, it faces several challenges.

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STEVE INSKEEP, host:

The thought of letting a stranger spend the night in your living room may sound creepy, but to some people it's good business in a tough economy. Several Internet websites now connect homeowners with travelers looking for a cheap place to crash.

NPR's Asma Khalid takes a look at one vacation rental site that's been in the spotlight. It's called Airbnb.

ASMA KHALID: Barb Howe lives in a charming red brick row house in Washington, D.C. She shares it with her dog, her cat, her boyfriend and the random houseguest willing to pay 99 bucks a night for her spare bedroom.

Ms. BARB HOWE: Hi, I'm Barb.

Mr. ELLIOTT SANCHEZ: Elliott. Nice to meet you.

Ms. HOWE: Okay.

KHALID: Howe is a super-host on the website Airbnb. She has more than 70 glowing reviews. That's why Elliott Sanchez decided to give her house a try. It's his first time using the site.

Mr. SANCHEZ: I signed up. I sent Barb an email, and within 24 hours I was at, just like I would have been at a hotel, but much more conveniently and a lot cheaper.

(Soundbite of footsteps)

KHALID: Howe takes Sanchez downstairs to a room with emerald green walls, high ceilings, a private bath.

Ms. HOWE: It's one of these keyless entry things. And so...

KHALID: Even a separate entry. Howe quit her job last September, around the same time she joined Airbnb.

Ms. HOWE: It was going to give me a lot more flexibility with leaving my job. I know that was a really risky thing in the middle of this kind of economy, but...

KHALID: Howe is still unemployed, but she doesn't mind. Her condo is booked almost every night. She brings in $1,800 a month from Airbnb renters.

The company got its start in 2007 when then-26-year-old Brian Chesky moved to San Francisco to live with his college buddy, Joe Gebbia. They needed money to pay the rent. When they heard a conference was coming to town and all the hotels were sold out, they came up with this idea.

Mr. BRIAN CHESKY (Founder and CEO, Airbnb): So we had this idea, why don't we create a bed and breakfast for the conference. We pulled the air beds out of the closet, inflated them and called it the Air Bed and Breakfast.

KHALID: Chesky says he's just bringing back what people used to do long before the Internet, when travelers would board in people's homes.

Mr. CHESKY: In fact, when we first came up with the concept, I told my grandfather who said, of course, this is how people used to travel. And I think technology is bringing back this concept of connecting with people in real life.

KHALID: Chesky and Gebbia are not the first ones to try this. Similar websites have names like CouchSurfing, HomeAway, VRBO, which stands for Vacation Rental By Owner. It's an easy-to-clone concept and the market's getting crowded.

Airbnb, though, stands out for its growth. The company says the number of nights booked through the site grew from 100,000 as of early last year, to now more than two million, and from 30 employees the company now has 200. Analysts credit the growth to creative PR...

(Soundbite of commercial)

(Soundbite of music)

Unidentified Woman: This place isn't mine but I'm staying here for the weekend. It's not a hotel...

KHALID: ...and smart funding.

Mr. ROO ROGERS (Co-Author, "What's Mine Is Yours"): The founders raise money in a very conscientious and careful way.

KHALID: Roo Rogers is an investor. He says he does not have any money in Airbnb. He wrote a book about collaborative consumption, which is the idea of shared goods and services, like Zipcar and Airbnb.

Mr. ROGERS: What they did is they brought in money in the early stage that was safe money, and now they've brought in big money that can really help them grow to that valuation that they want to be at.

KHALID: It's probably fair to say that Airbnb wants to be the eBay of its industry. Airbnb's financial backers include a former eBay executive and eBay veterans are on its staff. This summer, investor excitement helped pushed Airbnb to a billion-dollar valuation and the company made headlines. Soon after, it made headlines for a very different reason. An Airbnb host returned home to find that her guest had ransacked her apartment. It was a public relations nightmare, because it threatened that trust the company depends on for its success. Users need to trust who they're letting into their homes, and travelers need to know that those homes are safe and comfortable. After initially putting its head in the sand, the company announced new safety measures, most notably, a $50,000 guarantee for homeowners.

Airbnb's growth is also inviting critics, like Joe McInerney, president of the American Hotel & Lodging Association. He says people who rent out their homes on Airbnb could be violating local laws.

Mr. JOE MCINERNEY (President, CEO, American Hotel & Lodging Educational Foundation): They are providing a hotel service. They don't have a certificate of occupancy. They're not paying any occupancy tax and...

KHALID: Of course, the hotel industry also stands to lose out if more and more travelers opt for people's spare bedrooms instead of conventional hotel rooms. Analysts don't expect Airbnb and its rivals to take more than a percent or two of hotel revenues. But whatever happens, they say the industry will likely boil down to one or two big players, just as eBay came to dominate the online auction industry.

Asma Khalid, NPR News.

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