EP130: This Week in the World of Airbnb

EP130: This Week in the World of Airbnb


Airbnb’s growth is in the news this week, and acquisitions are in the air. Having only spent $300 million of the $3 billion raised, Airbnb has capital available. And they will have to invest in order to facilitate the growth necessary to reach the publicized goal of $3 billion in profit by 2020.

Jasper is joined by Hostfully Growth Guru, Silvia Li Sam, to discuss acquisitions that are already being negotiated as well as their suggestions for possible purchases.

Jasper and Silvia cover the latest lawsuit against Airbnb as well, filed by apartment management company Aimco.

Topics Covered

Article #1: Airbnb’s Profits to Top $3 Billion by 2020

  • Ambitious but possible
  • Vertical acquisitions may facilitate growth

Article #2: Airbnb is Buying Luxury Retreats for Around $200M

  • Focus on high-end homes
  • $1,000/night or more
  • Airbnb will attain team and technology
  • Likely to occupy a separate section of the Airbnb site

Article #3: Airbnb is in Talks to Acquire Social Payments Startup Tilt

  • Technology for group purchases is a good fit
  • Paying significantly less than last valuation of $400M

Jasper and Silvia’s Suggestions for Potential Airbnb Investments

  • Expand further into the travel space with airline aggregator
  • Airbnb’s quality user experience could compete with sites like Expedia and Kayak
  • Flightfox and Airwander assist in booking multi-city trips
  • Eventually, Airbnb could recommend flights, accommodations and experiences

Article #4: A Big Apartment Management Company is Suing Airbnb

  • Suit accuses Airbnb of deliberately incentivizing people to breach their leases
  • Aimco will have to prove monetary loss
  • In similar past lawsuits, platforms were not held responsible for user behavior

 Resources Mentioned

Article #1: http://fortune.com/2017/02/15/airbnb-profits/

Article #2: https://techcrunch.com/2017/02/09/airbnb-is-buying-luxury-retreats-for-around-200m/

Article #3: https://techcrunch.com/2017/01/24/airbnb-is-in-talks-to-acquire-social-payments-startup-tilt/

Article #4: https://techcrunch.com/2017/02/18/a-big-apartment-management-company-is-suing-airbnb/

flightfox.com

airwander.com

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Complete Transcript for Get Paid for Your Pad Episode 130

Welcome to Get Paid For Your Pad, the definitive show on Airbnb hosting, featuring the best advice on how to maximize profits from your Airbnb listing, as well as real-life experiences from Airbnb hosts all over the world. Welcome.
Jasper:

I began using a really cool service from Aviva IQ, and it’s made my life so much easier. My guests love receiving all the important details about their stay exactly when they need it, and I love all the five-star reviews I’m getting on communication. Check them out at www.avivaiq.com.

Hey, what’s up, everybody? Welcome to this week’s episode of the news in the world of Airbnb, and today I have one of my favorite cohosts, Silvia Li, from Hostfully. Silvia, how are you doing?

Silvia:

Good, Jasper. Thank you for having me.

Jasper:

How’s everything going in San Francisco?

Silvia:

It’s been raining like crazy, which is good because we were in a drought, but now, with the rain, I think we’re good to go.

Jasper:

Okay, good. Yeah, I heard in San Francisco it rains a lot, doesn’t it?

Silvia:

It doesn’t rain as much, but this year it’s been just crazy. I mean, literally, for the last couple of weeks, it’s been raining almost every day. And, for instance, in L.A., it doesn’t rain that much, as you know, but it’s been raining like almost every day, as well. So, people are going crazy because they’re not used to it, but I think it’s a good thing. We need the water.

Jasper:

Yeah, water’s important in California, right?

Silvia:

Totally, totally.

Jasper:

You can have some of ours. In Holland, we have plenty. I’ll send over a ship.

Silvia:

That sounds great.

Jasper:

The snow here in Amsterdam has melted, and now it’s raining. It was very cold a few weeks ago. It was like way below zero. So, it’s warming up a bit, but that also means that now the snow has turned into rain, which is not as pretty. But, yeah, at least it’s not too cold.

But, let’s get into the news of this week, and I wanted to start with an article that was written by Leigh Gallagher, who is an editor for Fortune magazine, and this article is about the expectation of Airbnb to top $3 billion in profits by 2020. So, do you think they will make that?

Silvia:

To be honest, after reading the article and learning about the different verticals that they are getting into, I believe so. I mean, with the leadership that they have with Brian Chesky, Joe Gebbia, I think this is something that, it’s possible, as long as they focus and keep delivering a good experience to users.

Jasper:

And there are a few different verticals that they are getting into. I heard they actually wanted to acquire Skyscanner. Last year, at some point, there was rumors about it, but it didn’t happen. But, $3 billion, that’s a lot of money, though, compared to what they’re making right now. In only three years from now, that’s quite ambitious, I would say.

Silvia:

Yeah. I mean, I would agree about it, and the next article that we’re going to discuss is that they’ve actually only used $300 million of the $3 billion that they raised, which is very little. And, I think, with that money, they can get to places with that money. But, I mean, of course, as we said, it requires a really good execution, and with competitors like HomeAway and all the companies that have raised a lot of money as well, that’s a huge obstacle. But who knows? It’s definitely possible.

Jasper:

But, other than the article that is interesting, I think what’s also really interesting is there’s a video in which the author of the article interviews Brian Chesky, and I thought the interview was quite interesting to watch. He talks about all the hurdles and the challenges that Airbnb has faced in the past, and looking back, one of the questions that Leigh asked Brian Chesky was, what would he have done differently if he were to start over again.

And his answer was that he would have kicked off a number of property managers off the platform because he says that some of these property managers who have lots of apartments, they kind of gave Airbnb a bit of a bad name. You know, people started talking about illegal hotels and all that kind of stuff, and it kind of took a while before Airbnb recognized this issue and they took action.

Silvia:

Yeah. I mean, definitely, that rep in an industry that has a lot of haters is definitely something really bad, and I think it makes sense to cut off folks that just give you bad PR, in this case. But, it’s also interesting that, now, they do have a really big focus on property managers that have a lot of listings. I think, as they grow, they’ll still have to face things like that, but I think Brian Chesky knows what he’s doing, and with the new acquisitions for, you know, like Luxury Retreats, which is, in a way, a huge amount of listings, this is something that will help Airbnb grow as time comes.

Jasper:

Well, now that you mentioned the acquisition of Luxury Retreats… Because, you mentioned before that there’s another article that came out where they talk about how Airbnb hasn’t spent much of the $3 billion that they raised. They only spent $300 million, which is quite surprising because they’ve grown so much. And, basically, what that means is that most of their growth has been organically, but now they’ve actually acquired a Canadian rival and they’ve paid $200 million for the company. It’s a company called Luxury Retreats, and it’s a company that offers accommodation exceeding $1,000 per night, so it’s really a luxury… Well, I guess the name kind of gives it away, Luxury Retreats.

Silvia:

Right, right, totally. And I think the company started in 1999, has raised around $11 million from BCs, venture investors, and in total, they’ve raised $16 million. So, I mean, Airbnb paid $200 million, so that’s a pretty good exit, I would say. And I believe that Luxury Retreats’ CEO is joining Airbnb as the person heading this initiative, and they probably acquired him because of talent, but also because of the listings.

Jasper:

Right. And the article doesn’t mention how many listings there are, but I mean, if Airbnb were to pay $200 million, then it must be quite a few listings. But, I think you’re right. They’re probably more interested in the people, the team, so that they can develop Airbnb’s own luxury rental business, and also, the technology that the company owns that they might want to use.

Silvia:

Yeah. I mean, it will be interesting to see what’s going to happen.

Jasper:

So, you know, I’m curious. You think they’re going to develop a whole new platform for these luxury retreats, or you think they’re going to integrate these listings on Airbnb as it is?

Silvia:

I think luxury retreats are interesting because it’s like a combination of you going into a vacation rental and you staying in an Airbnb. To me, it seems like it would make sense to have a different section for it. Probably, it’s going to be part of their platform, but having a different section where you want like a really different experience, where it’s more high-end, and even a little bit more personalized.

I think they probably want to have it in a different place because it’s more expensive, so it’s easier for people to just find it immediately. I think, if it’s integrated, you know, if you see the price and you’re a regular person, a regular user, you’d probably get intimidated by how much it costs. So, in my opinion, it will probably be separate. So, what do you think?

Jasper:

I think that makes more sense, yeah, because the people that would pay over $1,000 a night, they probably are looking for, like you said, a different experience. They might be looking for different services. So, I think, for people who are paying $1,000 a night or more, you might want to offer different concierge services, like a private driver, all that kind of high-end luxury stuff that you wouldn’t necessarily want to offer on a listing that charges like $50 a night or something.

Silvia:

Yeah.

Jasper:

But, I don’t know. Time will tell. We’ll have to keep an eye on the Airbnb website to see how they are going to implement this business.

Silvia:

Yeah. Would you see yourself booking one of their luxury retreats?

Jasper:

Yeah, if you give me a couple thousand dollars, I’m more than happy to book something.

Silvia:

Yeah, it will be interesting. I mean, from what I know, a lot of celebrities, like Justin Bieber and Kim Kardashian, they basically get Airbnbs that are mansions. So, I can see a lot of these folks who are very wealthy to start using luxury retreats, you know?

Jasper:

Yeah, that’s true. I saw some listings because, you know, in my newsletter, I always feature some listing, and I saw the listing – I can’t remember the name. It was a celebrity who actually…no, she didn’t rent it out, she rented something on Airbnb, and it was something ridiculous like $10,000 or $20,000 a night or something.

Silvia:

Yeah!

Jasper:

It was a pretty sick place in Aspen, if I remember correctly.

Silvia:

Wow! Wow, yeah. And there will be people that will be willing to pay for it.

Jasper:

Exactly. There’s people who have too much money.

Silvia:

Yup.

Jasper:

Now that we’re talking about potential start-ups for Airbnb to buy, there’s rumors that Airbnb is interested in a company called Tilt, which is a company that has technology for group purchases, which could be an interesting addition to the Airbnb platform. Because, you know, I’ve actually had some requests from former guests who said that the amount that they had to pay was too large for one person to cover with their credit card, and so they asked me if they could split it between four people, and obviously, the answer for me was ‘no’ because I have no control as a host over the method of payment that you can use.

But, I think this is a good move. You know, I really like how Uber implemented this technology where you can split the bill because it’s always a bit of a hassle, you know, when you’re splitting an Uber with three people, and then it’s $18, and it’s $6 each. People don’t really carry cash anymore, and now that’s kind of been sold. So, I think that it’s a good move.

Silvia:

Yeah, definitely. I think, in the article, it doesn’t say how much they’re going to buy it for, but from what I’ve seen, I mean, Tilt hasn’t been doing really well as a company, and if Airbnb’s not paying that much for the company, then I think this is a very good deal because, one, they’re acquiring the talent and they’re acquiring the technology, which took a lot of time and money to build this, so definitely a good strategy.

Jasper:

Yeah, and it says in the article that they are negotiating a deal to buy it for $12 million. Now, I don’t know if that’s going to be the final price, but that seems like a very low price given the fact that Tilt was last valued by investors at $400 million. I’ve actually never heard of this company, but $400 million, that’s a lot. That’s a big valuation.

Silvia:

Yeah, totally. I mean, Tilt was backed by Silicon Valley’s biggest VCs. It’s kind of sad to see it slowly just…I don’t want to use the word ‘dying’, but dying. But from, I think, since the day they started, they’ve had so many competitors in the space, and it’s been really hard for them to keep up to date.

Jasper:

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Well, that $12 million is not going to knock off much of that $2.7 billion that they have in cash, so you know, what are some other places where they could go and invest that money?

Silvia:

I think, something that they’ve been testing a lot, which, they haven’t launched anything serious, it’s airline aggregators, and basically competing with places like Expedia, Kayak. That would be interesting.

I think part of, anyone, whenever you book a trip, it tends to be very tedious because you start comparing prices, and then you can’t figure out if you actually want to buy it for that price because you think it’s expensive, you have to ask people. I think what Airbnb does really well is delivering an experience that’s just very easy to use.

So, hopefully, if they get into that, because they want to get into the whole travel space, they’ll improve that experience. And I think I would be willing to just use Airbnb for that because with Expedia and Kayak, it takes me forever to actually make a purchase decision, and maybe Airbnb will ease that and provide an amazing user experience.

Jasper:

Well, that’s true. One of the problems I have with some of the aggregators is that when you find a flight, but then you can’t always book it on the website because the cheaper price, sometimes, is on a different website, but then when you actually go there and you put in all the details, then it turns out that the flight is actually not available for that price. That’s something that happens to me quite a lot.

Silvia:

Yeah. I mean, it happens to me, too, because I follow this website called Secret Flying which gives you just random deals and airfares, and then whenever you go to the deal, it just either doesn’t work or it doesn’t give me an accurate price. So, it’s kind of tricky, right. Like, you don’t really trust the system. And, I think, having the Airbnb brand will help a lot if they actually go into that.

Jasper:

You know, I think they should acquire a company called Firefox. Have you heard of them?

Silvia:

No. What do they do?

Jasper:

So, Firefox is a… Oh, no, I say it wrong. It’s Flightfox. Firefox is a browser.

Silvia:

Yeah, that’s why I was going, “What?”

Jasper:

No, I don’t think they’re going to acquire Firefox. Flightfox is the one, and Flightfox is really cool because when you have a complicated itinerary, instead of trying to figure out what the best flights are, and you want to take into account different connections, how many stops you have, you want to figure out how much time you have to wait at the airport, all that kind of stuff, and then also the time at which you’re flying, like some people don’t want to fly at night or some people prefer to fly at night, well, it’s a lot of trouble, you know. It takes forever, and I know because I’ve been pretty much traveling for about seven years now.

And, just recently, I wanted to book a flight from Amsterdam to Florianópolis in Brazil, and then from Florianópolis to Santiago in Chile, and then back to Amsterdam, and it just took me forever to find a cheap flight, and I couldn’t find it. I spent hours doing all this research, trying all different dates, trying different routes. Like, for example, I would do Amsterdam to Rio de Janeiro and book a separate flight from Rio de Janeiro to Florianópolis. All sorts of stuff, I tried and I just couldn’t figure it out, and eventually, I found something from Paris to Florianópolis, and then back to Paris in the end, which is okay because Paris is not so far away, so you know, I could get there. But, I mean seriously, this took me hours and hours, and what I should have done is,

I should have used Flightfox because what Flightfox does is, you give them the itinerary and there’s professional travel bookers who, basically, their job is to find the cheapest flights. And so, what happens is, what you do is, you give them the cheapest price that you could find, and then they find you something better. And if they do find you something better, then they charge you a fee, but if they don’t find something better, then they don’t charge you anything.

So, I think that would be really cool if, on Airbnb, if you could just put in, you know, you just give them the places where you want to go, and your dates, and that they could, first of all, recommend the flights, and if they could also recommend good places to stay, because then you kind of outsource all your travel needs. And, with the experiences, they could even recommend experiences.

Basically, at the end of the day, if you could just go to Airbnb and say, “Hey, I want to spend two weeks in Thailand. Okay, I’m in New York, I want to spend two weeks in Thailand, figure something out.” And then, they come back with flights, they come back with Airbnb accommodation, they come back with experiences, that would be really cool.

Silvia:

Yeah. I mean, that sounds to me like, I guess, Flightfox is sort of replacing traditional travel agencies. Because, I remember, years ago, my parents used to do that, where they would call someone and be like, “Okay, I need to go to L.A., then I need to stop in Japan, and then I need to get to China, and then China back to L.A., and L.A. back to Peru,” for instance. And then, basically, the agent would literally just look for the best route, for the cheapest route, and usually, it would be cheaper than booking it online.

So, I can see that working really, really well, and it would save, like just you and I, hours of time, hours and hours of just discussing which advice you should take and making a decision. So, I definitely see that as a huge potential market in general.

Jasper:

Yeah. And then, what Airbnb could do, because they’re going to be introducing a loyalty program soon, so my suggestion would be that, for people who have a certain status in the loyalty program, that sort of concierge service, that should be for free.

Silvia:

Mmm, yeah.

Jasper:

So, I’m going to Tweet this to Brian Chesky.

Silvia:

Right, Chesky.

Jasper:

See if he likes my idea.

Silvia:

That would be great.

I think the last thing I want to mention related to this is that there’s this website that I discovered called AirWander. I’m not sure if you’ve ever heard of it.

Jasper:

No, I’ve never heard of it – AirWander.

Silvia:

Okay, so basically, what it does is, like, you know how sometimes you want to travel, like if I’m going from L.A. to Amsterdam, I might want to stop in London for three days, and I might want to stop in Paris for four days, and it’s a similar process where you want to be able to book that, but it’s much more expensive and it takes a lot of time to just, for you to figure out, so basically, AirWander does this for you, where you can put the departure place and a destination, and stopovers, and add the amount of days that you want to stay in each city. So, I mean, that’s huge to me because as a person that, in one trip, wants to visit different places, this makes it so much easier.

Jasper:

I love it. I’m just checking out the website. It’s funny because I put in ‘AirWonder’ with an ‘O’, and I couldn’t find it. I was like, “This company doesn’t exist.” But it’s ‘AirWander’ with an ‘A’.

Silvia:

With an ‘A’, yeah.

Jasper:

That’s very cool, though. I like it. I’m definitely going to check it out. Good find.

Another article I want to mention is, there’s a big apartment management company that is called…I think they’re called AIMCo – there’s an article in TechCrunch — and they are suing Airbnb because they’re saying that Airbnb is promoting their users to illegally rent out the units that AIMCo is renting to them, so their tenants are illegally using Airbnb, and they’re claiming that they are having losses as a result. What do you think about that?

Silvia:

I think, I mean, Airbnb has faced very similar things. A lot of these lawsuits were, you know, there are hosts that were actually just renting out their apartments without their permission, and that has happened a lot of times, but it’s very hard to say if it’s fair to blame Airbnb because they’re actually not promoting it. Like, they don’t know what’s happening in this case.

And, I think, on the article, it was quoted, like, “It is not acceptable to us that Airbnb actively promotes and profits from deliberate breaches of our leases, and does so in utter disregard of the disrespectful and unsafe situations created for our full-time residents and their families.”

I think, in this case, and we discussed this previously, I mean, they are not losing money because, at the end of the day, the renters are actually paying money, and they’re paying money on time. So, I mean, blaming Airbnb, I don’t know if it’s a good idea.

Jasper:

Well, I think that they’re going to have a tough time because there’s been similar lawsuits in the past where other online marketplaces have been sued for the behavior of their users, and in every case that I’ve seen, Amazon is an example, and eBay, I believe, is an example as well, in every case the judges have ruled in favor of the platform because they’re saying that you cannot hold the platform responsible for the behavior of the users, which, in this case, I think it will also apply.

And, like you said, you know, I guess they are trying to argue that because their tenants are using Airbnb, they’re causing disturbance to their neighbors who would then cancel their lease and move somewhere else. I guess that’s the only way I could see how they could be losing money, but I think it’s just too much, too indirect. You know, it’s going to be really hard to prove that they’re even losing money because of Airbnb.

And then, secondly, you know, they also have to make the case that Airbnb’s responsible for the behavior of its users, which is just one bridge too far, I think.

Silvia:

Yeah. But, I mean, it’s surprising. I’ve never heard of them, but they are actually pretty big. They have like 50,000 properties.

Jasper:

Yeah, they’re a big company. That’s right.

Silvia:

Yeah.

Jasper:

Awesome. Well, that’s it for today. So, Silvia, thank you very much for hosting this news episode with me, and I look forward to the next time.

Silvia:

Awesome. Thank you, Jasper. It’s been a blast.

Jasper:

And to all the listeners, of course, next week there’ll be another episode where we’ll be discussing the news. And today, it was published on Friday because there was a national holiday in the U.S. on Monday, so that didn’t give my editors enough time to get it ready on Thursday, but next week, it will be back on Thursday, so I hope to see you then.

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